Bad Debts under Corporate Structure Scheme reduce Sundry receivables, confirms the write-off of Bad Debts: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Chennai bench has held that bad debt formed under the corporate structure scheme reduces sundry receivables and confirms the addition of bad debts written off to accounts.

The Revenue and assessee filed a cross-appeal against the order of CIT(A)dated 27.12.2016. The petitioner claimed to delete the interest payable on loans taken from the Government of Tamil Nadu of ₹.7,53,16,872/-. The department on contrary contended that the interest payable on loans taken from the Government of Tamil Nadu and M/s. Infrastructure Leasing and Financial Services Company [IFLS], during assessment proceedings, has not paid given the moratorium and claimed to add on taxable income.  It was directed to delete the addition on account of interest payable by CIT (A). The department appealed before the Hon’ble High Court of Madras against the orders of the ITAT for the assessment years 2004-05 to 2008-09, 2009-10 & 2010-11 and pleaded for reversing the order passed by the CIT(A).

The assessee contended that the write off of bad debts pertains to accrued interest on the loan of ₹. 18.33 Cr. forwarded to the subsidiary of the assessee company due to the corporate debt restructuring of the subsidiary company. The assessee was represented by CA, Shri R. Viswanathan and the department was represented by Shri AR V Sreenivasan.

The Tribunal bench comprising Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member observed that consequent to the CDR scheme, the assessee had written off the receivables as bad debt and the debt has become bad only due to the corporate restructuring scheme. set aside the order of the CIT(A) and directed to delete the addition made towards bad debts written off. On the matter of deletion of disallowance on interest payable due to moratorium, the bench remits the matter back to the file of the Assessing Officer to decide the issue in line with the directions of the Hon’ble High Court for the assessment year under consideration.

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