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2023 (9) TMI 670 - ITAT KOLKATAAddition of bad debts - assessee has shown it as a provision for bad and doubtful debts - HELD THAT:- On perusal of the financial statements as well as the statement filed by the assessee find merit in the contention of the ld. Counsel for the assessee that it was an inadvertent mistake resulting into showing the bad debts claim as provision for bad and doubtful debts. Both the lower authorities ought to have considered this argument and considering the facts should have come to a conclusion that it was a bad debts claim and not provision for bad and doubtful debts. It has been rightly submitted by assessee that, nomenclature is of no consequences rather the substance of the matter should be looked into while deciding the liability of the expenditure. Whether the assessee has rightly claimed the bad debts? - Now going through the Section 36(2)(i) of the Act, one of the condition that no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off. The said condition is duly fulfilled in the case of the assessee as the amount of bad debts claimed has already been taken into account while computing the income by way of showing it as gross receipts and the outstanding amount was standing as sundry debtors. It clearly shows that the assessee has made justified claim under section 36(1)(vii) of the Act and the same should have been allowed as an expenditure during the year. Respectfully following the ratio laid down in the case of TRF Ltd. [2010 (2) TMI 211 - SUPREME COURT] finding of the ld. CIT(A) is set aside and bad debt claim is allowed. Ground No. 2 raised by the assessee stands allowed. Addition u/s 41(1) r.w.s. 28(iv) - HELD THAT:- As undoubtedly, as on 31/03/2012, there was an outstanding liability of sundry creditors in the name of SAMPL towards the services rendered by it to the assessee. The assessee has nowhere stated that the said liability is not payable. All documentary evidence have been placed before us to prove that the liability is active and the action is from both the sides i.e., the sundry creditor is trying hard to recover its amount and the assessee is trying hard to collect the sum from sundry debtors and repay the sundry creditors. No justification at the end of both the lower authorities of having invoked the provisions of Section 41(1) pertaining to cessation of liability and treating it as income in the hands of the assessee. Accordingly, the finding of the ld. CIT(A) is set aside, addition is deleted and Ground No. 3 raised by the assessee is allowed. Disallowance of pandal decoration expenses - not a allowable business expense - HELD THAT:- The assessee has not been able to place any documentary evidence to prove that the said sum has been repaid subsequently. Confirmation of account of Amit Agencies has also not been filed. It thus adds to the suspicion created in the instant case that the said expenditure was bogus in nature and even the Inspector deputed to verify the address of the sundry creditor was not able to trace any whereabouts of the entity. Under these circumstances, as the assessee has miserably failed to prove the genuineness of the transactions incurred towards pandal decoration expenses, we fail to find any infirmity in the finding of the ld. CIT(A) in confirming the said disallowance. Thus, the addition confirmed. Ground No. 4 is dismissed. Disallowance regarding repair and maintenance expenses - interior decoration of office premises - HELD THAT:- The assessee is into the entertainment business and thus, interior decoration of the office is very important and with its help the assessee can impress its clients and can make better efforts to increase its business. Assessee also incurred office rent expenses. There is no immovable property in the form of an office under the head ‘fixed asset’. It prima facie indicates that in the rental premises assessee has incurred some interior decoration work and same is subject to change as and when needed. Therefore, considering the total turnover of the assessee and the alleged sum being hardly 1% of the gross turnover and the assessee not having any self-owned office premises, we are inclined to hold that it is a revenue expenditure and the same should have been allowed by the ld. CIT(A). We accordingly reverse the finding of the ld. CIT(A) and allow Ground No. 5
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