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2016 (6) TMI 134 - HC - Income TaxClaim to write off on account of advance disallowed - year in which bad-debts crystallized - mercantile system of accounting - Held that:- Though the amounts relate to the period April 1998 to March 1999, the dispute of liability was ultimately crystallized during the period under consideration by the report of the Chartered Accountant referring, inter alia that the CBL has insured amount during that period and it was declared as sick industry by BIFR and any amount from such industry is not recoverable as there is prohibition contained in the Sick Industries Act. Then only the assessee has determined finally that the amount is irrecoverable from CBL and accordingly it is written off in the P&L Account under the head “advances of doubtful recovery written off”. This claim can never be comprehended by the scope of section 36(1)(vii) of the I.T. Act. As per the mercantile system of accounting and principles of Real Income Theory, the claim of the assessee during the period under consideration though related to the period April 1998 to March 1999 is allowable as the claim is finally crystallized during the period under consideration. In that view of the matter, the view taken by the department in disallowing the claim of the assessee is not sustainable for legal scrutiny and the same is hereby directed to be deleted. - Decided in favour of assessee
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