TMI Blog2014 (11) TMI 506X X X X Extracts X X X X X X X X Extracts X X X X ..... as irrecoverable in the accounts of the assessee - "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 as decided by the Hon'ble Supreme Court – the matter is remitted back to the limited purpose - Decided partly in favour of assessee. - T.C (A).Nos.1136 of 2009, 399 of 2009, 184 of 2014 and 737 of 2014 - - - Dated:- 22-9-2014 - MR. R. SUDHAKAR AND MR. G.M. AKBAR ALI, JJ. For the Appellant : Mr.V.S Jayakumar For the Respondent : Mr.T. Ravikumar JUDGEMENT Per: R Sudhakar: The four appeals are filed by the assessee in relation to the Assessment Years 2002-03, 2003-04, 2004-05 and 2005-06 and all the appeals are admitted on the following substantial questions of law: T.C.A.No.399 of 2009 1. Whether the Income Tax Appellate Tribunal is right in law in disallowing the appellants claim of bad debt which the appellant has written off as irrevocable in the books of account? 2. Consequent to the amendment to section 36(1)(VII) w.e.f 1.04.1989 whether the Income Tax Appellate Tribunal was right in law in disallowing the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same did not result in benefit of enduring nature? T.C.A.No.737 of 2014 1. Whether the Income Tax Appellate Tribunal was right in disallowing the appellant's claim of Bad debt which the appellant has written off as irrevocable in the books of account? 2. Whether the Income Tax Appellate Tribunal was right in law in disallowing the appellant's claim of Bad Debt which the appellant has written off in consonance with its management policy? 3. In consequence to the amendment to section 36(1)(vii) with effect from 01.04.1989, whether the Income Tax Appellate Tribunal was right in law in disallowing the appellants claim of Bad Debt under the pretext that the appellant has not adduced any evidence to the effect that the debt has become bad? 4. Whether the Income Tax Appellate Tribunal was right in law in upholding the findings of the Commissioner (Appeals), that the appellant is required to account for the interest on debts which are overdue for more than 90 days and which are written off by the appellant as bad debts on their becoming over due for more than 120 days . 2. The appellant is a private limited Company engaged in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to establish that the debt had become bad in the previous year. He submitted that now the requirement is only write off of such debt irrecoverable in the books of account of the assessee. He placed reliance on the following judgments: i) CIT vs Brilliant Tutorials P Ltd reported in the case of 292 ITR 399 ii) DCIT vs SREI reported in (2006) 10 SOT 722 (Del.); and iii) CIT vs Autometers Ltd (2007) 210 CTR (Del) 339 2. On the other hand, the Departmental Representative submitted that the management policy followed by the assessee is very inconsistent with the provisions of the Act. Only bad debts can be written off as bad and not any other debt. The write off is voluntary act of the assessee and not a natural business incidence. What was written off is a good debt and it was only within 120 days of advance made against securities. There is an asset from which assessee realized the debt. He strongly supported the orders of the lower authorities. He relied on the Madras High Court decision in the case of South India Surgical Co Ltd vs ACIT (287 ITR 62) and also the RBI guidelines. 3. We have heard the rival submissions and perused the materials on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held against the assessee. 9. In so far as the interest on the bad debts is concerned, the authorities below and the Tribunal came to hold that the assessee had not offered the interest income for 120 days but only for 90 days. Therefore, the order of the Original Authority was confirmed, against which, the present appeals are filed. 10. At the outset, it was pointed out by the learned counsel for the appellant that the issue relating to the claim of bad debts, is covered by the decision of the Hon'ble Supreme Court in (2010) 323 ITR 397 (T.R.F. Ltd vs Commissioner of Income Tax), which is extracted as under: Heard learned counsel on both sides. 2. In these appeals, we are concerned with asst.yr.1990-91 and asst.yr.1993-94. Prior to 1st April, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word established . which earlier existed in s.36(1)(vii) of the IT Act, 1961 ( Act , for short). 3. For the sake of clarity, we reproduce herein below provisions of s.36(1)(vii) of the Act, both prior to 1st April, 1989 and post-1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (for the Assessment Year 2002-03) and ITA No.2114/MDS/2006(for the Assessment Year 2003-04) could be decided, the date on which, these two appeals were taken up for final decision, there was no judgment of the Hon'ble Supreme Court available. Therefore, the Tribunal decided the matter on the basis of the law as it stood then. 13. However, when the other two appeals in ITA Nos.752/MDS/2013 (for Assessment Year 2004-05) and 800/MDS/2014 (for Assessment Year 2005-06), were decided on 5.7.2013 and 9.6.2014, the decision of the Hon''ble Supreme Court was very much available. But the learned counsel who appeared, failed to bring to the notice of the Tribunal the decision of the Hon'ble Supreme Court which is squarely applicable to the facts of the case. However, the Tribunal, relying upon the earlier order, dismissed the two appeals. Therefore, the assessee is before this court for all four Assessment Years on a common question which revolves around the issue of bad debt and whether it could be written off. 14. The decision reported in (2010) 323 ITR 397 (TRF Ltd vs Commissioner of Income tax) is relatable to Assessment Years 1990-91 and 1993-94 and the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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