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2014 (11) TMI 224 - HC - Income TaxTreatment of reversal of incorrect bill entries - Whether the Tribunal was right in not treating the reversal of incorrect bill entries as write off of bad debts – Held that:- By correcting the sale price in the invoice and filing a return on such income on the basis of the corrected invoice, the assessee cannot claim benefit of bad debt for the same financial year, viz., 2004-05 - the sum on the excess billing by the assessee on account of the wrong application of surcharge of Ferry Moly and Nickel, which were used in the manufacture of products supplied to the customer, cannot partake the character of the bad debt - the assessee found that it had billed the purchaser incorrectly and therefore issued credit notes and reduced the bill amount and correspondingly revised the debts as well - the Tribunal was correct in holding that it is not a case of writing off a bad debt - The buyer was not legally or lawfully bound to pay the surcharge amount to the assessee and the assessee was not legally entitled to recover the same from the buyer - it cannot be said that there is an of element of bad debt, which has to be written off. The assessee had complied with the requirement of the RBI Master circular C-15 for regularising the transaction, which is an export sale - The excess amount on account of surcharge which is not lawfully recoverable has to be set right, for which, permission of the Reserve Bank of India is required in a procedure prescribed - That by itself will not make the amount of ₹ 1.68 crores a bad debt - If the assessee does not follow the procedure, it would entail consequent legal action under the relevant provisions of the Foreign Exchange laws - the assessee had noticed the error and rectified the same in the balance sheet before the return was filed - It offered to tax the actual income and deleted the income, which is relatable to the erroneous claim under surcharge - Hence, the Tribunal was justified in holding that there is no question of tax on a hypothetical income – the order of the Tribunal is upheld – as such no substantial question of law arises for consideration - Decided against Revenue.
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