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TMI Blog2014 (1) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... case it was held that claim for deduction of non- recovery of trade advances was allowable on the facts of the case, merely because the bad debt claim was not made out under one particular provision of the Act, but was so made out under another provision of law, assessee cannot be deprived of the benefit of deduction of bad debts – the order of the CIT(A) set aside – Thus, the assessee is eligible to claim deduction on account of write off – Decided in favour of Assessee. - ITA No. 147/Del/2010 - - - Dated:- 5-7-2013 - Shri U. B. S. Bedi And Shri Shamim Yahya,JJ. For the Petitioner : Sh. C. S. Aggarwal, Senior Advocate, Vishal Kalra Ravi Mall, Advocates For the Respondent : Sh. Sameer Sharma, C.I.T.(D.R.) ORDER Per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1999- 2000. The remaining amount of ₹ 2,306,379/- written off as bad debts represents an amount recoverable from M/s Quality Beverages Limited on account of export to glass bottles. The amount became disputed as the goods were not as per the specifications of the importer and has therefore been written off as bad in the books of the assessee. The amount of export was taken into account while computing the taxable income for the assessment year 2002-03. Section 36(1)(vii) of the Act read with section 36(2) prescribes the fulfillment of following two conditions for writing off an amount as bad debt: - The amount has been written off as irrecoverable in the books of accounts of the assessee; and - The debt or part thereof ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rinks. That the loan given to M/s Dhillon Kool Drinks Beverages Limited cannot be said to be incidental to the business of the assessee. That debts not connected with business or profession carried on by the assessee or not arising out of the operation of business or profession carried on by the assessee are not admissible as bad debts even if other condition are satisfied. In this regard, Ld. Commissioner of Income Tax (A) referred to the decision of the Hon'ble Madras High Court in the case of C.I.T. vs. Dhanlakshmi Corporation (1962) 46 ITR 1031 (Mad.) and Hon'ble Apex Court decision in the case of C.I.T. vs. Abdullabhai Abdulkadar (1961) 41 ITR 545 (SC) for the above proposition. Ld. Commissioner of Income Tax (A) concluded as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (A) on the other hand, held that the impugned amount was not incidental to the business or the profession of the assessee. Hence, the same was not allowable. 8. We can gainfully refer here the provisions of section 36(1)(vii) and 36(2). 8.1 Section 36(1)(vii) provides that in computing the income of the assessee, subject to the provision 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 shall be allowed. 8.2 Section 36(2) reads as under:- (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply-- [(i) no such deduction shall be allowed unless such debt or part thereo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of sub- section (6) of section 155 shall apply; [(v) where such debt or part of debt relates to advances made by an assessee to which clause (viia) of sub-section (1) applies, no such deduction shall be allowed unless the assessee has debited the amount of such debt or part of debt in that previous year to the provision for bad and doubtful debts account made under that clause.] 9. We find that the important item of consideration in this regard is whether or not the debt or part thereof has been taken into account in computing the income of the assessee. This aspect has been duly complied with in as much as the said interest was offered for taxation as income in the assessment year 1999-2000. 10. Now we have to examine wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me bad/irrecoverable. Furthermore, the transaction was in the nature of the business of the assessee i.e. it was incidental to the business of the assessee. 13. Thus, we find that the Assessing Officer has made the disallowance on the premise that the amount involved was capital in nature. From no point of view, this opinion of the Assessing Officer is sustainable. Ld. Commissioner of Income Tax (A) has himself not considered the disallowance from this angle. Hence, the plea of the Assessing Officer has no cogency and is liable to be dismissed. 14. Now the Ld. Commissioner of Income Tax (A) has confirmed the disallowance of the amount on the premise that the said amount is not incidental to the business or profession of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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