2013 (7) TMI 1043 - AT - Income Tax

Summary

Issues involved: Disallowance of bad debts u/s 36(2) and applicability of section 40(a)(ia) on VSAT and lease line charges.

Disallowed Bad Debts u/s 36(2):
The Revenue appealed against the CIT(A)'s order allowing deduction of bad debts u/s 36(2) amounting to Rs. 20,70,684. The AO disallowed the amount, arguing that as the assessee earned only brokerage income, the principal amount of clients could not be considered as bad debts. However, the CIT(A) relied on the ITAT Special Bench decision in the case of Shreyas Morkhia and allowed the deduction. The issue was further clarified by the Hon'ble Bombay High Court's decision in the assessee's own case for the assessment year 2006-07, where it upheld the ITAT's order based on the decision in the case of CIT vs. Shreyas S. Morakhia. Consequently, the Tribunal found no reason to interfere with the CIT(A)'s order and rejected the Revenue's ground.

Applicability of Section 40(a)(ia) on VSAT and Lease Line Charges:
The second issue revolved around the deletion of the addition of Rs. 10,08,586 by the CIT(A) concerning VSAT and lease line charges. The AO disallowed this amount under section 40(a)(ia) for non-compliance with TDS provisions. However, the CIT(A) referred to decisions by co-ordinate Benches and the Hon'ble Bombay High Court in the assessee's case for the assessment year 2006-07, where it was held that these charges did not constitute technical services. The CIT(A)'s decision was in line with the High Court's principles, and thus, the Tribunal dismissed the Revenue's ground. Consequently, the appeal of the Revenue was dismissed, and the order was pronounced on 10th July 2013.