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TMI Blog2015 (12) TMI 843X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case are : The assessee is a company registered under the provisions of Companies Act, 1956. The assessee company is engaged in manufacturing and trading of electronic equipments like colour Monitor, UPS. CD Rom, DVD, Modem, Mother Board and Auto Electronic Components. The assessee is also providing Engineering and Design services and IT services. The assessee filed its return of income for the assessment year 2010-11 on 14-10-2010 declaring total income as Nil. The assessee had set off its business income of Rs. 63,03,346/- against brought forward business losses of assessment year 2009-10. The case of the assessee was selected for scrutiny. Accordingly, notice u/s. 143(2) was issued to the assessee on 25-08-2011. During scruti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on behalf of the assessee strongly supported the findings of Commissioner of Income Tax (Appeals). The ld. AR submitted that for claiming writing off of bad debts, the assessee has to only write off the bad debts in its books of account. It is for the assessee, not the Department to see whether the debts have become bad and irrecoverable. In support of his submissions, the ld. AR placed reliance on the judgment of the Hon'ble Supreme Court of India in the case of TRF Limited Vs. CIT reported as 323 ITR 397 (SC). The ld. AR further submitted that Kinetic Motor Co. Ltd. is one of the group concerns and is a loss making company. The assessee could not recover debts from the said company, as the company was in financial crisis and even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by vendors to KMCL till that date was to be discharged by KMCL. At the time of sale the appellant was having balance of approx. 237 lacs to be recovered from KMCL. Out of that amount of Rs. 110 lacs was recovered and balance amount of Rs. 127 lacs was written off as Bad Debts. The Assessing Officer treated this arrangement as restructuring of finance necessitated by financial constraints of the group as a whole and not on account of irrecoverability of the Bad Debts in respect of KMCL. To understand the issue, the learned counsel of the appellant was asked to give the details of settlement and payment by KMCL to other vendors compared to the total Debts, The appellant submitted that percentage of amount paid in respect of total dues was 57 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions filed before the Commissioner of Income Tax (Appeals) where in the summarized position of the debts settled by the Kinetic Motor Co. Ltd. was furnished. The same is reproduced here-in-under: Total Level Other than Bank 1. Total amount payable before the time settlement Rs.100,59,42,834 Rs.59,95,10,775/- 2. Total paid by KMCL as one Time settlement Rs.57,53,48,899 Rs.25,10,96,892 3. Percentage of amount paid to total dues 57.19% 41.88% 4. Percentage of amount paid to KCL to total dues 46.32% 46.32% 8. A perusal of the facts clearly shows that Kinetic Motor Co. Ltd. was in financial distress and it could pay only part of its debts. Since, the assessee in its books of account had written off bad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of Embassy Classic P. Ltd. Vs. ACIT (supra) will have no application in the facts and circumstances of the present case. 10. The ld. DR has also placed reliance on the decision of Hon'ble Madras High Court in the case of South India Surgical Co. Ltd. Vs. ACIT (supra). In the said case the assessee had written of the debts due from the Government as bad debts. The Hon'ble High Court held that it would be preposterous to consider that the Government was not in a position to discharge its acknowledged debt. It might be due to certain fund-flow problem and priority between different needs and there is postponement in discharging certain liability by the Government. There was no negation of claim nor has any Govern ..... X X X X Extracts X X X X X X X X Extracts X X X X
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