Pixel Image India P. Ltd, Pune vs Assessee

2 M/s Pixel Image India Private Limited

2. During hearing of this appeal, the ld. counsel for the assessee, Shri M.C. Naniwadekar, did not press ground no.2 with respect to appropriated deduction u/s 10A of the Act, thus, this ground is dismissed as not pressed.

2.1. The only ground agitated by the ld. counsel pertains to disallowance of Rs.61,91,965/- claimed as bad debt u/s 36(1)(vii) read with section 36(2) of the Income Tax Act, 1961 (hereinafter the Act), by contending that the amount was actually written off in its books of accounts, therefore, in view of the decision in T.R.F. Ltd. vs CIT 323 ITR 397 (SC), the claim of the assessee has to be allowed. On the other hand, the ld. DR, Shri Neil Philip, defended the conclusion arrived at in the impugned order by contending that the entire sale of graphic animation images were sold to parent company of the assessee, consequently, it was merely a arrangement to defraud the Revenue so as to reduce tax liability.

2.2. We have considered the rival submissions and perused the material available on record. The fact, in brief, are that the assessee is engaged in the business of developing still graphic animation images, claimed Rs.61,91,962/- as bad debt written off. The ld. Assessing Officer denied the claim on the ground that the debts, which were written off was only of parent company as the assessee is 100% subsidiary of the debtor and thus, such claim was not a bona-fide commercial decision. On appeal, before the ld. Commissioner of Income Tax (Appeals), the stand of the 3 M/s Pixel Image India Private Limited Assessing Officer was affirmed against which the assessee is in further appeal before this Tribunal.

2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, we note that after 01/04/1989, it is not necessary for the assessee to establish that debt, in fact, has become irrecoverable, it is enough, if bad debt is written off as irrecoverable in the accounts of the assessee as was held in T.R.F. Ltd. vs CIT 323 ITR 397 (SC), CIT vs Auto Meters Ltd. 292 ITR 345 (Del.), CIT vs Morgan Securities and Credits Pvt. Ltd. 162 taxman 124 (Del.), Suresh Gaggal vs ITO (2009) 180 Taxman 90 (HP), Lawlys Enterprises ltd. vs CIT 314 ITR 297 (Pat.), DIT vs Owan International Bank (2009) 184 taxman 314 (Bom.) The fact of amendment to section 36(1)(vii) read with section 36(2) is only that now for claiming deduction u/s 36(1)(vii) mere writing off debt or part thereof as irrecoverable is a substantial compliance. Our view is further supported by the decision in CIT vs Kohli Brothers Color Lab Pvt. Ltd. (2010) 186 taxman 62 (All.) and CIT vs Smt. Nilopher I. Singh 309 ITR 233 (Del.). In view of the aforementioned judicial pronouncements, the claim of the assessee is allowed. Thus, this ground of the assessee is allowed.

Finally, the appeal of the assessee is partly allowed.

4 M/s Pixel Image India Private Limited This Order was pronounced in the open court in the presence of ld. representatives from both sides at the conclusion of the hearing on 18/05/2015.

Sd/- Sd/- (N.K. Billaiya) (Joginder Singh) लेखा सद#य / ACCOUNTANT MEMBER या$यक सद#य / JUDICIAL MEMBER मब

ंु ई Mumbai; ,दनांक Dated : 18/05/2015 f{x~{tÜ? P.S/. न.स.

आदे श क %$त'ल(प अ)े(षत/Copy of the Order forwarded to :

1. अपीलाथ0 / The Appellant

2. 12यथ0 / The Respondent.

3. आयकर आय4 ु त(अपील) / The CIT, Mumbai. p4. आयकर आय4 ु त / CIT(A)- , Mumbai

5. 6वभागीय 1 त न ध, आयकर अपील+य अ धकरण, मब ुं ई / DR, ITAT, Mumbai

6. गाड$ फाईल / Guard file.

आदे शानस ु ार/ BY ORDER, स2या6पत 1 त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मब ुं ई / ITAT, Mumbai