TIRUPATI MICROTECH PRIVATE LIMITED,UDAIPUR vs. DCIT, CIRCLE-2, UDAIPUR

The first common issue arising in the appeals relates to disallowance of claim of bad debts on account of amount not recoverable from Nationals Spot Exchange Limited (NSEL).

Briefly the facts relating to this issue are, the assessee is a resident corporate entity stated to be engaged in the following activities:

For the assessment years under dispute, assessee had filed its return of income in regular course. Assessee’s case for both the assessment years were selected for scrutiny.

In course of assessment proceedings, the Assessing Officer noticed that the assessee had claimed write off of bad debts of Rs. 1,64,41,075/- in A.Y. 2015-16 and amount of Rs. 5,85,81,044/- in A.Y. 2017-18. On further verification, he found that bad debts written off were claimed on account of investment with NSEL. Thus, he observed that the investment made being in the nature of capital investment cannot be allowed as deduction.

Without prejudice, he observed that it will be premature to allow assessee’s claim as there is chance of recovery of the amount in future. Accordingly, he disallowed assessee’s claim in both the assessment years under dispute. Assessee contested the disallowances before the First Appellate Authority. After considering the submissions of the assessee, the First Appellate

We have considered rival submissions and perused the materials on record, it is not in dispute that the assessee indeed had carried out transactions on the platform of NSEL. Infact, the Assessing Officer based on information received from NSEL has recorded a finding of fact that the assessee had a balance of Rs. 16.19 crores as receivable on the platform of NSEL. However, the Assessing Officer has disallowed assessee’s claim primarily for two reasons. Firstly, it is a capital investment and secondly, there is chance of recovery of the amount from the defaulters, as the Hon’ble High Court has directed the investigating agency to attach and auction the assets of the defaulters.

The first Appellate Authority has given a new dimension to the issue by stating that the transaction is speculative in nature. Fact remains that the assessee has undertaken commodity trading activities on the platform of NSEL for which it has deposited an amount of Rs. 16.19 crores. However, due to default in making payment by certain parties, the assesee had failed to recover certain amount in both the assessment years. The Assessing Officer has not made any adverse comment regarding the fulfilment of conditions of Section 36(1)(vii) of

However, we make it clear, in the event of assessee receiving any part of the bad debt in future, the amount has to be offered as income in the assessment year wherein it is received. With the aforesaid observations, the addition made is deleted.

The next common issue relates to part disallowance of deduction claimed u/s 80IA of the Act. Briefly stated, as discussed earlier, the assessee is also in business of windmill operation. While examining assessee’s claim of deduction u/s 80IA of the Act. On profit derived from windmill, the Assessing Officer noticed that certain expenditure allocable to the eligible units, such as, head office expenses and depreciation on common assets have not been allocated.

Before us, Ld. Counsel appearing for the assessee submitted that the assessee operates three windmill power plants situated at Jaisalmer, Karnataka and Barmer. He submitted, the entire operation, maintenance and management of windmills have been outsourced on a turnkey basis to Suzlon Global Services Ltd. Hence, the assessee claimed deduction u/s 80IA of the Act on the profits on the eligible units after debititng only the direct expenses relatable to those units without apportioning any head office expenses or depreciation on common assets. Thus, he submitted, since no part of head office expense and depreciation on common assets, relate to operation of windmills, allocation of such expenses cannot be made for determining profit of windmills. Whereas, Ld. Departmental representative relied on the observations of the Assessing Officer and First Appellate Authority.

In view of the aforesaid, we are inclined to restore this issue to the Assessing Officer for fresh adjudication after examining all the factual details and after providing reasonable opportunity of being heard to the assessee.

In the result, appeals are partly allowed.