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TMI Blog2008 (6) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... ror in holding that section 80-0 deduction 'should be allowed on the gross income received by the assessee by ignoring the provisions of section 8OAB of the Act which contemplates granting of such a deduction on the amount of income as computed in accordance with the provisions of the Act and the judgment of the Calcutta High Court reported in CIT v. M. N. Dastur and Co. (P.) Ltd. [ 243 ITR 10 and that of the apex court in 239 1TR 233." 2. During the course of arguments, the learned counsel for the appellants Mr. M. V. Seshachala, has reframed the substantial questions of law by filing a memo which read thus: "1. Whether the Tribunal after having correctly held that the evidence adduced by the assessee was not sufficient to show that the bad debts was written off as irrecoverable proceeded to erroneously hold that the assessee need not prove the debt having become bad? 2. Whether the Tribunal was correct in holding that the direct expenses is required to be reduced from the gross receipts out of amount received in convertible foreign exchange and over the balance deduction under section 80-0 of the Act is to be allowed as against the net income computed in accordance with the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 80-0 of the Act is admissible on the gross profits of the assessee without taking into consideration the expenses incurred to earn that gross income ignoring the definition of gross total income as defined under section 80B(5) of the Act to arrive at the net income claimed by the assessee for deduction under section 80-0 of the Act, ignoring the concunent finding of fact recorded by the first appellate authority, wherein he has concurred with the finding of fact recorded by the Assessing Officer, the expenses incurred by the assessee should be taken into account in accordance with the provisions of section 80B(5) of the Act for the purpose of claiming deduction, therefore, he submits that in the absence of furnishing the details of expenses incurred by the assessee to earn the total gross income which amount shall be deducted as provided under section 80B of the Act for the purpose of claiming the benefit under section 80-0 of the Act, the assessee is not entitled for the benefit which he has claimed 6. The assessee for the purpose of working out its right regarding the "direct expenses" contained in the Explanation to section 80-0 towards the transfer of salary at Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20 which decision is followed by the Division Benches of this court referred to supra. 8. The learned counsel for the assessee in all these cases has sought to justify the correctness of the findings and reasons recorded by the Tribunal in the impugned judgment on both the aspects regarding the claim made by the assessee under section 36(1)(vii) which are irrecoverable, written off, bad and doubtful debts written by the assessee for the previous years by showing the same in the books of account applying mercantile method of accounting which method of accounting is permissible under the Income- tax Act read with the Companies Act. 9. The learned counsel for the assessee further submits that the Assessing Officer and the first appellate authority who has disallowed the claim of the assessee without examining the provisions applicable to it for giving deductions under section 36(1) (vii) of the Act for the assessment years in question on the basis of annual report made available and without verifying the item-wise particulars available on record. Further, it is urged that the Assessing Officer and the first appellate authority on erroneous assumption came to the wrong conclusion and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned counsel has placed reliance upon the Division Bench decision of the Gujarat High Court reported in Vithaldas H. Dhanjibhai Bardanwala v. CIT [ 1981] 130 ITR 95, wherein that court with reference to the repealed provisions of the Indian Income-tax Act of 1922 examined the method of writing off and its meaning of posting the debit entries in the profit and loss account and credit entries in the bad debt reserve account is sufficient or not to claim the ben efit under section 36(2) (b) of the repealed Act, which provisions are in pari materia with section 36(1) (vii) of the Act and also placed reliance upon another decision of the apex court in the case of Amarchand Sobhachand v.CIT reported in [1971] 82 1TR 591 in support of his submission that the finding of fact recorded by the Appellate Tribunal is justified and the same need not be interfered with by this court in exercise of its appellate jurisdiction unless it is shown that the substantial question of law framed in the appeal by the Revenue would arise in the case, he further submits that the Tribunal has set aside the concurrent finding of the first appellate authority holding that the same is erroneous for non-cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h is irrecoverable amount for different assessment years before the Assessing Officer for which deduction under the above provisions of the Act is claimed by the assessee. The said claim is disallowed by the assessing authority treating the same for different assessment years is only a provision made by the assessee which is not permissible in law in view of the Explanation to clause (vii) of section 36(1) of the Income-tax Act. The Explanation is provided by way of amendment to the said clause by Finance Act, 2001, which provision has been given retrospective effect from April 1, 1989. The Assessing Officer had no benefit of this provision for his consideration at the time of passing assessment order as the assessment order was passed on March 11, 1993, prior to the Finance Act of 2001. To appreciate the above legal contention it is necessary for us to extract section 36(1), clause (vii) and Explanation which reads thus: "subject to the provisions of sub-section (2) the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year: Provided that in the case of an assessee to which clause (viia) applies, the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concurrent finding of the first appellate authority has come to the conclusion with reference to the entries made in the annual returns and the deductions claimed by the assessee by furnishing the particulars and extracting various items in respect of deduction claimed under the aforesaid statutory provision. The Tribunal has set aside the order and remanded the matter to the Assessing Officer with a direction to reconsider the claim of the assessee in the light of the material particulars furnished under the item found on all debt/advances, bad and doubtful debt shown in the profit and loss account with reference to the entries made in the annual returns is bad in law, the Tribunal while setting aside the order has directed the assessee to produce additional material evidence before the Assessing Officer, this portion of the order is questioned by the learned counsel for the Revenue. The submission made on behalf of the assessee that the Assessing Officer has not applied his mind to the material particulars available before him and came to the wrong conclusion regarding bad and doubtful debts which is concurred with by the first appellate authority. Therefore, it is contended by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to be placed on record shall strictly examine the same keeping in view the Explanation to clause (vii) of section 36(1) of the Act and the Division Bench judgment of the Allahabad High Court in the case of Jubilant Organosys v. CIT reported in [2004] 265 ITR 420 (All). 15. With regard to substantial question No. 2, the same has to be answered in favour of Revenue for the following reasons: (i) The learned counsel for the Revenue Mr. Seshachala has rightly placed reliance upon the Division Bench judgment of this court in the case of Asst. CIT v. Abcon Engineering and Systems Pvt. Ltd. reported in [2006 287 ITR 201 wherein the Division Bench of this court after referring to sections 80-0, 80B(5) of the Income-tax Act and referring to various decisions of the apex court particularly in Motilal Pesticides (I.) Pvt. Ltd. v. CIT reported in [2000] 243 ITR 26 has clearly laid down the law with regard to deduction under sections 80-0 and 80B(5) of the Act at paragraph 19 page 207 which relevant paragraph of the said judgment is extracted as hereunder: "Two sections 80AA and 80AB of the Income-tax Act, 1961, were introduced by the Finance (No. 2) Act, 1980. While section 80AA was to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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