9911796707
TMI Blog1984 (12) TMI 115X X X X Extracts X X X X X X X X Extracts X X X X ..... to purchase 350 bales of cotton from M/s Pioneer Cotton Co. (P) Ltd., Ujjain. The above company did not deliver the goods and by virtue of a settlement entered into by the assessee with the above company on 23rd Jan., 1976, it was agreed that the said company would pay a sum of Rs. 80,000 as damages. Out of the above sum, the assessee actually received a sum of Rs. 20,000 during the asst. yr. 1976-77. However, the assessee credited the entire sum of Rs. 80,000 in its P L a/c for the asst. yr. 1976-77 and offered same for taxation and actually it was assessed to tax during the asst. yr. 1976-77. Later on, however, M/s Pioneer Cotton Co. (P) Ltd., Ujjain, did not make any payment either during the asst. yr. 1977-78 or even during the asst. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rough letters failed and the assessee know that the financial position of the company was bad and nothing was realisable, the said amount was written off as bad debt in the books of account by debiting the P L a/c and crediting the suspense account on the liability side. The AAC, while admitting that it was a case of bad debt, but since the said debt had not been written-off by passing the necessary entry in the account of the debtor, M/s Pioneer Co. (P) Ltd., the assessee's claim of bad debt was rightly disallowed. it appears from the order of the AAC that the claim of the assessee was mainly rejected on the ground that it had not been written-off properly by passing the necessary credit entry in the account of the debtors but by passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, in question, has been properly written-off as a bad debt by debiting the P L a/c and crediting the suspense account instead of crediting the account of the debtor. In this connection, it would be pertinent to refer to the following observations of the Hon'ble Bombay High Court in Commr. of IT EPT vs. Jwala Prasad Tiwari (1953) 24 ITR 537 (Bom). "Now, the whole of the argument of Sir Nusserwanji is that writing off can only be achieved by the accounts of the respective debtors in the books of the assessee being credited with the amount in respect of which they have been indebted to the assessee. Sir Nusserwanji says that the accounts do not show that the amounts have been written off because these amounts were still shown in the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and there could not be the slightest doubt the looking to the books of the assessee the amount has been written off. There is no more striking or significant way of writing off the amount than by debiting the amount to the P L a/c." 7. A similar dispute came up for consideration before the Gujarat High Court in Vithaldas H. Dhanjibhai Bardanwala vs. CIT (1981) 21 CTR (Guj) 190 : (1981) 130 ITR 95 (Guj), and the question for decision before their Lordships was whether the write-off of the amount was proper when the assessee has posted entries in the P L a/c and corresponding entries was posted in the bad debt reserve account. Their Lordships, following the decision of the Bombay High Court in (1953) 24 ITR 537 (Bom), observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport the case of the department for the reason that the assessee's claim has been disallowed by the AAC mainly on the technical ground that the amount, in question, had not been properly written off in the books of account since the necessary credit entry has not been passed in the account of the debtor, but the suspense account has been credited. We have already referred to the decisions of the Bombay and Gujarat High Courts to the effect that passing of necessary entries, as done by the assessee in its books of account, would clearly entitle it to the claim of bad debt, since the amount, in question, has been properly written off as bad debt in the books of account. 11. In the result, we accept this appeal and allow the assessee's cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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