9911796707
TMI Blog2010 (10) TMI 1210X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Framatone Connector Oen Ltd. v. DCIT (294 ITR 559), the learned CIT(A) ought to have upheld the action of the Assessing Officer. 3.1 The learned CIT(A) erred in deleting the addition of ₹ 55,59,100/- attributable to disallowance made with reference to accounting entries. 3.2 The learned CIT(A) failed to appreciate that the Hon'ble Supreme Court in the case of CIT v. Thanthi Trust (239 ITR 502) has approved in principle the proposition that book entries do have a legal effect. 4.1 The learned CIT(A) erred in holding that the entire quantum of bad debts written off by the assessee company is allowable as a deduction, thereby, deleting the addition of ₹ 587.59 lakhs. 4.2 Having regard to the Hon'ble jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited in the grounds raised by the Revenue before us. 3. The assessee is a business entity manufacturing autocomponents and engaged in services filed its return of income for the impugned assessment year declaring income of ₹ 41.14 Crores. The Assessing Officer in her scrutiny assessment under section 143(3) noted that the auditors in their report in Form 3CD disclosed that payment to clubs comprising subscription and expenses to the tune of ₹ 1,63,084/- was considered not an admissible expenditure under section 37 of the Act, was disallowed. She also noted that the claim on dry dock expenses was debited in the books as ₹ 55,59,100/- for the impugned assessment year and remaining 50% was deferred for the next assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bt was to be classified as irrecoverable, was to be written off in the books as available under the provisions of section 36(1)(vii) read with section 36(2) of the Act. The principle will hold valid for the entire quantum of bad debts written off which disallowance was deleted by the CIT(Appeals). On the issue of receipt of dividend of ₹ 4.56 Crores, when the Assessing Officer computed expenditure relatable to earning of the same as exempt under section 10(34) of the Act, the ld. CIT(Appeals) observed that the claim of ₹ 9,11,642/- was to be in accordance with CBDT instructions under the newly inserted Rule 8D by Notification dated 24th March, 2008 by Income Tax (Fifth Amendment) Rules, 2008 as notified in 299 ITR (St.) 88 requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as having perused the expenses given in pages 24 to 143 of paper-book. We are inclined to hold that these expenses incurred by the employees are business expenses of the assessee under contractual obligations and are to be allowed as such. This ground taken by the Revenue stands dismissed on the basis of facts on record. 6. The second issue relating to deferred expenditure noted by the assessee itself by claiming full deduction in the impugned assessment year requires re-consideration by the Assessing Officer in view of the Revenue relying on the decision of Hon'ble Supreme Court in the case of CIT v. Thanthi Trust reported in 239 ITR 502 which only indicates that in principle the proposition that book entries do have a legal effect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debt is written off as irrecoverable in the accounts of the assessee which proposition was directed to be considered by the Assessing Officer again in the light of the fact that it has become bad to that extent the assessee has chosen to write it off. On our perusal of the assessment order, we are inclined to hold that the Assessing Officer on page No.5 of her order in para 9.1 and 9.3 had noted that balance owed by the sundry debtors were to be considered for verifying of non-existing parties or Government agencies on becoming bad. On this proposition also we are inclined to hold that the facts are to be clarified in the light of the decision of Hon'ble Madras High Court in the case of South India Surgical Company Ltd. (supra). This is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim such expenses in the light thereof. 9. In the result, the appeal filed by the Revenue stands partly allowed as indicated above. 10. The Cross Objection only supports the order of the CIT(Appeals) which we have dealt with as above, except objecting the ld. CIT(Appeals) s direction to Assessing Officer to allow the expenditure to the extent provided under Rule 8D except exempted under section 10(34) of the Act. The assessee contended that Rule 8D came into effect with effect from 1.4.2007. Once the same could not be applied to the current assessment year vis- -vis the decision of Bombay High Court indicating allowability of expenditure has been considered in the decision rendered in the case of Godrej Boyle reported in 234 CTR 7 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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