TMI Blog2015 (9) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... d that:- There is no dispute on the fact that the assessee wrote off a sum of ₹ 7.75 lac in his books of account as bad debt. The Hon’ble Supreme Court in T.R.F. Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT ) has held that after 1.4.1989 the assessee is not required to establish that the debt has become bad in the previous year and a deduction on account of bad debts is permissible on a simple write off of the amount of bad debt. The deduction on account of bad debts is permissible on write off only if the amount of debt has been taken into account in computing the income of the assessee for the instant year or an earlier year. As decided in DCIT vs Shreyas S. Morakhiya (2010 (7) TMI 455 - ITAT MUMBAI ) amount receivable by the assessee share broker on account of brokerage is a part of debt receivable by him from his clients against purchase of shares on their behalf and, once such brokerage is credited to his Profit & Loss Account and the same is taken into account in computing his income, the condition stipulated in section 36(2)(i) gets satisfied and, therefore, the write off of the debt representing the irrecoverable amount receivable from the clients against purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. SYAL AND SHRI C.M. GARG, JJ. For The Assessee : Shri Ankit Gupta, Advocate For The Department : Shri Vikram Sahay, Sr. DR ORDER PER R.S. SYAL, AM: These two cross appeals one by the assessee and the other by the Revenue arise out of the order passed by the CIT(A) on 29.6.2011 in relation to the assessment year 2008-09. 2. First ground of the assessee s appeal is against confirmation of addition of ₹ 6,20,631/-, being the amount of service tax payable u/s 43B of the Income-tax Act, 1961 (hereinafter also called the Act ). The facts apropos this ground are that the assessee is engaged in the business of sugar as a commission agent. The assessee raised bills of commission with service tax. Only commission amount was credited to the Profit Loss Account and the amount of service tax was separately taken. The AO observed that a sum of ₹ 6,20,631/- representing service tax, education cess and higher education cess (hereinafter cumulatively called as service tax for convenience) was appearing as payable in the assessee s balance sheet. On being called upon to explain as to why the amount of service tax be not disallowed u/s 43B, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r passed by the Chennai bench of the tribunal in ACIT VS. Real Image Media Technologies (P) Ltd. (2008) 116 TTJ 964 , in which it has been held that service-tax though billed but not received not having become payable to the credit of the Central Government by virtue of s. 68 of the Finance Act, 1994, r/w r. 6 of the Service-tax Rules, 1994, the same cannot be disallowed under s. 43B. No contrary decision has been brought to our notice by the ld. AR. Respectfully following the above precedents and without going deep into the nuances of the issue, we hold that since the amount of service tax in dispute was admittedly not realized by the assessee, the same could not be disallowed u/s 43B. This ground is allowed. 4. Ground No.2 is against the confirmation of addition of ₹ 7,75,650/-, being the amount of bad debts written off in the books of account. Succinctly, the assessee claimed deduction for this sum under the head Bad debts. On being called upon to explain as to how the conditions of section 36(2) were fulfilled, the assessee stated that he was simply a commission agent of sugar mills assisting in the sale of sugar by them. As per the terms and conditions with the sug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale value. The question arose as to whether the crediting of brokerage to the Profit Loss Account would satisfy the condition stipulated u/s 36(2) in respect of the amount of bad debt towards non-realisation of sale value of the shares. Answering the question in affirmative, the Special Bench held that the amount receivable by the assessee share broker on account of brokerage is a part of debt receivable by him from his clients against purchase of shares on their behalf and, once such brokerage is credited to his Profit Loss Account and the same is taken into account in computing his income, the condition stipulated in section 36(2)(i) gets satisfied and, therefore, the write off of the debt representing the irrecoverable amount receivable from the clients against purchase of shares on their behalf is allowable as bad debt. The Hon ble Bombay High Court in CIT vs. Shreyas S. Morakhiya (2012) 342 ITR 285 (Mum) has approved the view taken by the Special Bench. Similar view has been taken by the Hon ble jurisdictional High Court in the case of CIT vs. Bonanza Portfolio Ltd. (2010) 320 ITR 178 (Del) . The facts of the instant case are, mutatis mutandis, similar to those con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007-08 relevant to assessment year 2008-09, then, his sales, gross receipts or turnover for the previous year 2006-07 relevant to assessment year 2007-08 must exceed ₹ 40 lac so as to make him liable for deduction of tax at source u/s 194H of the Act. Adverting to the facts of the instant case, we find that the total turnover of the assessee for the immediately preceding year was ₹ 26.74 lac. Since this amount of total turnover for the immediately preceding year does not breach the limit of ₹ 40 lac, there can be no obligation on the assessee to deduct tax at source on commission paid in the previous year relevant to assessment year under consideration. As such, we approve the view taken by the ld. CIT(A). It is further noticed that similar view has been taken by the tribunal in the preceding year. This ground is not allowed. 9. The only other ground which survives for consideration is against the deletion of addition of ₹ 4,89,688/- made by the AO u/s 68 of the Act. There were certain creditors and debtors appearing in the assessee s balance sheet. The AO issued inquiry letters to creditors/debtors for confirming the balance of the assessee in their bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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