2019 (1) TMI 1363 - HC - Income Tax

Addition on account of bad debts - AO disallowed on the ground that the bad debt figure had not been finally crystallized as there were claims and counterclaims between the parties and the Arbitration Proceedings were pending - CIT(A) on facts found that the amount has been crystallized as there was no counterclaim filed by the parties concerned and the Arbitration Award has also been passed. Thus, allowed the appeal also confirmed by tribunal - Held that - On facts the impugned order of the Tribunal found that letters were addressed by the parties admitting their liabilities with a request for settlement. Thus, there was no issue of counterclaim. Further, it also found the dispute a facts had settled in Arbitration and the respondent had received some amount in terms of Award. It was only the remaining amount of ₹ 12.58 crores which has been allowed as bad debt. Thus, dismissed the Revenue s appeal. We find that both the CIT (A) and the Tribunal have rendered a concurrent finding of fact holding that the amounts written off as bad debts had been crystallized. This finding of fact has not been perverse in any manner. In the above view, the question as proposed does not give rise to any substantial question of law.

Summary

Issues:
Appeal challenging order of Income Tax Appellate Tribunal regarding deletion of addition of bad debts for Assessment Year 2010-11.

Analysis:
The case involved an appeal under Section 260A of the Income Tax Act, 1961, challenging the order of the Income Tax Appellate Tribunal (the Tribunal) related to the Assessment Year 2010-11. The main question of law raised by the Revenue was whether the Tribunal erred in deleting the addition of ?12,58,17,269 made by the Assessing Officer on account of bad debts. The respondent-assessee had initially declared a loss of ?74.27 lakhs for the subject assessment year and had written off ?13.40 crores as bad debt in its profit and loss account. The Assessing Officer disallowed this amount, citing pending claims and counterclaims between parties and ongoing Arbitration Proceedings.

Upon appeal to the Commissioner of Income Tax (Appeals) (CIT(A)), it was found that the bad debt amount had been crystallized as there were no counterclaims filed and an Arbitration Award had been passed. The CIT(A) allowed the appeal to the extent of ?12.58 crores as bad debts written off, considering the balance had been paid by the parties. Subsequently, the Revenue appealed to the Tribunal, which found that parties had admitted liabilities and settled the dispute in Arbitration, with the respondent receiving some amount as per the Award. The Tribunal dismissed the Revenue's appeal, leading to the current challenge.

Both the CIT(A) and the Tribunal had concurred that the bad debts had been crystallized, and this finding was not deemed perverse. Consequently, the question raised did not give rise to any substantial question of law, leading to the dismissal of the Appeal. No costs were awarded in this matter.