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TMI Blog2013 (12) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... had debited a sum of Rs. 32,50,530 as bad debts written off. The sum was claimed as deduction while computing its total income. The Assessing Officer disallowed the claim of the assessee on the ground that the assessee had not established that the debts have become bad. Against the aforesaid decision, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). Before the Commissioner of Incometax (Appeals), the assessee submitted as follows : "(a) The amount of bad debts written off to the profit and loss account represents amount outstanding from debtors against designing and brand consultancy services rendered ; (b) The bad debts have been accounted as part of income and have entered in the quantification of total income of the assessee of the relevant years in which the corresponding invoices were raised and accounted ; (c) Write off was on account of non-acceptance of the job(s) by the customers, dispute(s) regarding the bill amount(s) and after constant follow-up client did not pay. Amounts were written off based on the evaluation and honest judgment reached by the management of the assessee after taking into account the relevant factors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law with effect from April 1, 1989 has held that from April 1, 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. In this judgment, the hon'ble court followed the ratio of earlier decisions in the case of Vijaya Bank v. CIT [2010] 323 ITR 166 (SC) and Southern Technologies Ltd v. Joint CIT [2010] 320 ITR 577 (SC). Accordingly, this ground of appeal is allowed." Aggrieved by the order of the Commissioner of Income-tax (Appeals), the Revenue has raised ground No. 2 before the Tribunal. The learned Departmental representative relied on the order of the Assessing Officer, while learned counsel for the assessee reiterated the submissions as were made before the Commissioner of Income-tax (Appeals). We have heard the rival submissions. Prior to April 1, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word "established", which earlier existed in section 36(1)(vii) of the Income-tax Act, 1961 ("Act", fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource under section 194J of the Act treating the payment as a payment for professional services rendered. According to the Assessing Officer, the payment was being made in the normal course of business and therefore the payment should have been considered as salary paid to an employee. The Assessing Officer was of the view that there was an employer-employee relationship between Ms. Meeta Malhotra and the assessee. The Assessing Officer therefore concluded that the payment in question was a salary. The Assessing Officer also noticed that in the return of income filed by Ms. Meeta Malhotra, she had declared the sum of Rs. 46 lakhs as professional charges received from the assessee and claimed expenditure of Rs. 36,47,785 and reflected the income of only Rs. 9,52,215. The Assessing Officer was of the view that had the assessee treated the payment in question as salary, then Ms. Meeta Malhotra can claim only permissible deductions under the head salaries and not a sum of Rs. 36,47,785. The Assessing Officer therefore concluded as follows : "7.11 The assessee-company has misrepresented the above 'salary' of Rs. 46,00,000 as 'professional charges' and deducted tax at source under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act), even then a disallowance of the expenses under section 40(a)(ia) of the Act could not have been made as those provisions do not apply to payment of salaries. The Commissioner of Income-tax (Appeals), on a consideration of the above submissions, held as follows: "4.2. Having examined the ratio adopted by the Assessing Officer and the grounds relied upon by the appellant, I find that once the commercial expediency of a payment is not questioned, and the TDS is actually effected, the question of a perceived misapplication of the particular TDS provision becomes academic. The appellant has accepted its liability to deduct the tax at source. A consultancy agreement exists, and its genuineness is not contested by the Assessing Officer with any rigour. Various courts have held that it is not for the Department to dictate the operations of an assessee's business, or dictate to him the extent of commercial expediency to be pursued. The technical contribution of the consultant to the appellant-company is not contested. I also agree with the defence of the appellant that the provisions of section 192 being outside the purview of section 40(a)(ia), the Assessing Officer has put himse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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