TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 1224
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of the assessee that the sum of Rs. 1,50,00,000/- has become irrecoverable. The Ld. AO showed the reply of NSEL to the assessee and again sought justification for his claim of bad debts to which the assessee replied stating as under:- "Outstanding Debt which was not recoverable as on 31.03.2014 was amounting to Rs. 5,23,29,230/-. This amount was included as income during the financial year 2013-14. The profit and loss account submitted with your honour was showing the amount of sales during the year including this amount of Rs. 5,23,29,230/- which has become irrecoverable. The outstanding Bad-debt was thus taken as income during the referred Assessment year 2014-15. The total amount of Bad-debt is Rs. 5,23,29,230/- included in the income of the assesee via the profit and loss account and out of this amount Rs. 1,50,00,000/- has been written off during the Assessment Year 2014-15. The Bad debts written off by the assessee during the referred year is allowable under section 36(1)(vii) and section 36(2) of the Income Tax Act, 1961. In this regard we submit herewith the CBDT Circular no: 12/2016 dated 30 May, 2016. This circular clarifies that Bad-debts written off by the assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hrough the broker Integrated Commodity Trades Pvt. Ltd., which was the authorized broker of M/s National Spot Exchange Ltd ('NSEL'). It is submitted that the appellant sold commodities amounting to Rs. 30,44,32,556/- through NSEL and income from which was duly offered for tax after deduction of various expenses. Out of the above mentioned total sale effected through NSEL an amount of Rs. 5,23,29,230/- was recoverable from NSEL at the end of the A.Y. 2014-15. It is the case of the appellant that the said amount of Rs. 5,23,29,230/- has become irrecoverable in the year under consideration as NSEL was prohibited from doing any transactions w.e.f. July 2013 due to certain irregularities found in its conduct. It is also submitted that the said irregularity was well acknowledged in public domain, leading to jail terms of NSEL's Managing Director and Chairman for their role in fraud. Therefore, assessee on becoming aware of the above developments, has written off an amount of Rs. 1,50,00,000/- out of the above said total amount of Rs. 5,23,29,230/- as bad debts during the impugned assessment year. The AO disallowed the said claim on the ground that the appellant was not satisfying the con....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Considering the facts of the case and the judicial pronouncements and the Circular issued by the CBDT, I find that the bad debt of Rs. 1,50,00,000/- written off by the appellant as irrecoverable in its account is admissible u/s 36(1 )(vii) read with section 36(2) of the Act. In view of the above, the addition of Rs. 1,50,00,000/- is deleted. Accordingly, the above ground of appeal is allowed." 6. The Revenue has come up in appeal before the Tribunal on the following grounds:- "1. Whether in law & facts and circumstances of the case, Hon'ble CIT(A) was correct in deleting disallowance of Rs. 1,50,00,000/- claimed on account of bad debts u/s 36(1)(vii) of the Income Tax Act, 1961. 2. The Ld. CIT(A) erred in law & in facts by ignoring the fact that assesee had not fulfilled conditions laid out u/s 36(2)(i) of the Income tax Act 1961 to be able to claim deduction of bad debts u/s 36(1)(vii) of the Act." 7. The Ld. Sr. DR, relying on the concluding para of the Ld. AO's order argued that the assessee has prematurely written off sum of Rs. 1,50,00,000/- without satisfying the conditions laid down under section 36(2) of the Act. According to him, bad debts are not written off in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he previous year' by the words 'any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year'. This is a major development with a view to avoid controversy as to the year in which such bad debt is allowable. It is thus evident that the year of write off is now taken as the year in which the amount is allowable as a bad debt. 8.3 The amended law w.e.f. 01.04.1989 provides that for an amount to be treated as a bad debt and to be allowed as an expenditure in the year in which it was written off, the assessee has to prove the satisfaction of both section 36(1)(vi) and section 36(2)(i), namely that bad debt had been written off and that bad debt had been taken into account in computing income of the assessee in any one of years mentioned in clause (i) of sub-section (2) of section 36 of the Act. 8.4 It is also crystal clear that after 01.04.1989, it is not necessary for the assessee to establish that debt has become irrecoverable. It is enough if bad debt is written off as irrecoverable in the accounts of the assessee. The assessee need not prove that debts have become bad. All that the assessee has to do after the amendment ....