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2024 (4) TMI 15 - AT - Income TaxDisallowance of bad debts written off - bad debts in respect of subscriptions defaulted by the prized subscribers - As per DR bad debts in respect of subscriptions defaulted by the prized subscribers can be claimed only to the extent of the funds introduced by the Foreman and that the subscriptions that is becoming bad in future point of time cannot be held to have become bad in the current year and hence bad debts can be allowed only to the extent of the funds put in by the Foreman during the year HELD THAT:- While dismissing the appeals of the Revenue and deciding the issue in favour of the assessee by the Hon’ble High Court of Hyderabad, Telangana [2023 (6) TMI 1373 - TELANGANA HIGH COURT] we have also perused the decision of the Hyderabad Benches of the Tribunal, wherein, for the assessment years 1998-99 and 1999-2000 Tribunal, in principle, allowed the appeal of the assessee in respect of bad debts claim and remitted the matter back to the file of the Assessing Officer for verification of factual issues of the case. Hon’ble Madras High Court in assessee’s own case [2012 (4) TMI 630 - MADRAS HIGH COURT] relied on by the assessee has dismissed the appeals of the Revenue for the preposition that the unrecovered amount of the subscriber was to be construed as a bad debt and allowable as deduction under section 36 of the Act. So far as the ground raised by the Department is that the Hyderabad Benches of the Tribunal, vide its order in ITA Nos. 471 & 1049/Hyd/2002 remitted the issue of bad debts to the file of the Assessing Officer is concerned, we find that the ground raised by the Department is not correct for the reason that the Hyderabad Benches of the Tribunal, in principle, allowed the claim of bad debts and only for factual verification, remitted the matter to the AO. Therefore, it cannot be said that the entire issue, on merits, has been remitted back to the file of the AO. Keeping in view of the decision of the Hyderabad Benches of the Tribunal, Hon’ble High Court of Hyderabad, Telangana [2023 (6) TMI 1373 - TELANGANA HIGH COURT] as well as the judgement of the Hon’ble Madras High Court in assessee’s own case (supra), the ground raised by the Department is dismissed. Disallowance u/s 14A - contention of the assessee is that for the purpose of calculating the amount of disallowance under provisions of Rule 8D, only those investments that would fetch exempt income should be included - HELD THAT:- The above contention of the assessee is acceptable in view of the decision of the Coordinate Benches of the Tribunal in the case of Parry Agro Industries Ltd. [2018 (3) TMI 2031 - ITAT CHENNAI] - Just because, the Department has not accepted the decision of the Tribunal, we cannot take any different view in the absence of any higher Courts decision having modified and reversed the findings of the Tribunal. CIT(A) has rightly directed the AO to rework the computation of disallowance u/s 14A r.w. Rule 8D to restrict the same to the extent of dividend income earned by the assessee by following the above decision of Parry Agro Industries Ltd.(supra). Where there is no exempt income earned in relevant assessment year, section 14A cannot be invoked in view of the decision in the case of CIT v. Chettinad Logistics (P) Ltd. [2017 (4) TMI 298 - MADRAS HIGH COURT] as rightly followed by the ld. CIT(A). Thus, we find no infirmity in the order passed by the ld. CIT(A) with regard to the application of section 14A r.w. Rule 8D. Decided against revenue.
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