2015 (8) TMI 178 - HC - Income Tax

Disallowance on account of deduction in respect of writing off of the irrecoverable advances and other debit balances u/s.36(1)(vii) - tribunal restricted the disallowance to the extent of ₹ 1 Lac - Held that - The actual amount with respect to provisions for Provision for Gratuity, salary payable, PF payable, staff loan, etc., and to satisfy ourself as to, whether the learned tribunal was justified in restricting the disallowance to ₹ 1 Lac, we called upon the learned advocate appeasing on behalf of the appellant - revenue to place before us. However, despite number of opportunities granted to the revenue, the revenue has failed to produce the same for perusal of this Court. However, considering the findings recorded by the learned tribunal, we confirm the disallowance restricted to ₹ 1 Lac. - Decided against revenue.

Summary

Issues:
- Disallowance of deduction in respect of writing off irrecoverable advances and other debit balances claimed by the assessee under section 36(1)(vii) of the Income Tax Act.

Analysis:
1. The appellant, a company engaged in manufacturing and trading Air-Conditioners, filed its income tax return for the assessment year 2005-2006 declaring total income at NIL. The case was selected for scrutiny due to the deduction claimed for writing off irrecoverable advances and other debit balances.

2. The Assessing Officer (A.O.) disallowed the deductions claimed by the assessee, resulting in the determination of total income at a specified amount. The disallowance included amounts written off as advances and balances, along with debts/bad debts.

3. The A.O. disallowed specific amounts, stating that they were not justified under section 36(1)(vii) of the Income Tax Act. The disallowance was challenged by the assessee before the Commissioner of Income Tax (Appeals) [CIT(A)], who partly upheld the A.O.'s decision.

4. Subsequently, the matter was taken to the Income Tax Appellate Tribunal, which partly allowed the appeal by the assessee. The tribunal observed that certain amounts were genuine and related to business purposes, thereby restricting the disallowance.

5. The revenue, feeling aggrieved by the tribunal's decision, filed a Tax Appeal challenging the disallowance of specific amounts. The High Court, after considering the arguments presented, examined the details of the disallowed amounts.

6. The High Court observed that the tribunal had appropriately considered the nature of the disallowed amounts, such as advances written off and other provisions. Despite opportunities given to the revenue, complete details were not produced before the court.

7. Ultimately, the High Court concluded that no substantial question of law arose from the case. Therefore, the Tax Appeal was dismissed, upholding the tribunal's decision to restrict the disallowance to a specified amount.

This detailed analysis of the judgment highlights the issues related to the disallowance of deductions claimed by the assessee, the decisions of the A.O., CIT(A), and the tribunal, and the final ruling of the High Court dismissing the Tax Appeal.