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2013 (11) TMI 146 - AT - Income TaxBad debts written off Held that - The officers didn t went into the inquiry as to what goods the assessee wanted to purchase Whether the debtors deals in those goods or not - It is not known whether the assessee deals in such goods which were to be supplied by the impugned four parties In order to decide that the debts falls in trading field or capital field the purpose for which the advance were given needed to be known The issue went back to the files of AO for fresh adjudication Decided against Revenue. Bad debts Held that - Following the binding judgment in TRF Ltd. vs. CIT Ranchi 2010 (2) TMI 211 - SUPREME COURT - The bad debts written off in the books of account should be allowed as an allowable expenditure and the assessee does not have to establish that written off debts have become bad and irrecoverable Decided against Revenue. Disallowance u/s 40(a)(ia) Reimbursement of expenses to clearing and forwarding agent Labour charges Held that - Following Maryline Shipping and Transports Ltd 2012 (4) TMI 290 - ITAT VISAKHAPATNAM - The provisions of section 40(a)(ia) of the Act have no application to the amounts already paid by the assessee during the financial year and they are applicable to the amounts payable as appearing in the balance sheet as on 31st March of the relevant financial year Due to absence of discussion by lower authorities and for further examination of actual payment made by the assessee Issue set back to the files of AO for fresh adjudication Decided in favour of Revenue.
Issues involved:
1. Allowance of bad debts written off under different sections of the Income Tax Act. 2. Disallowance under section 40(a)(ia) for non-deduction of TDS on certain expenses. Issue 1: Allowance of bad debts written off: The appeal by the Revenue against the order of the CIT (A) for the assessment year 2007-2008 involved the allowance of bad debts written off. The Revenue raised multiple grounds challenging the decisions of the CIT (A) regarding the bad debts. The first ground related to the write-off of bad debts amounting to Rs. 6,91,613. The AO disallowed these debts, considering them as capital in nature. However, the CIT (A) allowed the claim as a business loss under section 37(1) of the Income Tax Act. During the proceedings, the assessee cited relevant judgments to support the claim that the debts were incidental to the business. The appellate tribunal found that there was a lack of evidence to demonstrate the debts' business nature. The tribunal set aside the issue to the AO for further examination of whether the advances were for trading purposes and incidental to the business. The second ground involved bad debts amounting to Rs. 65,79,761. The appellate tribunal dismissed the Revenue's appeal based on settled judgments that allow bad debts written off as an allowable expenditure without the need to establish their irrecoverability. Issue 2: Disallowance under section 40(a)(ia) for non-deduction of TDS: The third ground raised by the Revenue related to the disallowance under section 40(a)(ia) for non-deduction of TDS on certain expenses. The AO disallowed reimbursement of expenses to the clearing and forwarding agent and labor charges for loading, unloading, and packing goods due to non-deduction of TDS. However, the CIT (A) provided relief, stating that the amounts did not attract TDS provisions. During the proceedings, the Revenue argued that TDS provisions were rightly invoked. The assessee's counsel, on the other hand, relied on a Special Bench decision to support that TDS provisions do not apply to amounts already paid. The appellate tribunal agreed with the assessee's counsel and set aside the issue to the AO for further examination. In conclusion, the tribunal partly allowed the Revenue's appeal, setting aside certain issues for reexamination by the AO, while upholding the decisions on bad debts written off based on established legal principles. This detailed analysis covers the key issues involved in the legal judgment delivered by the Appellate Tribunal ITAT Mumbai.
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