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2013 (12) TMI 887 - AT - Income TaxBad Debts Held that - Sedimentation claims are the normal features of the business carried on by the assessee - The manufacturer has to bear the loss due to sedimentation - The loss on account of sedimentation which the manufacturers have to bear is a debt due by the manufacturer to the assessee - The assessee has therefore recognized the liability which the beer manufacturer has to pay the assessee on account of short supply of beer due to sedimentation loss in its books of account - This liability has all the ingredients of a debt - This debt has been taken into account in computing the income of the assessee in the earlier previous year - Following TRF Ltd. v. CIT 2010 (2) TMI 211 - SUPREME COURT - It was not necessary for the assessee to prove that the debt in question has become bad and irrecoverable Decided against Revenue. Bad debts of earlier years Held that - The assessee has failed to explain the amounts written off with substantial evidence The assessee was given opportunity at three appellate stages to substantiate his claim - The assessee has not filed any evidence to substantiate its claim for deduction on account of bad debts Decided against assessee.
Issues Involved:
1. Deduction of bad debts claimed by the assessee. 2. Condonation of delay in filing the appeal by the assessee. 3. Additional claim for bad debts by the assessee. 4. Levy of interest under section 234D. Issue-wise Detailed Analysis: 1. Deduction of Bad Debts Claimed by the Assessee: The revenue appealed against the CIT(A)'s order allowing the assessee's claim for bad debts of Rs. 1,90,22,677. The Assessing Officer (AO) had disallowed the claim, arguing that the debts were not proven to be bad and were related to the assessee's subsidiary company. The CIT(A) had allowed the claim based on the Supreme Court's decision in TRF Ltd. v. CIT, which stated that it was not necessary for the assessee to establish that the debt had become bad. The Tribunal upheld the CIT(A)'s decision, noting that the sedimentation loss was a normal business feature and the debt had been recognized in the assessee's books. The Tribunal found that the conditions under section 36(1)(vii) and section 36(2) of the Act were fulfilled, and dismissed the revenue's appeal. 2. Condonation of Delay in Filing the Appeal by the Assessee: The assessee's appeal was delayed by 319 days. The delay was attributed to the director's travel and misplacement of papers. The Tribunal found the reasons vague but condoned the delay, adopting a liberal approach in tax matters. 3. Additional Claim for Bad Debts by the Assessee: The assessee made an additional claim for bad debts of Rs. 2,09,16,570, which was not raised before the AO initially. The CIT(A) rejected this claim, noting that the assessee failed to provide evidence for the debt. The Tribunal agreed with the CIT(A), observing that the assessee did not furnish any substantiating evidence even before the Tribunal, and dismissed the appeal. 4. Levy of Interest Under Section 234D: The CIT(A) upheld the AO's levy of interest under section 234D, stating that it was mandatory wherever applicable. The Tribunal did not find any misapplication of law and upheld the CIT(A)'s decision. Conclusion: The Tribunal dismissed both the revenue's and the assessee's appeals, upholding the CIT(A)'s decisions on all counts. The Tribunal found that the conditions for allowing the bad debts deduction were met, condoned the delay in the assessee's appeal, and rejected the additional claim for bad debts due to lack of evidence. The interest levy under section 234D was also upheld.
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