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TMI Blog2006 (1) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... lding that the debt claimed by the appellant as bad had not become bad and thus is not allowable as deduction under section 36(1)(vii) - - - - - Dated:- 6-1-2006 - Judge(s) : K. RAVIRAJA PANDIAN., P. P. S. JANARTHANA RAJA. JUDGMENT The judgment of the court was delivered by K. RAVIRAJA PANDIAN J.- The tax appeals filed against the order of the Tribunal dated March 12, 2002 made in I.T.A. No. 833 of 1999. The assessment year is 1996-97. The assessee, a company incorporated under the Companies Act, is carrying on the business of manufacturing and marketing surgical instruments. For the relevant assessment year, the assessee filed return of income declaring nil income after a claim of deduction under section 80-IA of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of that question. Hence the said question of law has not been considered by us. In respect of the second question of law regarding bad debts, learned counsel contended that the reasoning of the Tribunal that the debts could not be claimed as bad on the mere ground that the hospital and the Departments might make payments as and when funds are provided, is not correct, particularly on the fact that when the debts were more than three years old and have been written off by the assessee in the books of account. He further contended that the Tribunal failed to note that the debts had become time-barred inasmuch as the debts were more than three years old and consequently had been written off by the assessee. Inasmuch as the condition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2002] 254 ITR 63 (Cal); (5) Jhunjhunwala Co. v. Asst. CIT [2003] 259 ITR 178 (Bom); and (6) T. S. Pl. P. Chidambaram Chettiar v. CIT [1967] 64 ITR 181 (Mad). In the first of the cases, Devi Films Ltd. v. CIT [1963] 49 ITR 874 (Mad), it was held by this court that what is required is an honest judgment on the part of the assessee at the time when he makes the write off in the light of events up to that stage and the Department cannot insist on demonstrative proof, which is infallible. The Division Bench concluded in that case that there is no acid test to ascertain whether a debt has become bad and doubtful. The question is really one of fact depending upon congeries of facts and diverse circumstances bearing on the debtor's pecuniar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dertakings (Special Provisions) Act, 1958. The Government has also issued directions in relation to the said undertaking that for the period for which it continued as a relief undertaking, the rights and liabilities that might have accrued before the period it was declared as a relief undertaking and any remedy for enforcement thereof shall be suspended and all proceedings relating thereto pending before any court or Tribunal, etc., shall be stayed. In the case of A. W. Figgis and Co. P. Ltd. v. CIT [2002] 254 ITR 63, it was held by the Calcutta High Court that if the assessee knows that filing of the suit would not in any way help the assessee to recover the amount, but rather burden the assessee with the additional financial expenses, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a bad or doubtful debt has to prove not merely that the debt he seeks to deduct is bad or doubtful but also that it became bad or doubtful in the accounting year. From the above judgments, it is clear that it is not sufficient for the assessee to say that he has become pessimistic about the prospect of recovery of debt in question. He must feel honestly convinced that the financial position of the debtor was so precarious and shaky that it would be impossible to collect any money from him. The question is really one of fact depending upon the various facts and diverse circumstances bearing on the debtor's pecuniary position, his commitments and obligations. The judgment of the assessee in regarding the debt as a bad debt must be an hone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim nor has any Government hospital written that they would not pay any of these amounts. The other parties from whom huge amounts running into lakhs are due are public and private hospitals like Apollo Hospital, Vijaya Health Centre, CMC Hospital, Sree Chitra Tirunal Institute, Trivandrum. In this case also, the assessee did not produce any evidence to support its stand that the debts have become bad. With regard to a sum of Rs. 2,14,365 due from one Dr. S. S. Ramesh of Bangalore, the Commissioner of Income-tax (Appeals) has recorded the finding that the said doctor was connected with Mallya Hospital, Bangalore, to whom the appellant-company was making substantial supplies. The said doctor was connected with taking decisions regarding p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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