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BHAGWATI PRASAD Versus ASSISTANT COMMISSIONER OF INCOME-TAX

2015 (11) TMI 626 - ITAT JAIPUR

Disallowance of bad debts - Held that:- The assessee was carrying out commission business and having business dealings with farmers which is not disputed by the lower authorities. As held by the hon'ble Supreme Court in the case of T. R. F. Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] if the assessee has written off bad debts as irrecoverable in the accounts of the assessee, the claim is to be allowed under section 36(1)(vii). The fact that the same were outstanding for last 3-6 years has not .....

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year 2007-08). - Dated:- 11-8-2015 - R. P. TOLANI (Judicial Member) B. L. Bhojwani for the appellant. Kailash Mangal for the respondent. ORDER 1. R. P. Tolani (Judicial Member).-The appeal is filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals), Kota dated January 21, 2013 for the assessment year 2007-08. The sole ground raised by the assessee is as under : "That the learned Commissioner of Income-tax (Appeals) has erred in confirming the disallowance .....

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#8377; 24,52,939 and claimed write off of bad debts amounting to ₹ 2,20,870. According to the Assessing Officer, the assessee did not produce adequate evidence to establish that debt has really become bad. The debts were outstanding since last 3-6 years. The Assessing Officer, however, disallowed the claim by the following observations : "The reply of the assessee was considered but not found satisfac tory. It is not clear when the assessee treated that debt as income and it is not pr .....

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on for bad debts. The other condition is that debt has become bad debt." 3. Aggrieved, the assessee preferred first appeal. However, the learned Commissioner of Income-tax (Appeals) held that the provisions of section 36(1)(vii) are subjected to provisions of section 36(2) and since the assessee is not in money lending business, the claim could not be allowed. Apropos the assessee's contention that it may be allowed under section 37, it was held that the assessee has failed to prove tha .....

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they were continuing for the last 3-6 years. The genuineness thereof is not under challenge and there is no doubt that debts have actually become bad. 5. Both the lower authorities have denied the claim on the following observations : (1) The assessee has failed to establish that the debts have actually become bad. (2) The assessee is not a money lender in terms of section 36(2). (3) The claim is not allowable under section 37 also as the assessee could not prove the loss and it was not suffere .....

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lowability of bad debts. It was provided that the debt must be established to have become bad in the previous year. This led to enormous litigation on the question of allowability of bad debt in a particular year, because the bad debt was not necessarily allowed by the Assessing Officer in the year in which the same had been written off on the ground that the debt was not established to have become bad in that year. In order to eliminate the disputes in the matter of determining the year in whic .....

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is placed on various judgments, out of which main judgments are as under : (i) T. R. F. Ltd. v. CIT [2010] 323 ITR 397 (SC) ; (ii) Deputy CIT v. Oman International Bank SAOG [2006] 286 ITR (AT) 8 (Mum) [SB] ; (iii) CIT v. Autometers Ltd. [2007] 292 ITR 345 (Delhi) ; (iv) CIT v. Krone Communication Ltd. [2011] 333 ITR 497 (Karn) ; and (v) CIT v. Morgan Securities and Credits P. Ltd. [2007] 292 ITR 339 (Delhi). 8. Apropos the second objection that about applicability of section 36(2), it is trite .....

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