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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: MS. SUSHMA CHOWLA & DR.B.R.R.KUMAR, AM
आदेश / ORDER PER SUSHMA CHOWLA,VP The present appeal filed by assessee is against order of CIT(A)-43, New Delhi dated 01.04.2019 relating to assessment year 2014-15 against the order passed under section 143(3) r.w.s 144C of the Income-tax Act, 1961 (in short ‘the Act’).
The only issue raised in the present case is against the disallowance of bad debts claimed u/s 36(1)(vii) of the Act. Though the assessee has raised several grounds of appeal which are argumentative in nature but the issue to be decided is Ground No.2 which reads as under:-
Assessment Year 2014-15 2. “That both, the Ld.AO and the Learned Commissioner of Income- tax (Appeals) [“Ld. CIT(A)”] have erred in law, by wrongly interpreting the provisions of sec.36(1)(vii) of the Income-tax Act, 1961 (“the Act”, as the section clearly specify that while computing the income under then head Profit and Gains of Business of Profession, deduction shall be allowed for amount written off as irrecoverable in books of accounts of the Appellant.”
The preliminary issue raised in the present appeal is in relation to claim of deduction on account of bad debts written off during the course of the year in question. The assessee has written off expenditure of Rs.1.49 crores (approx.). The assessee submitted the following details during the assessment proceedings:-
• “Year wise details of amount of Income booked, out of which part amount was written off as bad debts during the year. • Invoice number, date of invoice and copy of invoices against which majority of bad debts were written off during the year. • Project wise details of bad debts written off during the year.”
The claim of the assessee is that the said deduction is to be allowed in the hands of the assessee while computing the income. In this regard, reliance was placed on the decision of Hon’ble Supreme Court in T.R.F.Ltd. vs CIT [2010] 323 ITR 397 (SC) wherein the Apex Court held that it is not necessary for a tax payer to establish that debt, has become irrecoverable.
The Assessing Officer however, disallowed the claim of the assessee. The CIT(A) was of the view that to allow the claim, the debt written off should be bad debts, which was prior condition of admissibility of deduction u/s 36(1)(vii) of the Act. Another point which was noted by the CIT(A) was that the assessee had done contractual work for the government entities and hence, he upheld the disallowance made by the Assessing Officer.
Assessment Year 2014-15 5. The Ld. AR for the assessee pointed that it had raised bills to the extent of Rs.11.65 crores (approx.) and had only written off a sum of Rs.1.49 crores (approx.) as bad debts. He further pointed out that the main ground on which the said addition was made was that the assessee had not established that the debts had become bad.
The Ld.DR for the Revenue placed reliance on the orders of the authorities below.
We have heard the rival contentions and perused the record. The issue raised in the present appeal is in respect of claim of deduction u/s 36(1)(vii) of the Act on account of write off of bad debts, stand settled in favour of the assessee by the Hon’ble Supreme Court in T.R.F.Ltd. (supra). The Hon’ble Apex Court had held that “there is no requirement to prove that the amount is actually irrecoverable before writing it off as bad debts.” Following the said parity of reasoning, we hold that where the assessee had written off debts as bad debts, then the same cannot be disturbed by the Revenue authorities especially where the assessee has also fulfilled the condition laid down in section 36(2) of the Act. We allow the claim of the assessee u/s 36(1)(vii) of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 28th February, 2020.