TMI Blog2017 (2) TMI 408X X X X Extracts X X X X X X X X Extracts X X X X ..... the DG set. Accordingly, we delete the disallowance of ₹ 67,096/- confirmed by the learned Commissioner of Income-tax (Appeals) out of the depreciation claimed on DG set. Disallowance of professional fees - Held that:- We find that the main agreement between the assessee company and M/s. “ARBEITEN” is not clear, whether it was for revival of the assessee company or for targeting companies in the line of the business of the assessee or another lines of business, but in supplementary agreement. Part of the agreement indicates that the consultancy expenses were for the purpose of establishing a new venture and not for running of the existing business. Further, the Assessing Officer has already pointed out main agreement was not witnessed by any person. On perusal of copy of collaborator’s profile we find that it is not signed by the second party. We find that the assessee has not been able to substantiate that expenses, were in respect of the existing business. In view of above facts, we are of considered opinion that the order of learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned . Disallowance on account of bad debts written off - Held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during first appeal proceedings. 3. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in confirming the disallowance of ₹ 6,00,000/- paid on account of commission to M/S Bharat Puria Finance Investment Ltd. Vide cheque No. 521970 dated 09.02.2000 for ₹ 1,00,000/- and cheque No. 522055 dated 30.05.2000 for ₹ 5,00,000/- toward service to represent the company case before financial institutions and banks for one time settlement of loans and waiver of interest. The Ld. CIT(A) failed to appreciate that the company got big relief of ₹ 2,97,13,702/- toward waiver of interest which evident from the profit and loss account for the year credited under extra ordinary item read with note 9(V), Schedule U of Balance Sheet. The Ld. CIT(A) ignored the detailed written submission dated 16.08.2005 submitted during first appeal proceedings. 4. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in confirming the disallowance of ₹ 2,26,88,161/- on account of bad debts written off under section 36(1)(vii) of Income Tax Act. The Ld. A.O. as well as Ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed to the extent of ₹ 2,68,386/- by the insurance company and the balance amount was written off. However, according to the Assessing Officer as per the provisions of section43(1) of the Act the actual cost of the asset means the actual cost of the asset to the assessee reduced by that portion of the cost thereof, if any, met directly or indirectly by any the person or authority and, therefore, written down value/cost of the said DG set was to be reduced by the amount of insurance claim received of ₹ 2,68,386/- and, accordingly, he disallowed the depreciation @ 25%, amounting to ₹ 67,096/- on the amount of insurance claim received. 3.2 The learned Commissioner of Income-tax (Appeals) concurred with the Assessing Officer and upheld the disallowance. 3.3 Before us, the learned Authorized Representative of the assessee referred to details of insurance claims received available on page 32 to 34 of the assessee s paper book and submitted that expenditure incurred on repairs of the DG set was already claimed as revenue expenditure in earlier year and the claim against the expenditure made to the insurance company was credited as income. In the year under consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company. It was claimed by the assessee company that as per the terms of agreement with M/s ARBEITEN FUR (INDIA) Inc, the assessee company paid ₹ 50,000/- on 12/01/2001 on signing the agreement and ₹ 1,84,000/- on 25/04/2001 by account payee cheque after deducting tax at source on such professional charges, however, after sometime the said consultancy firm disappeared and the assessee could not trace despite best efforts and, therefore, the assessee company wrote off the professional fees paid of ₹ 2,34,000/- as irrecoverable balance written off. The above explanation of the assessee was not accepted by the Assessing Officer on the following grounds: (i) That agreement was not signed by any witness. (ii) That the terms of agreement contained conditions that second payment of ₹ 1,84,000/- would be paid on signing of the profile and arranging the meeting with the collaborator, however, no documentary evidence in support of approval of profile and arranging a meeting with the collaborator were filed by the assessee for justification of payment of ₹ 1,84,000/- (iii) That the agreement was silent on what kind of business the assessee company wan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of business, but in supplementary agreement, which is placed on page 41 of the assesses paper book, it is mentioned by the Managing Director of the assessee company that it was not in a position to infuse any fresh capital required in a new venture through the technical and financial collaboration arranged by the second party. Thus, this part of the agreement indicates that the consultancy expenses were for the purpose of establishing a new venture and not for running of the existing business. Further, the Assessing Officer has already pointed out main agreement was not witnessed by any person. On perusal of copy of collaborator s profile placed on pages 43 to 58 of the assessee s paper book, we find that it is not signed by the second party. We find that the assessee has not been able to substantiate that expenses, were in respect of the existing business. In view of above facts, we are of considered opinion that the order of learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no further interference on our part is required, accordingly, we uphold the same. The ground of appeal is accordingly dismissed. 5. The ground No. 3 of the appeal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst bad debts. The learned Commissioner of Income-tax(Appeals) mentioned in the impugned order that no new material was brought before him in respect of claim of deduction of bad debt written off, and accordingly, he upheld the disallowance of ₹ 2,26,88,161/- for bad debt written off. 6.3 Before us, the learned Authorized Representative of the assessee referred to pages 65 to 79 of the assessee s paper book, which are copy of accounts of debtors, whose accounts were written off by the assessee as bad debt and submitted that for claiming bad debts under section 36(1)(vii) of the Act, it was not necessary to establish, whether the debt has become irrecoverable and it was enough, if the bad debt was written off a irrecoverable in the accounts of the assessee. In support of the above contention the learned Authorized Representative relied on the decision of the Hon ble Supreme Court in the case of TRF Ltd. Vs. CIT, (2010) 190 taxmann 391 (SC). It was submitted by the learned Authorized Representative that accounts of the debtor in the books of accounts of the assessee were written off to the extent of bad debt claimed, and therefore, claim of bad debt is in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to Account, which is available on page 28 of the annual report provision for doubtful debts for current year and previous year are mentioned. According to the note also the provision for doubtful debt for the current year is ₹ 2,26,88,161/-. For clarity, the said note is reproduced as under: 8. In respect of doubtful debts and advances amounting to ₹ 6,01,34,214/- (Previous year 4,98,97,385/-), a provision for ₹ 4,26,40,805/- (previous year 1,99,52,644/-) has been made in the accounts, which in the opinion of the management is adequate after considering the chances of their recovery in due course of time and the company s position in suit filed cases. 6.7 In view of the facts mentioned in the annual report of the assessee, the claim of the assessee need further verification. In our opinion, it is appropriate to restore the matter back to the file of the Assessing Officer for verification of facts whether the assessee has written off the bad debts in books of accounts of the assessee. The Assessing Officer is directed to examine the audited books of accounts of the assessee and find out from the auditor of the assessee company for the inconsis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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