TMI Blog2010 (11) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... n - But as the details of such loss or profit is not available , remit back this issue to the Assessing Officer for the limited purpose of examining whether STPI set up by the assessee has earned positive income for the impugned assessment year as an independent unit - If such independent profit is available in the hands of the assessee, the assessee is entitled for deduction u/s 10A. Bad debts written off - it clear that wherever the assessee has credited gross amounts of the bills issued to the customers and the assessee has not realized a part of that amount, the said unrealized part should be allowed as a deduction in the hands of the assessee as business loss - This needs verification - Therefore, this issue is set aside and sent back to the Assessing Officer for quantifying such unrealized bill amounts caused because of the non acceptance of the clients of the assessee - Once they are quantified, the officer has to verify whether the said amount has already been offered by the assessee as income in its Profit and loss account - If these two conditions are satisfied, then the Assessing Officer may allow the deduction as business loss and pass orders in accordance with law. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. vs. DCIT. 5. In first appeal, the CIT(A) found that there is no material on record to show that the new STPI unit of the assessee was formed by splitting up/reconstruction or by transfer of machine or plant of a business already in existence. He observed that the assessee did not purchase any plant and machinery because of the nature of the activities carried on by the assessee. The activity of the assessee was to depute its trained personnel to the work sites of the clients in South Korea. As all the activities were carried on in the client premises at South Korea, it was not necessary for the assessee to set up infrastructural facilities in India. The CIT(A) also found that plant and machinery were purchased by the assessee mainly in the form of computers in the subsequent years as and when need arose for the same. Therefore, the CIT(A) found that there is no case of any splitting/reconstruction of an existing business. The CIT(A) further held that in the light of the judgment of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd., vs. CIT, 196 ITR 188 the new unit set up in the leased premises and paying rent by the new unit to the existing business did not cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontext of deductions provided under Chapter VIA. The Hon'ble Supreme Court was examining the effect of such deductions in the light of the over all limiting provision contained in sec. 80AB. But in the present case, the claim of deduction of the assessee is not under Chapter VIA. The deduction is claimed u/s 10A. Therefore, the said decision does not apply. 9. Regarding the alternative contention of the Revenue, we agree with the finding of the CIT(A). The judgment of the Hon'ble Supreme Court in the case of IPCA Laboratories Ltd. is not in the context of sec. 10A or any such other item which would not form part of the total income of an assessee as provided in Chapter III of the Income-tax Act 1961. The judgment of the Hon'ble Supreme Court was delivered in the context of examining the effect and scope of sec. 80AB while giving the deductions provided under Chapter VIA of the Income-tax Act 1961. The Hon'ble Court held that sec. 80AB is having an overriding effect on the deduction provided under Chapter VI A and, therefore, such deduction should be controlled by the provision of law contained in sec. 80AB. In the present case, the deduction has been claimed by the assessee u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issue very carefully. The amount is not realized by the assessee from the bills issued to its customers. In fact, it did not per take the character of bad debts. A debt means an actionable claim. An actionable claim is an amount existed, admitted, and acknowledged both by the creditor and the debtor. If such debts are written off in the books of accounts it might be qualified as deduction u/s 36 of the Income-tax Act 1961. In the present case, the situation is different. The assessee is issuing bills say for Rs.100/-. For various reasons pointed out by the client to the assessee, the client acknowledges the liability to pay only Rs.80/-. The balance Rs.20/- was not paid by the client and not realized by the assessee. In such circumstances what actually happens is that the client accepts a debt of Rs.80/- alone. Therefore, the entire bill amount of Rs.100/- cannot be considered as an amount due from the client. The amount due from the client is only Rs.80/-. If that amount of Rs.80/- is paid by the assessee, there is no case of any bad debts. But in the present case, the assessee has already credited Rs.100/- in its profit and loss account, against which the assessee is getting Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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