2012 (6) TMI 847 - AT - Income Tax

Summary

Issues involved: Interpretation of legal provisions u/s 36(1)(vii) of the Income-tax Act, 1961 regarding bad debts and whether the debt must be established as irrecoverable or if it is enough to be written off in the accounts of the assessee.

Summary:
1. The Appellate Tribunal ITAT Ahmedabad considered a Miscellaneous Application filed by the assessee against the Tribunal's order dated 02.03.2012 in a case for the assessment year 2004-05. The Revenue had filed an appeal against the order of CIT(A)-V, Baroda, raising six grounds of appeal. The assessee raised specific grounds related to the interpretation of legal provisions regarding bad debts u/s 36(1)(vii) of the Income-tax Act, 1961.

2. The assessee argued that the Tribunal's order did not consider the Supreme Court decision in the case of T.R.F. Ltd. Vs. CIT (2010) regarding the requirement to establish irrecoverability of debt pre and post-April 1, 1989. The Tribunal remitted the matter to the Assessing Officer for further examination as it was not determined whether the bad debt was actually written off in the accounts of the assessee.

3. The counsel for the assessee contended that post-April 1, 1989, it is sufficient for the assessee to write off the debt as irrecoverable in the books of account, without the need to establish irrecoverability. The Tribunal decided to recall the impugned order to consider the legal position on bad debts in light of the Supreme Court decision, specifically focusing on ground no.4 of the appeal.

4. Ultimately, the Miscellaneous Application was allowed, and the Tribunal directed a reexamination of the issue in the interest of justice based on the legal interpretation of bad debts as per the Supreme Court decision.

Separate Judgement: No separate judgment was delivered by the judges in this case.