2010 (11) TMI 1046 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(Appeals) regarding deletion of addition for personal expenditure and disallowance of bad debts written off for assessment year 2007-08.

Issue 1 - Deletion of addition for personal expenditure:
The assessee had debited a sum for professional charges, including amounts for consultancy services, ESOP scheme preparation, software consultancy, and HR consultancy. The AO disallowed the expenditure, questioning its nexus with the business. However, the ld. CIT(A) allowed the expenses, stating that they were revenue in nature as they did not lead to acquisition of capital assets or enduring benefits. The Tribunal upheld this decision, emphasizing that the expenditures were for staff welfare, business efficiency, and revenue purposes, hence deductible in computing total income.

Issue 2 - Disallowance of bad debts written off:
The assessee wrote off a sum from the account of a company and claimed it as a bad debt deduction. The AO disallowed the claim, but the ld. CIT(A) allowed it, noting that the debt was previously accounted for and properly written off. The Tribunal observed that the debt was for services rendered, had been accounted for earlier, and met the conditions under section 36(1)(vii) for deduction. As the write-off was genuine and met legal requirements, the Tribunal held that the assessee was entitled to the deduction. Consequently, the appeal against the disallowance of bad debts written off was dismissed.