The division bench of the Delhi High Court has held that there was no proof of payment from the debtor and upholds deduction of bad debts u/s 36(1)(vii).
The Assessing Officer during assessment proceedings disallowed the deduction of Rs.4,07,53,938/- claimed on account of bad debts written off and added to the total income of the assessee, Nilgiri Financial Consultants. On appeal, the ITAT deleted the addition, hence the revenue filed an appeal before the High Court.
The appellant by relying on the remand report of the AO before CIT(A) submitted that the debtor of the assessee, i.e., M/s Max New York Life Insurance Company in response to a notice issued under Section 133(6) has shown the amount as a liability in its books of accounts and the Respondent has not closed the account of M/s Max New York Life Insurance Company.
The High Court observed that the amounts claimed as bad debts had been taken into account in computing the income of the assessee in the previous year and offered for taxation and the unrecovered amounts had been written off in the books of account, thus the assessee satisfies the two conditions under section 36(1)(vii) r/w Section 36(2) of the Act to claim deduction on account of bad debts.
The Coram of Mr. Justice Manmohan and Ms. Justice Manmeet Pritam Singh Arora while dismissing the appeal has held that “the Max New York Life Insurance Company had considered Respondent’s invoices to the tune of Rs.4,84,30,109/- as ‘not payable’, the amount of Rs.4,07,53,938/- claimed as bad debts by the Appellant was legal and justified. In any event, in the appeal filed by the Department, it has not been averred that the Respondent has received any payment from M/s Max New York Life Insurance Company against the alleged bad debts in the last seven Assessment Years”.
Mr. Ruchir Bhat and Mr. Gautam Jai appeared on behalf of the revenue and assessee respectively.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
