1999 (9) TMI 132 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of claim of bad debts.
2. Disallowance of claim of depreciation at 100%.
3. Disallowance of T.D.S. credit.
4. Levy of interest u/s 234B and 234C.

Summary:

Disallowance of Claim of Bad Debts:
The assessee claimed Rs. 5,31,097 as bad debts, which was disallowed by the Assessing Officer (AO) on the grounds that the debtor, M/s. Narang Industries Ltd., was a live company and the debt had not become irrecoverable. The first appellate authority upheld this view. However, the Tribunal noted that post-amendment of section 36(1)(vii) w.e.f. 1-4-1989, it is sufficient if the debt is written off as irrecoverable in the accounts of the assessee. The Tribunal held that the assessee is the best judge of its commercial aspects and allowed the claim of bad debts.

Disallowance of Claim of Depreciation at 100%:
The assessee claimed 100% depreciation on electrical meters leased to Rajasthan State Electricity Board (RSEB), which was disallowed by the AO on the grounds that the transaction was a sham and the assessee did not own the assets. The first appellate authority confirmed this view. The Tribunal, however, observed that sale and lease back transactions are recognized under the Income-tax Act and that the absence of physical delivery does not invalidate the transaction. The Tribunal held that the assessee is the owner of the assets and eligible for depreciation, allowing the claim of Rs. 75,00,100.

Disallowance of T.D.S. Credit:
The assessee did not press this ground as a rectification order was passed by the lower authorities. Hence, this ground of appeal was dismissed as not pressed for.

Levy of Interest u/s 234B and 234C:
The levy of interest u/s 234B and 234C was considered consequential. The Tribunal directed the AO to give consequential effect while giving effect to the order in respect of the other grounds.

Conclusion:
The appeal filed by the assessee was partly allowed, with the Tribunal allowing the claims for bad debts and depreciation while dismissing the ground related to T.D.S. credit and directing consequential adjustments for interest u/s 234B and 234C.