2019 (1) TMI 2017 - HC - Income Tax

Deduction u/s 80IA - HELD THAT - The first substantial question of law is covered by the earlier orders of this Court in the assessees' own case 2012 (8) TMI 809 - MADRAS HIGH COURT . Deduction of Bad debts - claim was disallowed on the ground that the debts have been taken over from the sister concerns voluntarily only as a measure of support to it and knowing fully well that the same was irrecoverable - HELD THAT - We find, as a matter of fact, that the Tribunal has taken note of the position that the Memorandum and Articles of Association permitted the assessee to carry on the business of money lending and the transactions in question have been held to be in the realm of business activity. There is no dispute raised before us on this factual position. In the light of the same, the second substantial question of law is also answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Entitlement to relief under section 80IA of the I.T.Act, 1961.
2. Claiming deduction of Bad debts without adjudicating if it is a trade debt.

Entitlement to relief under section 80IA of the I.T.Act, 1961:
The appeals filed by the Revenue challenge an order of the Income Tax Appellate Tribunal concerning Assessment Years 2002-03 and 2003-04. The substantial question of law admitted for resolution is whether the assessee is entitled to relief under section 80IA of the Income Tax Act, 1961. Previous orders of the Court in the assessee's own case and T.C.(A)No. 1140 of 2009 support the assessee's entitlement to relief under section 80IA. Consequently, the first substantial question of law is answered in favor of the assessee and against the Revenue.

Claiming deduction of Bad debts without adjudicating if it is a trade debt:
Regarding the second substantial question of law, section 36(1)(vii) of the Income Tax Act, 1961 allows for the allowance of bad debts written off as irrecoverable in the assessee's accounts for the previous year. In this case, the assessee had taken over debts from M/s. Elgi Finance Ltd. and claimed certain amounts as bad debts. The Assessing Officer disallowed the claim, stating that the debts were taken over voluntarily and were known to be irrecoverable. However, the Commissioner of Income Tax (Appeals) allowed the claim. The Tribunal noted that the transactions were part of the assessee's business activities as permitted by its Memorandum and Articles of Association. As there was no dispute on this factual position, the second substantial question of law is also answered in favor of the assessee and against the Revenue.

In conclusion, both Tax Case (Appeals) are dismissed with no costs incurred.