2023 (8) TMI 92

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....he following question of law is framed for the consideration by this court: (i) Whether the Income Tax Appellate Tribunal [in short, "Tribunal"] misdirected itself on facts and in law in disallowing the deduction of Rs. 10,78,12,465/- [sic. Rs. 10,78,12,469/-], to the appellant/assessee, for Assessment Year (AY) 2003-04, under Section 36(1)(vii) of the Income Tax Act, 1961 [in short, "Act"]? 3. Since there is no dispute with regard to the facts and circumstances and the question of law, in substance, is a pure question of law, we have heard the counsels for the parties and proceeded to, straightaway, hear arguments, with the consent of the counsels for the parties. 4. In order to adjudicate the present appeal, the following broad facts....

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....mstances that the appellant/assessee has preferred the present appeal under Section 260A of the Act. 7. Ms Shashi M. Kapila, who appears on behalf of the appellant/assessee, has submitted that the authorities below have committed factual and legal errors. 7.1 In this context, Ms Kapila has drawn our attention to paragraph 14 of the impugned order passed by the Tribunal, which alludes to the fact that in the previous AY i.e., AY 2002-03, the profit determined was Rs. 215,62,49,368/-. 8. Ms Kapila says that the appellant/assessee had, in fact, filed a loss return. The AO via the order dated 18.03.2005 had disallowed the loss claimed and, that the said issue is presently pending adjudication in an appeal [ i.e., ITA 87/2020 ] lodged in this....

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....an order dated 18.03.2005, whereby the loss claimed by the appellant/assessee for AY 2002-03 was disallowed.   (iii) There was clearly no provision made for bad debts available in the succeeding period i.e., AY 2003-04. (iv) In the AY 2003-04, the appellant/assessee had claimed bad debts amounting to Rs. 12,67,00,000/-. 15. Given these facts and the state of the law, as expounded by the Supreme Court in Catholic Syrian Bank Ltd., in our opinion, the appellant/assessee is entitled to straightaway claim deduction towards irrecoverable bad debts under Section 36(1)(vii) of the Act. There is no dispute that the conditions prescribed under Section 36(2) of the Act stand fulfilled. 15.1. Section 36(1)(vii) and Section 36(1)(viia) of ....

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....r under laws of a country outside India. Since the appellant/assessee was incorporated under laws of the UK, it would thus, fall under the aforementioned sub-clause. 15.4. Notably, Sub-section 2(v) states that where a debt or part of debt relates to advances made by an assessee to which clause (viia) of Section 36(1) applies, no such deduction would be allowed unless the assessee has debited the amount of such debt or part of the debt in the previous year in issue, to the provision made for bad and doubtful debts in the accounts of the assessee. Thus, as would be evident, the scheme of the aforementioned provisions would exclude the applicability of the first proviso appended to Section 36(1)(vii) of the Act, as there was no provision for ....