1986 (6) TMI 82 - AT - Income Tax

Summary

Issues:
1. Allowance of bad debts
2. Disallowance of 'Vyopari Expenses'

Analysis:

Issue 1: Allowance of bad debts
The Revenue objected to the CIT(A)'s decision to allow bad debts of Rs. 38,184, arguing that the debts had not become bad and were not written off in the accounts. The authorized counsel of the assessee contended that the debts were indeed bad and irrecoverable, supported by evidence of efforts to recover the amounts. The Tribunal found that both debtors were unable to pay, with inquiries confirming their financial inability. The Tribunal agreed with the assessee, citing compliance with accounting provisions and previous court decisions. It held that the bad debts claim was justified and should be allowed, dismissing the Revenue's objection.

Issue 2: Disallowance of 'Vyopari Expenses'
The Revenue challenged the CIT(A)'s decision to reduce the disallowance of 'Vyopari Expenses', citing statutory provisions prohibiting entertainment expenditure unless related to employees. The assessee failed to provide evidence that the expenses were for employees, and the Tribunal found that the expenses were not related to staff welfare. The Tribunal disagreed with the CIT(A) that extending human courtesy did not constitute hospitality, interpreting the statutory provision broadly. It noted that previous Tribunal decisions did not support the CIT(A)'s interpretation. Consequently, the Tribunal disallowed the 'Vyopari Expenses' deduction, except for the statutory deduction, allowing the Revenue's objection and dismissing the assessee's cross objection.

In conclusion, the Tribunal partially allowed the Revenue's appeal and dismissed the assessee's cross objection.