The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has recently held that the assessee, VGA Digital Printers Eligible for Deduction in respect of Bad Debt from Reliance Communications.
The assessee in the instant case had written off Rs.19.22 Lakhs in its accounts as bad debt. However, the Assessing Officer (AO) did not allow the deduction on the ground that the assessee was still continuing business transactions with the company. The Commissioner of Income Tax (Appeals) [CIT(A)] affirmed the decision of the AO, against which the assessee has preferred the present appeal before the Tribunal.
The assessee was represented by M.K. Kulkarni the revenue, by M.G. Jasnani.
The amount receivable from Reliance Communications Ltd. after lot of e-mail correspondence with the company, including, Mr. Anil Ambani for recovery of outstanding amounts, was written off by the assessee.
The Pune Tribunal Bench of Vice President R S Syal and Judicial Member Partha Sarathi Chaudhury observed that, the assessee did write off Rs.19,22,610/- as Bad Debt in its books of account. Mere writing off the amount as bad debt is sufficient for claiming deduction under Section 36(1)(vii) of the Income Tax Act, 1961.
It was further noted that, “In case any recovery is made there after against the bad debt written off, such an amount is chargeable to tax”, while setting aside the confirmation of disallowance of Rs.19,22,610/- towards Bad Debts.
Two additional grounds which were not pressed were dismissed by the tribunal. Those include the grounds raised against the disallowance of Rs.1,29,167/-, being, claim towards Gratuity Fund and a general ground that was dismissed as ‘not pressed’.
However, a claim against the confirmation of disallowance of Rs.60,15,400/- towards Salary and Bonus to Directors, wherein the AO had made out a case that if the assessee company had paid dividend instead of remuneration to directors, such payment would have been fetched more tax was allowed.
It was observed that, “assessee justified the payment of such salary and bonus to directors and also complied with the necessary provisions under the Companies Act, 1956 in this regard,” and held that “we are satisfied that no case has been made out for any disallowance.”
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