TMI Blog2007 (1) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... m April 1,1989, even taking the view that the benefit could not be claimed as an automatic concomitant of writing off, an honest judgment made at that time when the assessee wrote off the debt, in the light of the events leading to that stage, could not be found fault with. Under the circumstances, the claim made in terms of section 36(1) (vii) cannot be rejected. Having regard to the scope of section 36(1)(vii) and the commercial decision which persuaded the assessee to write off, we do not find any question of law arising from the order of the Tribunal, for admission. Hence, given the understanding by the Board to the provisions also, this appeal fails. Nature of Expenses - Advertisement charges - receipts not matched - When once it is admitted that the expenditure is of revenue nature and incurred fully and exclusively in the business, a further enquiry as to whether the income has flowed thereon from the expenditure, would not be a justifiable ground for rejection. On the other hand, an expenditure satisfying the character as revenue expenditure should be allowed in the assessment. In the decision in CIT v. Southern Roadways Ltd.[ 2006 (1) TMI 64 - MADRAS HIGH COU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and it had collected security deposits from various franchisees. It is stated that the business, however, slowed down and worsened due to the tragic incidents in the USA in September, 2001. Faced with this situation, and that the franchisees had closed down their business, the assessee was left with no other option except to write off the dues from the franchisees. The assessee filed a detailed statement, showing the names of the franchisees, the amount due from them, the security deposit adjusted and the net amount written off. Such course was adopted by the assessee, on the contention that there had been a serious fall in the income earned by these franchisees. They also felt that the closure of the business by the franchisees had also motivated them to write it off as bad debt. 4. The assessing authority took the view that the assessee-company had taken a unilateral decision of closing the accounts of the franchisees and thereby claimed the debts as bad. Hence, the assessing authority rejected the plea and disallowed the claim of bad debts, thus resulting in addition of a sum of Rs. 51,57,365 to the assessee' s total income. 5. Aggrieved by the above, the assessee p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts herein and the benefit of expenditure on advertisement would not be available on a specified future period. The Tribunal further held that the benefit would be available for a long period of time, but such period of time could not be defined by any method. The Tribunal also rejected the reliance placed on the assessee\qs own case for the earlier years, on the ground that the assessee was following the cash system then. Going by the language of section 37(1) it is clear that it does not impose any condition except those that are explicitly set out in the provision that the expenditure is laid out exclusively for the purpose of business and that the expenditure being revenue in character, the mere fact that the assessee might have derived benefit in future years could not stand in the way of granting the relief on the expenditure incurred on advertisement. The Revenue has preferred this appeal on this ground also. 7. Learned standing counsel appearing for the Revenue submitted that the view of the Tribunal that the assessee would be entitled to the relief on the claim of bad debt by a mere writing off without any evidence to support the same would be totally unsustainable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment made at that time when the assessee wrote off the debt, in the light of the events leading to that stage, could not be found fault with. Under the circumstances, the claim made in terms of section 36(1)(vii) cannot be rejected. 11. Having regard to the scope of section 36(1)(vii) and the commercial decision which persuaded the assessee to write off, we do not find any question of law arising from the order of the Tribunal, for admission. 12. Learned counsel appearing for the Revenue placed reliance on CIT v. Micromax Systems P. Ltd. [2005] 277 ITR 409 (Mad) a decision of this court, relating to the assessment year 1997-98. While considering the amendment, this court held that after April 1, 1989, it is a mandatory condition that deduction actually written off and not just made as a provision, would be allowed as a bad debt. 13. Explaining the amendment, the Board issued a Circular No. 551, dated January 23, 1990 (see [1990] 183 ITR (St.) 7 ), which read as follows (page 37) : The old provisions of clause (vii) of sub-section (1) read with sub- section (2) of the section laid down conditions necessary for allowability of bad debts. It was provided that the debt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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