2022 (6) TMI 1353 - AT - Income Tax

Disallowance of write-off - write-off represents amounts due to the assessee by various state transport corporations - assessee submitted that these amount represent price difference / discounts deducted by the Government undertakings which were written off as bad debts since they were not recoverable though they were in the nature of discounts - AO held that the assessee could not produce any details such as copies of invoices to prove the claim relating to the claim of discounts and any correspondence to show that the Government undertaking claimed discounts on the invoices raised by the assessee - HELD THAT - The undisputed position that emerges is that the assessee has received short-payment against invoices from various transport undertakings. The same is evident from the ledger extract furnished by the assessee. Undisputedly, these undertakings are the customer of the assessee and the shortfall of amount so received by the assessee has been claimed as bad-debts / discounts. In our considered opinion, to claim the same, it was not necessary for the assessee to map each of the amounts against particular invoices. It was sufficient to show that there was shortfall in receipt of amount against the invoices. This fact has already been established by the assessee. Therefore, the expenditure is clearly allowable as business loss. Assessee appeal allowed.

Summary

Issues: Disallowance of write-off of Rs.41.37 Lacs as bad debts representing amounts due to the assessee by various state transport corporations.

Analysis:
1. The appeal for Assessment Year 2008-09 arises from the order of the Commissioner of Income Tax (Appeals) dated 18-03-2019 regarding the disallowance of a write-off of Rs.41.37 Lacs by the assessee. The matter was remitted back to the Assessing Officer in the first round of appeal for further consideration.

2. In the remand proceedings, the disallowance was repeated by the Assessing Officer. The assessee claimed that the write-off amounts were due to discounts deducted by government undertakings and were written off as bad debts. The Assessing Officer, however, held that the assessee failed to provide sufficient details such as copies of invoices to prove the claim of discounts. Consequently, the claim was rejected.

3. Despite further appeal, the disallowance was upheld. The Tribunal observed that the assessee had received short-payment against invoices from various transport undertakings, as evidenced by the ledger extract. The Tribunal held that it was not necessary for the assessee to map each amount against specific invoices to claim the shortfall as bad debts. The Tribunal found that the expenditure was allowable as a business loss, as the shortfall in receipt of amounts against invoices was established by the assessee.

4. Therefore, the Tribunal allowed the appeal, stating that the assessee was entitled to claim the write-off as a business loss. The judgment was pronounced on 15th June 2022.