Delhi High Court
Commissioner Of Income Tax Delhi ... vs Modi Telecommunication Ltd. on 12 April, 2010
Author: Badar Durrez Ahmed
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 12.04.2010
+ ITA 1308/2007
COMMISSIONER OF INCOME TAX DELHI II ..... Appellant
versus
MODI TELECOMMUNICATION LTD. ..... Respondent
Advocates who appeared in this case:-
For the Appellant : Ms. Sonia Mathur with Mr. Sumit Kr.
Singh, Advs.
For the Respondent : Mr. K.R. Manjani, Adv.
CORAM:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE V.K. JAIN
1. Whether Reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in Digest?
BADAR DURREZ AHMED, J (ORAL)
1. This appeal by the Revenue is directed against the order dated
23.03.2007 passed in ITA No.1463/Del/2003 in respect of the Assessment
Year 1998-99.
2. The assessee had written off an amount of Rs.81,28,269/- during the
year in question on account of bad debts. The assessee had sold certain
pagers to individual customers on instalments. Later on the pager prices
crashed and were available at a much lower price in the market. The
customers did not make their further payments. It is on this account that the
amount payable became outstanding and ultimately turned into bad debts.
The assessee had tried legal means also but the said amounts could not be
recovered. Consequently, the assessee wrote off the bad debts in its books
of accounts and claimed a deduction in respect thereof.
3. The Assessing Officer, however, did not accept the contention of the
assessee and made an addition of Rs.81,28,269/-.
4. Being aggrieved by the said assessment order, an appeal was filed by
the assessee before the Commissioner of Income Tax (Appeals) where it was
specifically contended by the assessee that both the conditions laid down
under Section 36(1)(vii) of the Income Tax Act, 1961 for allowability of any
bad debt or part thereof were clearly fulfilled. The two conditions being that
the debts had been taken into account in computing the income of the
assessee of the previous year or of an earlier previous year and that the same
had been written off as irrecoverable in the accounts of the assessee.
According to the assessee, both these conditions had been complied with
and, therefore, there was no reason as to why the deduction on account of
the bad debts written off ought not to be allowed.
5. The Commissioner of Income Tax (Appeals), however, did not accept
the contention of the assessee on the ground that the bad debts were not
verifiable and identifiable and, therefore, disallowed the same confirming
the order of the Assessing Officer. It may be pointed out at this juncture that
the Commissioner of Income Tax (Appeals) did not make any adverse
comment or did not dispute the assessee's contention that debts had been
taken into account in computing the income of the assessee of the previous
year or of an earlier previous year. The Commissioner of Income Tax
(Appeals) only focused on the verifiability and identifiability of the
customers and the bad debts.
6. Being aggrieved by the order passed by the Commissioner of Income
Tax (Appeals), the assessee preferred an appeal before the Tribunal on the
ground that the Commissioner of Income Tax (Appeals) had erred in law as
also on facts and circumstances of the case in upholding the addition of
Rs.81,28,269/- on account of bad debts and in confirming the addition made
by the Assessing Officer.
7. The Tribunal agreed with the assessee and allowed the appeal. The
Tribunal took the view that once the assessee had written off the outstanding
amounts as irrecoverable in its books of accounts, it was sufficient
compliance of the provisions indicated above and, therefore, the Assessing
Officer ought not to have disallowed the deduction on account of bad debts
written off by the assessee. The Tribunal also noted that after the
amendment (w.e.f. 01.04.1989) in the provisions of Section 36(1)(vii), it was
no longer necessary on the part of the assessee to prove that the amount
written off had, in fact, become a bad debt. The writing off of the bad debt
was prima facie evidence on the part of the assessee and it was sufficient
compliance with the amended provisions.
8. It is a well-settled position in law that after 01.04.1989, it is not
necessary for the assessee to establish that the debt, in fact, has become
irrecoverable. It is enough if the bad debt is written off as irrecoverable in
the accounts of the assessee in view of the decision of the Supreme Court in
TRF Limited v. Commissioner of Income Tax, Ranchi, Civil Appeal Nos.
5293/2003 and 5294/2003 decided on 09.02.2010.
9. We may point out that the learned counsel for the Revenue had placed
reliance on TRF Ltd (Supra) seeking remand of the matter to the Assessing
Officer to verify as to whether the assessee was entitled to the said
deduction. However, we note that the decision in TRF Ltd (Supra) stood on
a different footing on facts. In that case, it was not clear as to whether the
bad debts had, in fact, been written off in the accounts of the assessee or not
and it is for that purpose alone that the matter was remitted to the Assessing
Officer for a de novo consideration on this aspect only and, that too, only to
the extent of the write off.
10. In the present case, the situation is entirely different. Here, it is an
admitted position that the assessee had, in fact, written off the said bad debts
in its books of accounts and had shown them as irrecoverable. Therefore, no
question arises of remitting the matter to the Assessing Officer for
consideration on this aspect which already stands admitted.
11. In so far as the plea taken by the learned counsel for the Revenue that
the matter may be remitted to the Assessing Officer to determine as to
whether bad debts or part thereof had, in fact, been taken into account in
computing the income of the assessee of the previous year or of an earlier
previous year, the same does not arise for consideration before us in as much
as the plea taken by the assessee before the Commissioner of Income Tax
(Appeals) that the debts had been taken into account in computing the
income of the assessee of the previous year or of an earlier previous year had
not been controverted by the Commissioner of Income Tax (Appeals) or by
the Assessing Officer. Nor was it an issue before the Income Tax Appellate
Tribunal.
12. For all these reasons, we find that no interference with the Tribunal's
order is called for and, in any event, no substantial question of law arises for
our consideration.
13. The appeal is dismissed.
BADAR DURREZ AHMED, J
V.K. JAIN, J
APRIL 12, 2010/RB
