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2012 (9) TMI 541 - AT - Income TaxBad debt u/s 36 Whether assessee has to establish that debt has become irrecoverable to claim expense Assessee is in business of money lending for many years - The debtor company is under the same management - Doing business from the same premises - Directors have substantial interest in it Held that - Following the decision of Supreme court in case of T.R.F.Ltd. (2010 (2) TMI 211) it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. AO has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. It is not the case of the revenue to disallow any part of such bad debt as has been written off by the lender in its books of accounts. Appeal decides in favour of assessee
Issues:
1. Disallowance of bad debt of Rs.1,20,06,153. 2. Treatment of income from sale of green leaf as agricultural income exempted from tax. 3. Deletion of addition of Rs.2,36,934 on account of cess on green leaf. Issue 1: Disallowance of Bad Debt The Revenue filed an appeal against the order disallowing a bad debt of Rs.1,20,06,153. The Assessing Officer (AO) disallowed the amount as bad debt, alleging it was a diversion of income to evade tax. The AO observed that the debtor company was not insolvent and had not written off the debt in its books. The AO disallowed the amount, adding it back to the income. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted the disallowance, stating that the lender's discretion determines bad debt and that recovery of the debt in the future would be shown as income. The CIT(A) referred to relevant sections and allowed the bad debt. The Revenue appealed, citing case laws, but the Tribunal upheld the CIT(A)'s decision based on the Supreme Court's ruling post-April 1, 1989, emphasizing that the debt write-off in the accounts is sufficient for allowance. Issue 2: Treatment of Income from Sale of Green Leaf The Revenue contested the treatment of income from the sale of green leaf as agricultural income exempted from tax. The AO disallowed the income without reason, but the CIT(A) allowed it as exempted agricultural income under section 10(1). The Tribunal upheld the CIT(A)'s decision, finding it justified to treat the income from the sale of green leaf as exempted agricultural income, dismissing the Revenue's appeal on this ground. Issue 3: Deletion of Addition of Cess on Green Leaf The AO disallowed an amount of Rs.2,36,934 on account of cess on green leaf, stating it was not allowable from business income. However, the CIT(A) deleted the disallowance, following a High Court decision that allowed the deduction of the cess. The Tribunal upheld the CIT(A)'s decision, noting that the issue was concluded by the High Court's decision, and the pending SLP before the Supreme Court did not affect the ruling. The Tribunal dismissed the Revenue's appeal, upholding the deduction of the cess on green leaves in computing the composite income from tea business. In conclusion, the Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions regarding the bad debt disallowance, treatment of income from the sale of green leaf, and deletion of the addition of cess on green leaf. The Tribunal's decision was based on legal provisions, case laws, and the specific circumstances of each issue.
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