TMI Blog1989 (5) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... merely writing few letters it could not be said that the debt become bad, that no legal action was taken by the assessee. He, therefore, disallowed the claim of assessee for deduction of Rs. 30,000 as bad debt. 3. Being aggrieved the assessee carried the matter in appeal before the CIT(A). The CIT(A) was of the view that the assessee has not discharged the burden of proving that the debt became bad during the previous year relevant to the assessment year in question. He further pointed out that the debtor was very much in existence and having a sound financial position. He, therefore, confirmed the disallowance. 4. Being aggrieved the assessee has come up in second appeal before us. The learned counsel for the assessee, Shri J.P. Shah, submitted that inspite of requests time and again made by the assessee for payment of Rs. 30,000 the debtor was reluctant to pay the amount on the ground that the work done by the assessee was not satisfactory and subsequently they have not only refused the payment but rather also threatened to recover damages from the assessee. The assessee was new in the line of business and, therefore, the expediency of the business it had written off the du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the Revenue to agitate this point for the first time in the reference. However, in the instant case the assessee-company had posted entries in the profit and loss account and corresponding entries were posted in the Bad Debt Reserve Account. These entries coupled with the deduction of Rs. 2,37,537 from advances in the balance-sheet of the assessee-company would be compliance with the condition with regard to the writing off of the debt in question in its books of account for the relevant year of account. The mere passing of a decree in favour of the assessee-company did not necessarily indicate that there was a possibility of recovering the debt. Subsequent events clearly showed that the assessee-company was justified in concluding that the amount was not recoverable in the year in question. Insolvency proceedings were initiated against the firm and its partners. In summary Suit No. 532 of 1966, the firm and its partners were granted leave to defend on condition that Rs. 1,00,000 were deposited in the Court. No deposit was made and ultimately the consent decree was passed. This circumstance also indicated that the financial circumstance of the firm and the partners are such that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onus payable under the Bonus Act could not be allowed. Thus he disallowed a sum of Rs. 37,468. The assessee carried the matter in appeal before the CIT (A) who also took the view that the claim of the assessee could not be allowed in view of the provisions of s. 36(1)(ii). 9. In second appeal before us, the assessee's learned counsel Shri J.P. Shah submitted that in addition to the bonus payable under the Bonus Act the assessee had paid an ex-gratia bonus to the workers as incentive bonus or customary bonus and that can be allowed under s. 37(1) of the Act. For this he relied on the decision of the Madras High Court in the case of CIT vs. Sivanandha Mills Ltd. (1985) 156 ITR 629 (Mad). On the other hand, the learned Departmental Representative relied on the orders of the authorities below. He further added that the assessee has not claimed that this was a customary bonus or incentive bonus or any bonus which is allowable under proviso 2 to s. 36(1)(ii). 10. After hearing the rival submissions we find that the facts are not in dispute that the assessee has paid Rs. 37,468 in addition to the amount of Rs. 48,000 as bonus payable as per the Bonus Act. This issue has been conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that ground the assessee is entitled to weighted deduction. He further submitted that the case relied on by the learned ITO viz. CIT vs. Southern Sea Foods (P) Ltd. (1982) 31 CTR (Mad) 23 : (1983) 140 ITR 855 (Mad) is not applicable on the facts of the case as in that case the commission was paid to other concern in India and not outside India. He also submitted that whether the assessee has maintained any agency for a year or for a week is not material and what is material is the fact whether the assessee has maintained an agency outside India and the purpose of this allowance is to bring foreign currency by export of more and more goods. Therefore when the commission is paid for the sale to an agent outside India it is fully eligible for weighted deduction. 13. The learned Departmental Representative Mr. Sharma, on the other hand, relied on the decision in Southern Sea Foods and emphasised that weighted deduction can be allowed only when the expenditure is on maintenance of an agency outside India for sale promotion. 14. After hearing the rival submission, the undisputed fact is that the assessee has paid an amount of Rs. 42,594 to a foreign agent M/s Overseas Trade Serv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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