DEPUTY COMMISSIONER OF INCOME-TAX, BANGALORE vs. M/S.SNOWMAN LOGISTICS PVT. LTD., BANGALORE

Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of CIT(A) on a solitary ground that CIT(A) has erred in holding that bad debts are written off as irrecoverable even when the assessee failed to submit the relevant evidences in the form of closed ledgers of the parties and further there were no intimation to the parties concerned. The facts borne out from the record are that the AO has disallowed the bad debts written off amounting to Rs.2,73,34,870/- on the ground that a few of the clientele are continuing to have business with the assessee company. Therefore, the assessee has no genuine interest to claim debts. The

Now the Revenue is before us and has placed reliance upon the order of the AO.

“8. In ground No.2, the appellant is aggrieved that AO did not allow bad debts written off amounting to Rs.2,73,34,870/-. It is seen that the main reason for disallowance by AO was that ‘a few of the clientele are continuing to have business with the assessee company indicating that assessee has no genuine interest to claim debts. It is also seen that some of the clients appear in the sundry creditors’ list’. Before the AO, no evidence was produced to show that steps for recovery of these debts had failed. However, it is to be noted that the Hon’ble Supreme Court in the case of TRF Ltd in CA Nos 5292 to 5294 of 2003 vide judgment dated 9/2/2010 held that ‘after 1/4/1989, for allowing deduction for the amount of any bad or part thereof under section 36(1)(vii) of the Act, it is not necessary for assessee to establish that the debt, in fact has become irrecoverable; it is enough if bad debt is written off as irrecoverable in the books of accounts of assessee’. Therefore in the light of the Apex Court’s judgment which is binding, the AO is directed to allow bad debts claimed by the appellant. The ground is allowed.”

Pronounced in the open court on 6th October, 2017.