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2021 (12) TMI 973 - AT - Income TaxDisallowing certain bad debts written off in respect of revenues pertaining to the financial year 2009-2010 - HELD THAT:- As deduction on account of bad debt as allowed u/s 36(l)(vii) read with section 36(2), after amendment by the Direct Tax Laws (Amendment) Act 1987, envisage merely wiring off the debt as irrecoverable in the accounts of the assessee as a condition for such an allowance. Before the amendment by the DTL (Amendment) Act 1987, of course, there was a condition to establish that the debt has become bad. The Hon'ble Supreme Court in the case of T.R.F. Limited vs C.I.T [2010 (2) TMI 211 - SUPREME COURT] has clearly observed that after 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee - we are of the view that the assessee is entitled to claim deduction on account of bad debts and the AO is directed to allow claim of assessee. Deduction u/s 80-IC in respect of the amount added back under Section 40(a)(ia) - HELD THAT:- There is no dispute regarding genuineness of the expenditure that was disallowed and the fact that the said expenditure is otherwise allowable as deduction in computing income from business. In such circumstances, even if the expenditure is disallowed u/s.40(a)(i) of the Act, the result will be that the disallowance will go to increase the profits of the business which is eligible for deduction u/s.80-IC of the Act and consequently the deduction u/s. 80-IC of the Act should be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. Hon'ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. [2010 (6) TMI 65 - BOMBAY HIGH COURT] and Hon'ble Gujarat High Court in the case of ITO vs. Kewal Construction, [2013 (7) TMI 291 - GUJARAT HIGH COURT] have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Chapter VIA should be allowed on such increased profit. In view of the aforesaid decisions and the CBDT Circular No.37/2020, we hold that the revenue authorities erred in not allowing deduction u/s.80-IC. The claim of the assessee in this regard is accepted and the AO is directed the give necessary relief to the assessee in this regard. Deduction under section 80-IC on reversal of commission expenses - Finding of the AO and the CIT(A) is that the assessee failed to produce evidence or explanation as to how the amount of commission was disallowed towards the unit claiming deduction u/s.80-IC of the Act. This finding has not been rebutted by the assessee in the proceedings before the Tribunal also. Therefore Grd.No.1 b raised by the assessee is dismissed.
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