2019 (11) TMI 976 - AT - Income Tax

Disallowance on account of bad debts written off - HELD THAT - Relevant details in respect of its claim for bad debts written off were furnished by the assessee during the course of assessment proceedings before the AO and only on perusal of the same, it was found by the AO that almost the entire course fees receivable by the assessee from 16 students was written off by the assessee as bad debts. As rightly contended by the learned counsel for the assessee, the said course fees having been offered by the assessee company as its income and the same having been written off in the books of account as irrecoverable, the conditions stipulated in section 3(1)(iii) read with section 36(2) were duly satisfied and the assessee was entitled to claim deduction on account of bad debts written off as held by the Hon ble Supreme Court in the case of TRF Ltd. vs CIT 2010 (2) TMI 211 - SUPREME COURT . We accordingly deleted the disallowance made by the AO Disallowance on account of miscellaneous expenses written off - HELD THAT - As rightly contended by the learned DR in this regard, such details are not furnished by the assessee either before the AO and before the Ld. CIT(A) to show the nature of expenses and the basis on which the same are written off in the year under consideration. He has contended that this matter may therefore be sent back to the AO for verification. We find merit in this contention of the learned DR. The impugned order of the Ld. CIT(A) on this issue is accordingly set aside and the matter is restored to the file of the AO for deciding the same afresh after verifying the relevant details to ascertain the exact nature of expenses claimed by the assessee as well as the basis of the writing off the same. Ground No. 2 of the assessee s appeal is treated as allowed for statistical purpose. Disallowance of expenditure under the head membership fees and subscription - revenue or capital expenditure - HELD THAT - Assessee has submitted that it was annual fees paid by the assessee to Hotel Oberai and not an entrance fees. He however has not brought on record any documentary evidence to show that the amount in question represents annual fees paid to Hotel Oberai and not the entrance fees. Moreover, the business expediency of the expenditure incurred by the assessee is also remained to be unproved. We, therefore, uphold the impugned order of the Ld. CIT(A) confirming the disallowance made by the AO on this issue and dismiss ground No. 3 of the assessee s appeal. Addition u/s 40(a)(ia) - delay in payment of tax deducted at source from the payments made against contract charges, rent and professional charges - HELD THAT - DR as contended that the claim made on behalf of the assessee of having deposited the relevant TDS amount before the due date of filing of return of income requires verification by the AO in the light of the relevant details furnished by the assessee at page No. 6 of the Paper Book. We find merit in this contention of the learned DR and since the learned counsel for the assessee has not raised any objection in this regard, we restore this issue to the file of the AO for deciding the same afresh after verifying the claim of the assessese of having deposited the entire amount of TDS before the due date of filing of return of income. Ground No. 4 of the assessee s appeal is accordingly treated as allowed.

Summary

Issues:
1. Disallowance of bad debts written off.
2. Disallowance of miscellaneous expenses written off.
3. Disallowance of membership fees and subscription.
4. Disallowance under section 40(a)(ia) for delay in TDS payment.

Issue 1: Disallowance of Bad Debts Written Off:
The appellant, a company providing corporate education and management training, filed an appeal against the disallowance of ?53,15,574 made by the AO and upheld by the Ld. CIT(A) regarding bad debts written off. The AO disallowed the deduction as he believed that the entire fees receivable from 16 students could not have been written off. The Ld. CIT(A) confirmed this disallowance citing lack of verification of bad debts offered as income in previous years. The ITAT Kolkata, after considering submissions, ruled in favor of the appellant. They found that the conditions under section 36(1)(vii) and 36(2) were met, allowing the deduction for bad debts written off. The judgment referenced the TRF Ltd. vs CIT case, supporting the appellant's claim, ultimately deleting the disallowance.

Issue 2: Disallowance of Miscellaneous Expenses Written Off:
The AO disallowed ?40,58,615 claimed by the appellant for miscellaneous expenses written off, related to the period 01.07.2001 to 30.06.2004, as not allowable for the current year. The Ld. CIT(A) upheld this disallowance, noting lack of clarity on the nature and basis of writing off these expenses. The ITAT Kolkata set aside the Ld. CIT(A)'s order, directing the matter back to the AO for verification of the expenses' nature and basis for writing off. The appellant's claim was treated as allowed for statistical purposes.

Issue 3: Disallowance of Membership Fees and Subscription:
A claim of ?30,000 under "membership fees and subscription" was disallowed by treating it as capital expenditure due to lack of proof regarding the nature of the expense and business expediency. The Ld. CIT(A) confirmed this disallowance, and the ITAT Kolkata upheld it, stating that the appellant failed to provide evidence that the amount represented annual fees paid to Oberai Hotel, not entrance fees, and lacked proof of business expediency.

Issue 4: Disallowance under Section 40(a)(ia) for Delay in TDS Payment:
The AO disallowed ?54,46,470 under section 40(a)(ia) for delayed payment of TDS from contract charges, rent, and professional fees. The ITAT Kolkata, after hearing arguments, found that the TDS amount was deposited before the due date of filing the return. They directed the AO to verify this claim based on evidence provided, treating the appellant's claim as allowed. The appeal was partly allowed.

This detailed analysis covers the key issues and outcomes of the legal judgment by the Appellate Tribunal ITAT Kolkata.