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Income Tax Appellate Tribunal, BANGALORE BENCHES “ C ” BENCH: BANGALORE
Before: SHRI B.R. BASKARAN & SHRI PAVAN KUMAR GADALE
O R D E R
PER SHRI PAVAN KUMAR GADALE, JM :
The assessee has filed an appeal against the order of Commissioner of Income Tax (Appeals)-6, Bangalore passed u/s 143(3) r.w.s 144C(1) and u/s 250 of the Income Tax Act, 1961.
At the time of hearing, the LdAR has not pressed Ground of appeal no.2 and is treated as withdrawn and dismissed.The assessee has raised the Grounds of appeal as under :
3.The brief facts of the case are that, the assessee company is engaged in the business of software maintenance, after sales support customer relationship, Software Training in SAP related services and manufacturing of DVDs. The assessee has filed the return of income for the Asst. Year 2011-12 on 30.11.2011 and subsequently a revised return of income was filed with total income of Rs.1,33,93,62,511/- under the normal Income Tax provisions. Whereas, the total income as per MAT was higher, and the assessee has paid taxes on MAT liability. The case was selected for scrutiny under CASS and Notice under Section 143(2) of the Act was issued. On perusal of Audited Assessing Officer find that, the assessee company has international transactions exceeding Rs.15 Crores and with the prior approval of CIT, the matter was referred to the TPO for determination of Arm’s Length Price (ALP). The TPO has passed the order under Section 92CA of the Act with Nil adjustments on 30.01.2015. Subsequently, the Assessing Officer issued Notice under Section 142(1) of the Act. In compliance, the LdAR of the assessee appeared from time to time and made submissions. The Assessing Officer has dealt on the issue of claim under Section 80IC of the Act. Further, the Assessing Officer found that the assessee has debited a sum of Rs.23,11,27,517/- towards the bad debts written off in respect of maintenance unit, non80 IC units and non 10A units. The Assessing Officer found that the bad debts written off pertains to sales and maintenance charges for the FY 2010-11 and are written off in the same year. The Assessing Officer further observed that, the amount of Bad debts written off include amount pertaining to companies like Infosys Technologies Ltd., Wipro Limited and TCS Ltd were sale transaction itself taken place within one year before the date of write off. The Assessing Officer dealt on the facts at page 3 para 8 to 8.5 of the order and the provisions of Section 36(1)(vii) of the Act. The A.O. relied on the judicial decisions and found that the assessee has failed to prove the basic ingredients and the nature of transaction of creation of debt. Further no explanations were filed, to conclude that the debt should be written off as irrevocable in the books of accounts and the compelling forces to convert the last sales transaction into a bad debt. Hence, A.O. made addition of amount written off as bad debt and disallowance of depreciation on PABX system and assessed the total income of Rs.1,57,14,02,203/- and passed order under Section 143(3) r.w.s. 144C(1) of the Act dt.30.03.2015. Aggrieved by the order, the assessee has filed an appeal with the CIT (Appeals). Whereas the CIT (Appeals) considered the submissions, grounds of appeal and findings of the Assessing Officer and confirmed the disallowance of bad debts relying on the assessee own case for the A.Y. 2012-13 and partly allowed the appeal.
4. Aggrieved by the order of CIT (Appeals), the assessee has filed an appeal with the Tribunal. At the time of hearing, the learned Authorized Representative made elaborate submissions on the disputed issue of bad debts written off and emphasized that the assessee has written off bad debt based on the financial statements and supported his arguments with Paper Book and judicial decisions and prayed for allowing the appeal. Contra, the LdDR supported the orders of the CIT (Appeals) and filed written submissions.
5. We heard the rival submissions and perused the material on record. The sole matrix of the disputed issue is with respect to bad debts written off debiting to profit and loss account by the assessee. The LdAR vehemently submitted that the bad debts are correctly written off and supported his submissions with the CBDT Circular on admissibility of claim of bad debts under Section 36(1)(vii) of the Act. The LdAR demonstrated the Page no 215 of paper book with Annexure, details of bad debts along with date of invoice. The contentions of the learned Authorized Representative are that the law has been settled after the decision of the Hon'ble Supreme Court in the case of TRF Limited Vs. CIT 323 ITR 395 (SC).When a query was raised in respect of nature of the bad debts, the LdAR could not substantiate with evidences on the nature of Bad debts details of 251 parties referred at page 215 to 219 of Paper Book. We on perusal of the assessment order found that the assessee company has written off Bad debts in respect of Infosys Limited, TCS Ltd. and Wipro Limited which are in existence till today. Further, the LdAR submitted that the assessee company has provided the support services, were the value of services provided are more than the actual amount paid. Hence, the difference is treated as irrevocable and written off to the profit and loss account. On perusal of the Paper Book filed in respect of details of bad debts, we found that the date of invoices pertaining to F.Ys 2008-09, 2009-10 & 2010-11 and also for earlier years. We find the Co- ordinate bench of tribunal in assessee own case for A.Y. 2012-13 in dt 7-2-2020 has observed at page 2 para5 of the order, which is read as under:-
We have considered the rival submissions. We find that apart from writing off of bad debts in the books of accounts, the assessee has to fulfill this requirement of section 36(2) of the IT Act also that the amount in question has been considered as income in the relevant year or in an earlier year. As per the assessment order and as per the order of CIT(A), the assessee has not given any explanation or details regarding exact nature of transactions with the parties in question. In the absence of that, it cannot be ascertained as to whether the assessee is complying with the requirements of section 36(2) of Income Tax Act, 1961 or not. Under these facts and in the interest of justice, we feel it proper to restore this matter to the file of CIT(A) for a fresh decision. The assessee is directed to furnish complete details before CIT(A) regarding the nature of transaction with each party and the assessee has to establish that the assessee is complying with the requirements of section 36 (1) (vii) and 36(2) of the Income tax Act, 1961 and after granting adequate opportunity of being heard to both sides, Learned CIT(A) should decide this issue afresh. Accordingly, ground No.1 is allowed for statistical purposes. Even in the present case the facts are identical and similar. Accordingly, we fallow the judicial precedence and restore the disputed issue to the file of CIT(A) to decide a fresh with similar directions.The assessee should be provided adequate opportunity of hearing and shall co-operate in submitting the information for early disposal of appeal and allow the ground of appeal of the assessee for statistical purpose.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 25th Nov., 2020.