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TMI Blog2022 (4) TMI 1224X X X X Extracts X X X X X X X X Extracts X X X X ..... r that after 01.04.1989, it is not necessary for the assessee to establish that debt has become irrecoverable. It is enough if bad debt is written off as irrecoverable in the accounts of the assessee. The assessee need not prove that debts have become bad. All that the assessee has to do after the amendment w.e.f. 01.04.1989 is to establish that the debt has been written off. It is not necessary to establish that debt has become irrecoverable during the year. We may refer to the judgment of the Hon ble Supreme Court in the case of T.R.F. Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] CIT(A) noticed therefrom that the outstanding balance as on 31.03.2014 is ₹ 5,23,29,230/-. The assessee also submitted the copy of confirmation dated 25.09.2018 from the broker wherein it is mentioned that the remaining balance of ₹ 5,21,16,449/- is receivable by the assessee from NSEL. All this go to prove that the claim of the assessee is bonafide and that he has fulfilled the first pre condition of section 36(1)(vii). As regards the second pre condition, namely that the bad debt should have been taken into account in computing the income of the assessee, the submission of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee that the sum of ₹ 1,50,00,000/- has become irrecoverable. The Ld. AO showed the reply of NSEL to the assessee and again sought justification for his claim of bad debts to which the assessee replied stating as under:- Outstanding Debt which was not recoverable as on 31.03.2014 was amounting to ₹ 5,23,29,230/-. This amount was included as income during the financial year 2013-14. The profit and loss account submitted with your honour was showing the amount of sales during the year including this amount of ₹ 5,23,29,230/- which has become irrecoverable. The outstanding Bad-debt was thus taken as income during the referred Assessment year 2014-15. The total amount of Bad-debt is ₹ 5,23,29,230/- included in the income of the assesee via the profit and loss account and out of this amount ₹ 1,50,00,000/- has been written off during the Assessment Year 2014-15. The Bad debts written off by the assessee during the referred year is allowable under section 36(1)(vii) and section 36(2) of the Income Tax Act, 1961. In this regard we submit herewith the CBDT Circular no: 12/2016 dated 30 May, 2016. This circular clarifies that Bad-debts written off b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in the business of commodity trading through the broker Integrated Commodity Trades Pvt. Ltd., which was the authorized broker of M/s National Spot Exchange Ltd ( NSEL ). It is submitted that the appellant sold commodities amounting to ₹ 30,44,32,556/- through NSEL and income from which was duly offered for tax after deduction of various expenses. Out of the above mentioned total sale effected through NSEL an amount of ₹ 5,23,29,230/- was recoverable from NSEL at the end of the A.Y. 2014-15. It is the case of the appellant that the said amount of ₹ 5,23,29,230/- has become irrecoverable in the year under consideration as NSEL was prohibited from doing any transactions w.e.f. July 2013 due to certain irregularities found in its conduct. It is also submitted that the said irregularity was well acknowledged in public domain, leading to jail terms of NSEL s Managing Director and Chairman for their role in fraud. Therefore, assessee on becoming aware of the above developments, has written off an amount of ₹ 1,50,00,000/- out of the above said total amount of ₹ 5,23,29,230/- as bad debts during the impugned assessment year. The AO disallowed the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debt is written off as irrecoverable in the books of accounts of assessee . Considering the facts of the case and the judicial pronouncements and the Circular issued by the CBDT, I find that the bad debt of ₹ 1,50,00,000/- written off by the appellant as irrecoverable in its account is admissible u/s 36(1 )(vii) read with section 36(2) of the Act. In view of the above, the addition of ₹ 1,50,00,000/- is deleted. Accordingly, the above ground of appeal is allowed. 6. The Revenue has come up in appeal before the Tribunal on the following grounds:- 1. Whether in law facts and circumstances of the case, Hon ble CIT(A) was correct in deleting disallowance of ₹ 1,50,00,000/- claimed on account of bad debts u/s 36(1)(vii) of the Income Tax Act, 1961. 2. The Ld. CIT(A) erred in law in facts by ignoring the fact that assesee had not fulfilled conditions laid out u/s 36(2)(i) of the Income tax Act 1961 to be able to claim deduction of bad debts u/s 36(1)(vii) of the Act. 7. The Ld. Sr. DR, relying on the concluding para of the Ld. AO s order argued that the assessee has prematurely written off sum of ₹ 1,50,00,000/- without satisfying the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment) Act, 1987, w.e.f. 01.04.1989 substituted any debt or part thereof, which is established to have become bad debt in the previous year by the words any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year . This is a major development with a view to avoid controversy as to the year in which such bad debt is allowable. It is thus evident that the year of write off is now taken as the year in which the amount is allowable as a bad debt. 8.3 The amended law w.e.f. 01.04.1989 provides that for an amount to be treated as a bad debt and to be allowed as an expenditure in the year in which it was written off, the assessee has to prove the satisfaction of both section 36(1)(vi) and section 36(2)(i), namely that bad debt had been written off and that bad debt had been taken into account in computing income of the assessee in any one of years mentioned in clause (i) of sub-section (2) of section 36 of the Act. 8.4 It is also crystal clear that after 01.04.1989, it is not necessary for the assessee to establish that debt has become irrecoverable. It is enough if bad debt is written off as irrecoverable in the accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation dated 25.09.2018 from the broker wherein it is mentioned that the remaining balance of ₹ 5,21,16,449/- is receivable by the assessee from NSEL. All this go to prove that the claim of the assessee is bonafide and that he has fulfilled the first pre condition of section 36(1)(vii). 10. As regards the second pre condition, namely that the bad debt should have been taken into account in computing the income of the assessee, the submission of the assessee is that the outstanding debt which was not recoverable as on 31.03.2014 amounted to ₹ 5,23,29,230/-. This amount was included as income during the previous year 2013-14. The amount of sales during the year reflected in the profit and loss account included the said amount of ₹ 5,23,29,230/- which has become irrecoverable. The outstanding bad debt was, thus taken as income of the assessment year 2014-15. To make it more explicit the assessee explained that the total amount of bad debt of ₹ 5,23,29,230/- was included in the income of the assessee via the profit and loss account and out of the said amount ₹ 1,50,00,000/- has been written off during the assessment year 2014-15. Thus, the assessee sati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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