TMI Blog2011 (2) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... es were made pursuant to an agreement for contractual work - No such agreements were produced before us for substantiating such claim - Further, from the assessment order and ld.CIT(A)'s order, no such facts emanate - The findings of the ld. Assessing Officer is that the loan had been given to a sister concern and not for the business of the appellant - This fact has not been disproved before the ld. CIT(A) - Hence, matter be remitted back to the file of ld. CIT(A) in order to grant one more opportunity to the assessee to establish the bonafide of its claim. - ITA No. 565/Bang/2010 - - - Dated:- 11-2-2011 - George George K, A. Mohan Alankamony, JJ. Sharath Rao, CA for the Appellant G.V. Gopala Rao, CIT, DR, for the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed u/s. 143(1) of the Act on 18.2.2004, subsequently selected for scrutiny and assessment completed u/s. 143(3) of the Act after reference u/s. 92CA of the Act on 28.2.2006. 4. The ld. AO disallowed the claim of the assessee for writing off bad debts to the tune of Rs.1,94,99,064 arising out of export turnover since the requisite approval from the appropriate authorities were not obtained. Ld. CIT(A) upheld the order of ld. AO and held as under: "7.2 ...... I see no strength in the arguments made above. Firstly the Board Meeting shows the name of the company vide Annexure-1 as Net Kraft private Ltd. Even letters for obtaining approval for write off has been written for M/s. Net Kraft Private Limited and not the appellant. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Rs.35 lakhs on the ground that the advances were made to the assessee's sister concern and is not a bad debt occurring in the normal course of business. Ld. AO's belief was that such expenses are not allowable as per the provisions of section 36(2) of the I.T. Act. Ld. CIT(A) upheld the order of the AO with the following observations: "8.4 The above were considered. Evidences filed show that Aishwarya, Belting and Allied Industries (P) Ltd. (henceforth referred to as ABAI) 116-B, Dada Nagar, Kanpur - 208022 had taken an intercorporate deposit from M/s. Net Kraft (I) Ltd., Bangalore through two cheques of Vijaya Bank Kanpur, each of Rs.5 lakhs dated 08-05-01 and 31-05-2001 i.e., A.Y. 2002-03. However, the same had been returned back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... These advances were made to independent software companies in India in relation to a sub-contract of software development that the appellant had entered into. However, subsequently after short period of time, these companies were untraceable and also did not render any software development service to the appellant. Ld. AR forcefully submitted that the appellant had claimed these amounts as bad debts as per the provisions of section 36(1)(vii) read with sec. 36(2) of the Act. The appellant had also obtained a certificate from the Chartered Accountant for the purpose of Exchange Control Regulations wherein invoice-wise details of the amounts written off have been provided. The appellant had complied with the formalities under Foreign Exchange ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case Southern Technologies Ltd. v. JCIT 320 ITR 577 (SC), wherein it was held that the RBI directions of 1998 are merely prudential norms regarding presentation of non-performing assets provision in the balance sheet; they do not touch upon the nature of expense to be decided by the Assessing Officer in the assessment proceedings under the Income Tax Act. Though this judgment is rendered with respect to compliance of RBI Directions on prudential norms regarding presentation of non performing assets, the ratio of this decision has a bearing on the instant case on hand. We have also perused the case Pearl Agencies v. Dy. CIT Delhi referred supra wherein it was held "As regards the question as to whether the debt in question really became ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) of the Act with respect to the unrealized bills from export turnover to the tune of Rs.1,94,99,064. 10. With respect to the advances made to corporates for Rs.35 lakhs the assessee has stated that these advances were made pursuant to an agreement for contractual work. No such agreements were produced before us for substantiating such claim. Further, from the assessment order and ld.CIT(A)'s order, no such facts emanate. The findings of the ld. Assessing Officer is that the loan had been given to a sister concern and not for the business of the appellant. This fact has not been disproved before the ld. CIT(A). However, in the interest of justice, we are of the considered view that this matter be remitted back to the file of ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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