Hariharan Foundations Pvt. Ltd., ... vs Department Of Income Tax

The Assistant Commissioner of M/s. Hariharan Foundations Pvt. Ltd, Income Tax, Vs 19/9, Chandra Vilas, Corporate Circle -2(2) 8th Street, Chennai 600 034 Radhakrishnan Salai, Mylapore, Chennai 600 004.

[PAN: AAACH 9715N] (अपीलाथ'/Appellant) ("(यथ'/Respondent)

अपीलाथ क ओर से / Appellant by : Shri. N. Madhavan, IRS, JCIT. यथ क ओर से / Respondent by : Shri. N.R. Suresh, C.A.,

सन ु वाई क तार ख/Date of hearing : 24.06.2015 घोषणा क तार ख /Date of Pronouncement : 30.06.2015

आदे श / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER

This appeal by Revenue is directed against the order of the

Commissioner of Income Tax (Appeals)-II, Chennai, dated 09.07.2014.

2. The facts of the case are that the assessee company in its Profit

and Loss account, debited 'bad debts' of C1,05,78,656/-. The :- 2 -: I.T.A.No.2945/Mds/2014.

Assessing Officer opined that since the assessee company had not

proved that it had taken sufficient steps to recover the debts, the claim

of bad debts were not allowable. Accordingly, the Assessing Officer

disallowed the assessee's claim of bad debts of C1,05,78,656/-.

Aggrieved, the assessee preferred an appeal before the Commissioner

of Income Tax (Appeals).

3. On appeal before the Commissioner of Income Tax (Appeals),

the assessee submitted that with the change in the provisions of the

Act, once the debts are written off as ''bad debts' in the books, the

same had to be allowed as bad debts. The assessee further explained

that there was no need to prove that the debts had become bad and

recovery could not be made. For this purpose, the assessee relied on

several case laws. The Commissioner of Income Tax (Appeals)

observed that with effect from 01.04.1989, the provisions of sec

36(1)(vii) of the Act read as under:-

''Subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year''.

According to the Commissioner of Income Tax (Appeals) the assessee

has actually ''written off' the amount in its books of accounts as bad

debts and claimed the same as deduction u/s.36(1)(vii) of the Act. In :- 3 -: I.T.A.No.2945/Mds/2014.

view of the judgment of Supreme Court in the case of T.R.F Ltd vs.

CIT 323 ITR 397, the Commissioner of Income Tax (Appeals) allowed

the deduction. Against this, the Revenue is in appeal before us.

4. We have heard both the parties and perused the material on

record. With effect from 01.04.1989, the assessee is not required to

establish that the debts had become bad. Once the debts occurred in

the ordinary course of business and the assessee written off the same

in the books of accounts as irrecoverable, then it is allowed as bad

debts. In the present case, there is no dispute to the fact that debts

occurred in the ordinary course of business and the assessee

considered the same while determining income. Since the assessee

could not recover the debts, the same was written off in its books of

accounts. Being so, in our opinion it is to be allowed as bad debts.

This view of ours is fortified by the judgment of jurisdictional High

Court in the case of Citi Financial Retail Services India Ltd vs ACIT 228

Taxman 258, wherein it was held that the decision in T.R.F Ltd vs CIT

323 ITR 397 (SC) relatable to assessment years 1990-91 and 1993-94

and the Supreme Court held that prior to 01.04.1989, the assessee has

to establish as a matter of fact, that the debt advanced by the

assessee had, in fact, become irrecoverable. But after 01.04.1989, it :- 4 -: I.T.A.No.2945/Mds/2014.

held that it is not necessary for the assessee to establish that the debt,

in fact has become irrecoverable.

5. In view of the law laid down in the case of TRF Ltd (supra) there

is no hesitation to hold that 'bad debts' if written off, on the accounts

of the assessee and appropriately claimed before the competent

authority, the authorities are bound to consider the same in the light of

the decision of the Supreme Court.

6. Accordingly, we have no hesitation to confirm the order of

the Commissioner of Income Tax (Appeals) on this issue and dismiss

the ground raised by the Revenue.

7. In result, the appeal of the Revenue in ITA No.2945/Mds/2014

is dismissed.

Order pronounced on Tuesday, the 30th day of June, 2015, at Chennai.

Sd/- Sd/- (च ला नागे "साद ) (चं पज ू ार ) (CHALLA NAGENDRA PRASAD) (CHANDRA POOJARI) या#यक सद य/ JUDICIAL MEMBER लेखा सद य/ ACCOUNTANT MEMBER चे"नई/Chennai. #दनांक/Dated:30.06.2015. KV

आदे श क त&ल'प अ(े'षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आय* ु त (अपील)/CIT(A) 4. आयकर आय* ु त/CIT 5. 'वभागीय त न-ध/DR

6. गाड फाईल/GF.

:- 5 -: I.T.A.No.2945/Mds/2014.