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TMI Blog2013 (10) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has not proceeded against the guarantors - One of the guarantors is Sri Anand Srivastava. The guarantee was invoked through a letter to the District Magistrate, Bareilly. However, Sri Anand Srivastava could not be located and was not traceable. The theory that Sri Anand Srivastava is not traceable was discarded as he happened to be son of Sri G.P. Srivastava, an IAS officer of U.P. cadre. There is nothing on record to show that the outstanding dues could have been recovered from the guarantors or the guarantors were available. If the assessee corporation which is State owned corporation in its wisdom resolved to write off the debt treating it as a bad debt, in view of its inability to recover the amount from the District Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment Year 1985-1986. The assessee corporation is a wholly owned U.P. Government undertaking. Its main activity is to grant loans and advances to industries already set up or likely to be set up in the State of U.P. For the relevant assessment year the assessee had claimed the deduction for bad debts totalling Rs.63,62,810/- in respect of loans given to the following parties:- 1. M/s. Kem Metal Powders (P) Ltd. Ghaziabad Rs.15,62,904/- 2. M/s. R.G. Soft Drinks (P) Ltd. Rs. 49,00,135/- The assessee's claim with regard to the aforesaid amounts as bad debts within the meaning of section 36(1) (vii) of the Income Tax Act was disallowed. The order of Assessing Officer has been confirmed in appeal by the CIT (A) and in further appeal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve submissions of the learned counsel for the parties and perused the record. For the reasons recorded in the order of the Tribunal, the Tribunal has held that the assessee has not discharged its burden to prove that the debts became irrecoverable in the relevant previous year. Consequently, it disallowed the claim and confirmed the assessment year. The dispute relates to the assessment year 1985-86. We find that the law was amended subsequently by reducing the rigour of law. However, the amended law is applicable for the assessment years 1989-90 onwards. By the subsequent amendment, a debt can be treated as bad debt by making the entries in the account books. "The clause, as amended from Assessment Year 1989-90 grants deduction in resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any personal interest to look after the work of the corporation. They did what they could. The learned counsel for the assessee placed reliance upon the Commissioner of Income Tax Versus Late Sri Ram Gupta, (2008) 296 ITR 212 wherein it has been held that where the assessee has made all efforts to realise the amount of loan and had written off the sum as bad debt after he has failed in his efforts, it was justified in allowing the claim of bad debt notwithstanding no legal proceeding was initiated by the assessee against the debtor. Whether a debt has become bad debt or not is an objective fact to be determined objectively. The fact that the assessee had not taken steps by way of legal proceedings against the debtor would not automaticall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time. The only objection raised by the department is that the debt has not become bad as there is still hope to recover the amount. The said approach in view of the peculiar facts of the present case is not justified. When a debt has become bad will depend upon the facts and circumstances of each case. The very fact that the assessee took out the proceedings to recover the amount by sale of the properties of the debtors unsuccessfully is indicative of the fact that the debt has become bad in absence of any plea of collusion or bad fate of the assessee. The other ground which has been taken by the Tribunal is that the assessee has not proceeded against the guarantors. One of the guarantors is Sri Anand Srivastava. The guarantee was invok ..... X X X X Extracts X X X X X X X X Extracts X X X X
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