TMI Blog2019 (12) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... actually become bad during the year. Thus order of the learned CIT(A) cannot be sustained as the assessee has written off the bad debts as same have been offered to tax by the assessee in the earlier year and accepted by the Revenue - Decided in favour of assessee. - ITA No. 5957/Mum/2016 - - - Dated:- 17-12-2019 - Shri A.D. Jain, Vice President And Shri Rajesh Kumar, Accountant Member For the Appellant : Shri Salil Kapoor And Shri Shagun Mahajan For the Respondent : Shri Awungshi Gimson ORDER PER RAJESH KUMAR, AM This appeal filed by the assessee is directed against the order of the CIT(A)- 16, Mumbai dated 21.07.2016 and it relates to A.Y. 2012-13. 2. The issue raised in Ground No. 1 is general in nature and needs no adjudication. The issue raised in Ground Nos. 2 3 is against the order of the CIT(A) upholding the disallowance of ₹ 30,66,21,626/- made by the AO in respect of bad debts. Ground Nos. 2 3 are extracted below for the sale of ready reference : - 2. On the facts and in the circumstances of the case and in law, the Lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,41,86,660/- RIL 11,40,94,665/- TOTAL 80,34,41,720/- 4. The assessee could not realise the said bills despite hectic follow up with Reliance Communication Ltd. and Reliance Telecommunication Ltd. and ultimately a settlement agreement was reached with those companies that those companies will not make payment of ₹ 38,34,42,562/- out of the total claim of ₹ 80,34,41,720/-. The assessee also submitted before the AO that the assessee was incorporated on 27.05.2008, which was established as a joint venture between Alcatel Lucent India Ltd. holding 67% in the share capital and Reliance Communication Infrastructure Ltd. holding 33% in share capital. The AO after considering the contention of the assessee came to the conclusion that the said bad debts of ₹ 21 crores and not including ₹ 17 crores, aggregating to ₹ 38,34,42,562/- were nothing but sham transactions and colourable device on the ground that the assessee is influenced by its shareholders who have substantial control over the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assesse Company claimed that it was a bad debt. The Tribunal referred to the fact that one Mr. Harshad P. Chokshi is holding substantial shares in the assessee -company and also in SNFPL. This shows that there was a book entry wherein the assessee claimed bad debts as a means to reduce taxable profits. The reasons assigned in para 12 of the order of the Tribunal therefore, are essentially in the backdrop of the peculiar facts and circumstances emerging from the record. In such circumstances, we do not find any substantial questions of law arising for determination and consideration in this Appeal. This is not a case where there is a controversy or the debt written as bad in the accounts being required to be established as indeed bad debt. This is a controversy where the claim of bad debts was raised to avoid tax liability. That having been proved and the entire version is termed as a mere eye-wash, that this is not a fit case where substantial Questions of law arise for determination in this appeal. The appeal is devoid of any merits and is dismissed. 6.1.5 While deciding the issue, regarding allow ability of bad debts in the cases of related parties, the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,this would have caused huge loss to the assessee in the form of impact on assessee s business operations due to the uncongenial business relation with the Reliance entities. The learned A.R. submitted that it is not the case of the Revenue that services in respect to which debt was due were not rendered. Neither it has been alleged that the conditions prescribed in section 36(1)(viia) and 36(2) were not satisfied. The learned A.R. contended that merely because, the debts were due from sister concerns cannot form the basis for holding the same were sham transactions. The learned A.R., laying more stress on the fact that during the four years commencing from A.Y. 2009-10 to A.Y. 2012-13, the assessee has offered a revenue of ₹ 829 crores and the same has been accepted by the Revenue. The learned A.R. contended that once the revenue from rendering such services were accepted as genuine transactions, any loss due to non-recovery of the said amount cannot be held to be non-genuine and re-characterised as a sham transactions. The learned A.R. argued that the AO has failed to bring on record any material to show that the debts, which were written off, were not genuine. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce entities. Dispute arose between the assessee and the Reliance entities to the tune of ₹ 80,34,47,720/-, which was settled vide deed of settlement dated 24.12.2011 wherein it has been provided that Reliance entities, i.e. Reliance Communication Ltd and Reliance Telecom Ltd. would pay ₹ 42 crores in instalments by March, 2012 and the balance would not be paid by the Reliance entities and the assessee company should issue credit notes to the respective parties. Accordingly a sum of ₹ 38,34,42,562 was agreed not to be paid to the assessee by Reliance Communication Ltd and Reliance Telecom Ltd . Out of the said amount, ₹ 9,44,67,515/- was adjusted against current year revenue of the assessee company and ₹ 7,68,20,936/- was adjusted towards deferred revenue pertaining to the customers while ₹ 21,21,54,111/- pertained to dealings done prior to March 31, 2011 which has been disclosed separately as settlement of claim in the Profit Loss Account. The AO rejected the claim of the assessee by making disallowance of bad debts ₹ 38,34,42,562/- by holding that the amounts written off were sham transactions and was a methodology to reduce tax liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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