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2022 (6) TMI 1060 - AT - Income TaxDisallowance on account of bad debts - contention of ld. AR of assessee is that neither the party supplied the material nor returned the amount of advance - assessee has shown the profit @ about 32% on its sales and the amount of bad debits is comparatively a very meagre amount. The advance was made in the year 2008 - HELD THAT:- We find that the Assessing Officer disallowed the claim of bad debts by taking a view that it cannot be considered as debtor as the name of party is not in the name of debtors. Before the ld. CIT(A), the assessee also raised alternative plea to allow the same u/s 28 as the advance could not be recovered for more than three years - CIT(A) upheld the order of AO on the ground that there is no sales to the party and its name is not in the list of debtors. On alternative plea, CIT(A) held that the assessee has not made any effort to recover the advance. We find that the Hon’ble Jurisdictional High Court in PCIT Vs Shreno Ltd. [2021 (2) TMI 188 - GUJARAT HIGH COURT] while relying upon the decision of Hon’ble Supreme Court in the case of T.R.F. Ltd. [2010 (2) TMI 211 - SUPREME COURT] held that where the assessee company write off outstanding interest on the advances paid to its subsidiary as a irrevocable when net worth of subsidiary eroded, the assessee’s claim of bad debt was to be allowed without expecting the assessee to prove the bad debts has actually become bad. Considering the binding decision of Hon’ble Jurisdictional High Court on similar ratio, we direct the AO to delete the disallowance of bad debt. Considering the fact that we have accepted the primary submission assessee and allowed the write off of advances, therefore, adjudication on the alternative plea of business loss and allowance under Section 28 of the Act have become academic.- Decided in favour of assessee.
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