MITHI SOFTWARE TECHNOLOGIES PRIVATE LIMITED,PUNE vs. INCOME-TAX OFFICER, WARD - 11(1), PUNE

This appeal by the assessee against the order dated 03-08-2017 passed by the Commissioner of Income Tax (Appeals)-7, Pune [„CIT(A)‟] for assessment year 2008-09.

The assessee raised ground Nos. 1 and 2 amongst which only issue emanates challenging the action of CIT(A) in confirming the disallowance made by the AO on account of claim for bad debts in the facts and circumstances of the case.

Heard both the parties and perused the material available on record. The assessee is a company dealing with the business of development of software products and services. The assessee claimed writing off bad debts to an extent of Rs.1,58,641/-. The AO requested to produce the details of the claim. According to AO, the assessee is still carrying its business with the firm and no material evidence filed to show that the bad debts are not recoverable. Accordingly, the AO disallowed the above said amount and added to the income of assessee.

The CIT(A) held that the assessee did not produce any evidence in respect of sale of product with Gini & Johny Apparel Pvt. Ltd. and no evidence in order to sale claimed u/s. 36(2) of the Act. Accordingly, the CIT(A) upheld the order of AO for not substantiating that any actual debt exist which became bad debts as on 31-08-2008.

Before us, the ld. AR filed ledger account as on 31-03-2008 regarding doubtful debts written off during the Financial Year 2007-08. On perusal of the same at page 49 of the paper book on 19-03-2008 an entry clearly shows that an amount of Rs.47,892/- written off and likewise on 31-03-2008 an entry of Rs.1,26,448/- was written off. At page 50 of the paper book the assessee filed ledger account of assessee be that of Indian Bank, wherein we note that the debit entry of Rs.47,892/- regarding AMC Receipt, against which the assessee written off the same on credit entry on 19-03-2008 with a corresponding debit to doubtful debts written off. At page 51 of the paper book, copy of account of Gini & Johny Apparel Pvt. Ltd. regarding an amount of Rs.1,26,448/- the assessee recognized the same as debit on 22-03-2007 and written off in its account on 31-03-2008 with a corresponding debit to doubtful debts written off. Therefore, it clearly shows ledger accounts of Indian Bank and Gini & Johny Apparel Pvt. Ltd. with books of assessee clearly show the assessee recognized the receipt as income and for not realizing the same, the assessee written off both the amounts in its account. Further, at pages 53 and 54 of the paper book wherein it clearly shows the Tax Invoice raised by the assessee against the Buyer, Indian Bank and Gini & Johny Apparel Pvt. Ltd. regarding services availed by the said two concerns with assessee. Therefore, it is established that the Indian Bank and Gini & Johny Apparel Pvt. Ltd. availed the services of assessee in terms of Tax Invoice dated 15- 12-2006 and 29-03-2007, respectively from the assessee and for non- payment the said amounts becomes irrecoverable which led to writing off in the accounts of assessee. Further, it is observed at page 58 of the paper book that the assessee recognized the receipts from Indian Bank in 2007 and 2008 and Gini & Johny Apparel Pvt. Ltd. as income as on 31-03-2007 and claimed the same as bad debts as on 31-03-2008 which clearly shows that the assessee had shown the above said two receipts from Indian Bank and Gini & Johny Apparel Pvt. Ltd. as income in the earlier year/current year and claimed as writing off of bad debts in the year under consideration, therefore, the claim of assessee as bad debts is to be allowed in terms of decision of Hon‟ble Supreme Court in the case of T.R.F. Limited Vs. CIT reported in 323 ITR 397 (SC).

The Hon‟ble Supreme Court in the case of T.R.F. Limited (supra) held that it is not necessary to establish that the debt, in fact, has become irrecoverable but would be sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. In the present case as discussed above the assessee shown the receipts from Indian Bank and Gini & Johny Apparel Pvt. Ltd. as income in the earlier years and written off both the amounts as were not irrecoverable on 19-03-2008 and 31-03-2008, therefore, the assessee is entitled to claim above said amounts as deduction. Thus, the order of CIT(A) is not justified and it is set aside. Accordingly, ground Nos. 1 and 2 raised by the assessee are allowed.

In the result, the appeal of assessee is allowed.