2011 (6) TMI 913 - AT - Income Tax

Summary

Issues involved:
The judgment by Appellate Tribunal ITAT MUMBAI pertains to assessment years 2004-05 and 2006-07, addressing issues related to bad debts, treatment of income, revised computation of MAT u/s 115JB, disallowance u/s 14A, and confirmation of disallowance of bad debts.

A.Y. 2004-05:

Issue 1 - Bad Debts:
The first ground involves the confirmation of addition of Rs. 2,64,282/- as bad debts and restoration of disallowance on account of bad debts in respect of a specific company. The AO observed that the assessee failed to substantiate its claim for bad debts relating to 24 parties, including a sum of Rs. 7,36,245/- due from a company. The ld. CIT(A) upheld the addition of Rs. 2,64,282/- but directed the AO to examine the claim related to the company. The Tribunal, citing legal precedents, held that the mere writing off of bad debts in the books of account is sufficient for claiming deduction u/s 36(1)(vii). As the assessee had written off the amount as bad debts, the Tribunal ordered the deletion of the addition of Rs. 10,00,727/-.

Issue 2 - Treatment of Income:
The second ground challenges the treatment of income amounting to Rs. 11,69,675/- as falling under "Income from other sources" instead of business income. The Tribunal differentiated between interest income on deposits for business purposes and other sources, directing the AO to verify details and decide the taxable head accordingly. Interest on income-tax refund and loans were correctly treated as "Income from other sources," while finance charges on leased assets were deemed as "Business income."

Issue 3 & 4 - Revised Computation of MAT u/s 115JB:
Grounds 3 & 4 contest the non-consideration of the revised computation of MAT u/s 115JB. The AO rejected the revised computation, citing the expired time limit for filing. The Tribunal held that the revised computation should have been considered during assessment proceedings and directed the AO to reevaluate it as per law.

A.Y. 2006-07:

Issue 1 - Disallowance u/s 14A:
The first ground challenges the confirmation of disallowance u/s 14A at Rs. 3,22,775/-. Citing a precedent, the Tribunal directed the AO to compute the disallowance on a reasonable basis, without applying Rule 8D prospectively.

Issue 2 - Disallowance of Bad Debts:
Ground 2 contests the confirmation of disallowance of bad debts written off by the assessee. Following a similar decision in the previous assessment year, the Tribunal ordered the deletion of the addition of Rs. 2,15,000/-.

In conclusion, the Tribunal partly allowed the appeals for both assessment years, addressing various issues related to bad debts, treatment of income, revised computation of MAT u/s 115JB, and disallowance u/s 14A.