2012 (11) TMI 1291 - AT - Income Tax

Summary

Issues involved: Disallowance u/s 14A of the Act and disallowance of Bad Debts written off

For the issue of disallowance u/s 14A of the Act:
The assessee appealed against the disallowance of Rs. 76,84,919 u/s 14A of the Act, arguing that the expenses were incurred in the normal course of business. The AO added the amount based on Rule 8D of the IT Rules, 1962. The FAA upheld the disallowance. The AR contended that Rule 8D was not applicable for the assessment year 2006-07, citing a Bombay High Court decision. The ITAT, following the High Court's ruling in another case, reversed the FAA's order and remanded the matter to the AO for fresh proceedings. The ground was partly allowed in favor of the assessee.

For the issue of disallowance of Bad Debts written off:
The AO disallowed Rs. 55.05 lakhs as bad debts written off, stating that the debts were not written off as irrecoverable in the accounts. The FAA upheld part of the disallowance. The AR argued that the debts were written off and fulfilled the requirements of Section 36(1)(vii) of the Act. The ITAT agreed with the assessee, citing a Supreme Court judgment and holding that the debts were written off as irrecoverable in the accounts, thus allowing the claim. The ground was decided in favor of the assessee-company.

In conclusion, the appeal filed by the assessee was partly allowed, with the ITAT ruling in favor of the assessee on both issues.