Commissioner Of Income-Tax vs E. Sawhney Exports
2007 Latest Caselaw 925 Del

JUDGMENT

V.B. Gupta, J.

1. The short question raised in this appeal filed by revenue is as to whether the Income Tax Appellate Tribunal ( herein after referred to as 'Tribunal') was right in deleting the addition of Rs. 31,62,238 made by the assessing officer with regard to the deduction claimed by assessed for bad debts under Section 36(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as 'Act').

2. The assessed is engaged in the business of exports of garments and the payments were being received in foreign exchange. For assessment year1997-98, assessed filed return claiming bad debts amounting to Rs. 1,25,36,852. The Reserve Bank of India had allowed permission in respect of sum of Rs. 90,36,518 to be written off in the books of account. In respect o balance amount of Rs. 31,62,238, the assessing officer denied the benefit of writing off the bad debts since assessed has not furnished any evidence to this effect.

3. In appeal filed by the assessed, the Commissioner of Income-tax(Appeals) held that amount of Rs. 31,62,23 8 has been written off during the year and the same should be allowed as deduction, even though the approval from the Reserve bank of India has been received subsequently, and the assessing officer has himself allowed the claim for the balance amount, even though approval has been received after the close of the previous year. It was further held that the approval from Reserve bank of India is not mandatory condition for writing off, under the provisions of the Act and as such addition of Rs. 31,62,238 was deleted.

4. The revenue challenged the order of the Commissioner of Income-tax(Appeals) and the Tribunal vide impugned order dated 25-8-2006 dismissed the appeal filed by the revenue.

5. It has been contended by learned counsel for the revenue that mere entry in the books of account "writing off the debts" is not sufficient to make a claim for deduction under Section 36(1)(vii) of the Act and the onus is still on the assessed to prove that the debts has become irrecoverable beyond doubt.

6. It is apparent from the record that Reserve bank of India had earlier given an approval for writing off a sum of Rs. 90,36,518 vide their letter dated 20-3-1998, i.e., subsequent to the previous year relevant to the assessment year under consideration. The assessed's claim for writing off the remaining amount of Rs. 31,62,23 8 ought to have been considered by a the assessing officer inasmuch as both the approvals have been received subsequent to the previous year relevant to the assessment year. Besides this, as per provisions of Section 36(1)(vii) of the Act, the assessed is required to write off bad debts in its books of account which have been written off during the previous year relevant to the assessment year.

7. Hence, the Tribunal was right in deleting this addition of Rs. 31,62,238made by the assessing officer and, thus, there is no infirmity in the order passed by the Tribunal and from the facts and circumstances of the case we find that no substantial question of law arises for our consideration in this case.

8. Accordingly, the appeal is dismissed.