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TMI Blog2010 (9) TMI 661X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenditure on account of payments to Master Card and VISA, USA and disallowance of bad debt. Though the assessee in A.Y.1997-98 has raised some other grounds also, only the two grounds mentioned above have been cleared for litigation before the Tribunal by COD and therefore only these grounds are admitted for adjudication. 2. The first dispute which is common in all the appeals is regarding disallowance of bad debt. The claim of bad debt is allowable under the provisions of clause (vii) and (viia) of section 36(1). These provisions are reproduced below as a ready reference : "(vii) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Accordingly it was argued that bad debts exceeding general provisions for bad debt should be allowed as deduction without adjusting the same against the provisions for rural bad debt. The AO however did not accept the arguments advanced and observed that clause (vii) of section 36(1) did not make any distinction between general provisions for bad debt and provisions for bad debt in respect of rural advances. Therefore the AO held that aggregate provision for rural and non rural debts has to be considered for the purpose of proviso to clause (vii) and only bad debt which is in excess of the credit balance in the provision account will be allowed. In appeal CIT(A) confirmed the order of AO aggrieved by which the assessee is in appeal before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The tribunal therefore restored the matter to the AO for deciding the issue afresh after necessary examination. In the present case the order of CIT(A) shows that the claim of the assessee was that bad debts mostly related to non rural advances. It is not clear how much of bad debt related to rural advances and how much to non rural advances. We therefore, set aside the order of CIT(A) and restore the matter to the file of AO for passing a fresh order after necessary examination in the light of decision of the special bench (supra) and after allowing opportunity of hearing to the assessee. 3. The second dispute which is also common in all the appeals is regarding allowability of claim of deduction on account of payments to Master Car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been paid or deducted under Chapter XVII B. Provided that where in respect of any such sum tax had been paid or deducted under Chapter XVIIB in any subsequent year the sums shall be allowed as a deduction in computing the income of the previous year in which such tax had been paid or deducted. Explanation - for the purpose of this sub clause (A) royalty shall have the same meaning as in Explanation 1 to clause (vi) of sub section (1) of section 9. (B) Fees for technical services shall have the same meaning as in Explanation-2 to clause (vii) of sub section (1) of section 9. 3.1 The assessee disputed the decision of the AO and submitted before CIT(A) that income arising on this account to Master Card and VISA was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was pointed out that as per the provisions applicable for the relevant period, expenditure on account of payment to residents could not be disallowed on ground of non deduction of tax at source. The said Article 26(3) is reproduced below as a ready reference: "Article 26(3):- Where the provisions of paragraph 1 of Article 19 (Associated Enterprises), paragraph- 7 of Article 11 ( interest) of paragraph- 8 of Article 12 (royalties and fees for included service) apply, interest, royalties and other disbursements paid by a resident to a Contracting State to resident of other Contracting State shall for the purposes of determining taxable profit of the first mentioned resident, be deductible under the same conditions as if they had been paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nship with the payee and therefore paragraph 8 of Article 12 was not applicable and the case of the assessee was thus not covered by any exceptions provided in Article 26(3). The Learned DR on the other hand placed reliance on the order of CIT(A) and the AO. 3.4 We have perused the records and considered the rival contentions carefully. The dispute is regarding disallowance of deduction claimed by the assessee on account of payments made to Master Card and VISA Cards. The said payments were made by the assessee for services rendered by the foreign non residents and disallowance has been made under section 40(a)(i)on the ground that no tax had been deducted at source. The case of the assessee is that said payments were not taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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