NARPATKUMAR,CHENNAI vs. ITO NON CORPORATE WARD 12(1), CHENNAI

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ITA 3139/CHNY/2017Status: DisposedITAT Chennai10 May 2018AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the only condition for claiming bad debts is an actual write-off in the books of accounts, which the assessee had done. Continuing transactions with the same parties do not negate the fact that earlier debts were written off.

What were the facts?

The assessee, a wholesale trader of iron and steel, claimed bad debts of Rs. 9,17,161.94 in its profit and loss account. The Assessing Officer disallowed Rs. 8,50,230 of this claim, stating that the debtors still had running accounts and the write-off was not ripe.

What were the issues?

Whether the write-off of bad debts is allowable even if the assessee continues to have transactions with the same debtors.

Which sections of the Income-tax Act were involved?

Section 36(1)(vii)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, ‘C’ (SMC

Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE]

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER Assessee in this appeal filed against an order dated 11.09.2017 of ld. Commissioner of Income Tax (Appeals)-13, Chennai is aggrieved on disallowance of its claim for bad debts.

2.

Ld. Counsel for the assessee submitted that assessee a wholesale trader of iron and steel, had filed his return for the impugned assessment year disclosing income of �13,65,520/-. As per the ld. Authorised Representative, assessee had claimed bad debts of �9,17,161.94 in its profit and loss account. Contention of the ld. Authorised Representative was that ld. Assessing Officer had disallowed �8,50,230/- out of such claim, observing that debtors whose balances were written off were still having running accounts and was not ripe for write off. As per the ld. Authorised Representative, though assessee raised this issue before the ld. Commissioner of Income Tax (Appeals) and relied on the judgment of Hon’ble Apex Court in the case of TRF Ltd vs. CIT, (2010) 323 ITR 397, ld. Commissioner of Income Tax (Appeals) did not accept the claim. Ld. Authorised Representative relying on paper book, page No.4 submitted that assessee had written off amounts due from four parties namely M/s. Steel Strips Wheels Ltd �1,500.66, M/s.

1.

Coromandel International Ltd �22,287.03, M/s. True Lock Hyoromatics Pvt. Ltd �1,98,106.15 and M/s. Shrijaa Engineering Pvt. Ltd �6,28,337.96. According to her, by virtue of judgment of Hon’ble Apex Court in the case of TRF Ltd (supra), the claim ought have been allowed.

Per contra, ld. Departmental Representative submitted that 3.

four debts which were written off were of debtors who were having running accounts. As per the ld. Departmental Representative, assessee had continuing transactions with these persons and hence the write off was not a bonafide one.

4.

We have considered the rival contentions and perused the orders of the authorities below. There is no dispute that assessee had written off the following bad debts through his profit and loss account.

Steel Strips Wheels Ltd �1,500 M/s. Shrijaa Engineering Pvt. Ltd 6,28,337 True Lock Hyoromatics Pvt. Ltd �1,98,106 Coromandel International Ltd �22,287

--------------- �8,50,230 --------------- As per the judgment of Hon’ble Apex Court in the case of TRF Ltd (supra), the only condition for claiming a bad debt is that there should be an actual write-off of such debt in the books of accounts.

Undisputedly, assessee had done so. Only grievance of the Revenue is that assessee was having continuing transactions with very same parties even in the subsequent years. However, assessee had clearly stated that continuing transactions by itself would not show that any earlier debt was a good one. We find strength in the argument of the assessee that purchasers would not always honour their commitments, since there could be disputes on quality or quantity of the goods sold. In our opinion, assessee having written off the bad debts in his books of accounts, lower authorities could not have denied the claim of bad debts. We therefore set aside the orders of the lower authorities on this issue and allow the claim.

In the result, the appeal of the assessee stands allowed. 5.

Order pronounced on Thursday, the 10th day of May, 2018, at Chennai.

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