DCIT 8(2), MUMBAI vs. PAREKH PLATINUM LTD, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद"य लेखा लेखा सद"य सद"य राजे"" सद"य राजे"" राजे"" केकेकेके अनुसार राजे"" अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order,dt.02.11.2012, of the CIT(A)-17,Mumbai,the Assessing Officer (AO) has filed the present appeal.Assessee-company ,engaged in the business of manufacturing of chemicals,catalysts, engineering products from precious metals,pre alloys and jewellery products etc.,filed its return of income on 30.9.09 declaring income of Rs. (-) 9,46,11,350/-. The AO completed the assessment,u/s. 143(3) of the Act,on 14.12.2012 determining the income of the assessee at Rs. Nil. 2.First effective ground(GOA.s1-2)is about deleting the disallowance of bad debts amounting to Rs.49.86 crores.During the assessment proceedings,the AO found that the assessee had written off an amount of Rs.49,86,23,627/-for the reason that the subsidiary namely M/s. Gulf Metals and Chemicals, FZE had ceased to be in existence. As per the AO the assessee had not filed any details in that regard. He held that onus lied on the assessee to prove that the amount receivable from its subsidiary had become bad,that the idea of amount of subsidiary being irrecoverable was illogical and against common prudence. He disallowed the claim made by the assessee u/s.36(1)(vii) of the Act. 3.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellat4e Authority(FAA).After considering the submission of the assessee and the assessment order, FAA referred to the case of TRF Ltd. (323ITR397) and held that position of law had changed after 1.4.89, that it was not necessary for the assessee to establish that 4676/M/13-Parekh debts had become recoverable, that it was enough if the bad debt had been written off in the books of account of the assessee,that the assessee had written off the amount,due from its subsidiary,in its books.Finally,he deleted the disallowance made by AO.

4.Before us,Departmental Representative (DR) supported the order of the AO. As stated earlier none appeared on behalf of the assessee. 5.We have heard the DR and perused the material available on record. We find that the assessee had written off an amount of Rs.49.86 crores due from its subsidiary, that necessary entries were made in the books of account, that the FAA had deleted the disallowance made by the AO. Following the judgment of TRF Ltd., we are of the opinion that if an assessee makes necessary entries in the books of account and writes off the bad debts there was no justification on part of the AO to disallow the claim made in that regard.The decision to write off a particular item during a particular year is the prerogative of a businessman. The departmental authorities are not supposed to enter into the shoe of a businessman. Therefore, in our opinion,the order of the FAA does not suffer from any legal or factual infirmity. Confirming his order,we decide the first effective ground raised by AO in his favour.