9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (1) TMI 840 - AT - Income TaxDisallowance of Bad debts Allowability u/s 36(1)(vii) of the Act Held that - The appellant wrote off the date after the cheque issued by the said debtor was dishonored by the bank - considering the financial crises faced by the client and also to get the best out of the financial crises faced by the client, the appellant had to settle the sum of .43 lacs and balance is.21,11,238/- had to be written off as balance despite best efforts Following DCIT Versus Shreyas S. Morakhia 2010 (7) TMI 455 - ITAT MUMBAI Disallowance in respect of bad debts allowed Decided against Revenue.
Issues: Disallowance of bad debts amounting to Rs. 21,11,238
Analysis: 1. Issue of Disallowance of Bad Debts: - The appeal pertains to the disallowance of bad debts amounting to Rs. 21,11,238 by the department, contested against the order of CIT(A) 9, Mumbai. - The Assessing Officer (AO) highlighted the importance of bad debts under the mercantile system of accounting and the criteria for claiming bad debts as per Sec. 36(1)(vii) of the Income Tax Act. - The AO emphasized the need for the debt to be proven as bad in nature before claiming it as a deduction, as per Circular No. 55/1990 issued by the Central Board of Direct Taxes. - The amendment made in 1987 aimed to streamline the allowance of bad debts, ensuring they are written off as irrecoverable in the year they are claimed. - Section 36(2) of the IT Act specifies conditions for bad debt allowance, particularly in cases of share and stockbrokers, where unrecovered amounts from clients may not qualify as bad debts under Sec. 36(1)(vii). 2. Submission and Decision at CIT(A) Level: - The assessee argued before the CIT(A) that the unrecoverable dues from a client should be considered as bad debts, supported by detailed transaction records and the circumstances leading to the write-off. - The CIT(A) ruled in favor of the appellant, citing precedents like Oman International Bank and decisions from various High Courts and the Supreme Court, directing the deletion of the disallowance of Rs. 21,11,238. 3. ITAT Judgment and Conclusion: - The ITAT upheld the CIT(A) decision, stating that the issue was already settled by the Bombay High Court and the Supreme Court, endorsing the reliance on previous judicial decisions. - The ITAT dismissed the department's appeal, emphasizing that the issue was conclusively addressed by higher courts and expressing dissatisfaction with the appeal being pursued despite clear legal precedents. In summary, the judgment focused on the disallowance of bad debts and the criteria for claiming such deductions under the Income Tax Act, culminating in the ITAT affirming the CIT(A) decision based on established legal interpretations and precedents set by higher courts.
|
