TMI Blog2020 (3) TMI 343X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. This Court in CIT Vs. Shreyas S. Morakhia [ 2012 (3) TMI 103 - BOMBAY HIGH COURT ] also considered a claim of share broker assessee to deduction by way of bad debts under Section 36(1)(vii). This Court referred to the decision of the Supreme Court in T.R.F. Ltd (supra) and held that under Section 36(1)(vii) of the Act, the amount of any bad debt or any part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year is to be allowed as deduction in computing income under Section 28 of the Act. Thus, it is a settled position in law that after 1.4.1989, it is not necessary for the assessee to establish or prove that the debt has in fact become irrecoverable but it would be sufficient if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 1. This order will dispose of both Income Tax Appeal Nos. 1265 of 2017 and 1469 of 2017. 2. Heard learned counsel for the parties. 3. Assessee in both the appeals is the same. While Income Tax Appeal No. 1265 of 2017 relates to assessment year 2001-02, Income Tax Appeal No. 1469 of 2017 relates to assessment year 2003-04. 4. However, for the sake of convenience, we may refer to the facts in Income Tax Appeal No. 1265 of 2017. 5. This appeal under Section 260A of the Income Tax Act, 1961 ( the Act for short) is preferred by the revenue against the order dated 26.8.2016 passed by the Income Tax Appellate Tribunal, Mumbai H Bench, Mumbai ( Tribunal for short) in Income Tax Appeal No. 7175/Mum/2010 for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the field of lease and higher purchase transaction, management consultancy services etc. During the assessment proceedings for the assessment year 2001-02, Assessing Officer noticed that assessee had claimed bad debts of ₹ 13,01,04,359.00. While in three cases, assessee had written off inter corporate deposits, in respect of four cases, the written off of bad debts pertains to advances given either for purchase of vehicles or plant and machinery. Referring to Section 36(1)(vii) of the Act, Assessing Officer took the view that unless there was an admitted debt it could not be allowed as bad debt when it is written off. Besides, the debt must be incidental to the business or profession of the assessee. Taking such view, Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority rejected the claim of bad debts made by the assessee. 11. In further appeal before the Tribunal, reliance was placed in the case of T.R.F. Ltd Vs. CIT [2010] 323 ITR 397 (SC) wherein Supreme Court held that after 1.4.1989, it was not necessary for the assessee to establish that the debt in fact has become irrecoverable. It was enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Noticing that assessee had written off all the debts in question as irrecoverable in its accounts, Tribunal set aside the findings of the first appellate authority affirming the view of the Assessing Officer and allowed the claim of the assessee. Aggrieved, revenue is in appeal before us raising the above two quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically dealt with by the Supreme Court in T.R.F. Ltd (supra). Supreme Court noted the difference in the language of Section 36(1)(vii) prior to 1.4.1989 and after the amendment, post 1.4.1989. Since this aspect is relevant, Section 36(1)(vii) as it existed prior to 1.4.1989 and after 1.4.1989 are extracted hereunder:- Pre-1st April, 1989: 36. Other deductions -(1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28-- ****************************************** (vii) subject to the provisions of sub-section (2), the amount of any debt, or part thereof, which is established to have become a bad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... establish or prove that the debt has in fact become irrecoverable but it would be sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. This is because, as held by this Court, decision to treat a debt as a bad debt is a commercial or business decision of the assessee. Recording of a debt as a bad debt in his books of accounts by the assessee prima facie establishes that it is a bad debt. If the Assessing Officer disputes that the onus would be on him to prove otherwise. 18. Adverting to the facts of the present case, Tribunal recorded from the materials on record that admittedly, the debt in question had been written off as irrecoverable in the accounts of the assessee. 19. If that be the positio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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