2016 (8) TMI 1317 - HC - Income Tax

Deduction of claim on account of Provident Fund (PF) and ESI - Held that - The privilege fees being a revenue expenditure is required to be allowed as a revenue expenditure. This court in the aforesaid case has also allowed the claim of the assessee in so far as payment of PF & ESI etc. is concerned on the finding of fact that the amounts in question were deposited on or before the due date of furnishing of the return of income and taking in consideration judgment of this Court in Commissioner of Income Tax Vs. State Bank of Bikaner & Jaipur and Commissioner of Income Tax Vs. Jaipur Vidyut Vitaran Nigam Ltd. (2014 (5) TMI 222 - RAJASTHAN HIGH COURT) and accordingly both the questions are covered by the aforesaid judgment and against the revenue. Claim about bad debt - Held that - CIT (A) as well as the Tribunal has taken into consideration the judgment of the Apex Court in the case of T.R.F. Ltd Vs. CIT (2010 (2) TMI 211 - SUPREME COURT) and recorded a finding of fact that the said amount having become irrecoverable the assessee has rightly written off the same and merely because the assessee has not filed any claim that could not be considered to be a ground for disallowing a bad debt. Admittedly the amounts were lying outstanding for the last couple of years and the assessee has rightly written off the said amount in the books of account and merely because a suit was not filed and that cannot be considered to be a cogent reason to disallow the claim which became bad. One need not incur good money for recovery of the so called irrecoverable or a bad money and file a suit which remains pending for years and with uncertainty. - Decided in favour of assessee

Summary

Issues:
1. Claim of privilege fees and deduction under Sec. 36 (1) (va)
2. Claim of bad debt write-off

Analysis:
1. Claim of privilege fees and deduction under Sec. 36 (1) (va):
The Counsel for the revenue acknowledged that the main issue regarding the claim of privilege fees and deduction under Sec. 36 (1) (va) has been previously addressed in a judgment related to the same assessee for different assessment years. The Court had ruled in favor of the assessee in that judgment. The Court reiterated that privilege fees are to be treated as revenue expenditure and allowed the claim of the assessee for Provident Fund (PF) and ESI payments as they were deposited before the due date of income tax return filing. The Court cited previous judgments to support its decision, thereby dismissing the revenue's contentions.

2. Claim of bad debt write-off:
The revenue sought to challenge the write-off of a bad debt amounting to a specific sum by the assessee. The revenue argued that the debt write-off was not adequately justified as the assessee failed to provide evidence on how the debt turned bad and did not make efforts for recovery. However, the Court found that the debt in question was related to outstanding supplier balances from previous years, and the assessee had explained that the advances were for business purposes but not utilized. The Court noted that both the CIT (A) and the Tribunal had accepted this explanation and allowed the write-off under Sec. 36 (1) (VII) of the Act. The Court referenced a Supreme Court judgment to support the decision that the debt was rightly written off as irrecoverable. It emphasized that the age of the outstanding amounts justified the write-off, and the absence of a legal claim did not invalidate the bad debt status. The Court concluded that no substantial legal question arose from this issue.

In conclusion, the Court dismissed the appeal as it found no merit in the arguments presented by the revenue, affirming the decisions on the privilege fees, deduction under Sec. 36 (1) (va), and the write-off of the bad debt.