The Income Tax Appellate Tribunal (ITAT), Bangalore Bench while restoring the matter back to the CIT(A) held that the assessee apart from writing off of bad debts in the books of accounts, the assessee has to fulfill this requirement of section 36(2) of the Income Tax Act also but has not given any explanation regarding exact nature of transactions with the parties in question.
The assessee company, M/s. SAP India Pvt. Ltd. is engaged in the business of software maintenance, after-sales support customer relationship, Software Training in SAP related services, and manufacturing of DVDs.
The assessee has filed the return of income for the Assessment Year 2011-12 on 30.11.2011 and subsequently, a revised return of income was filed with a total income of Rs.1,33,93,62,511 under the normal Income Tax provisions.
However, the total income as per MAT was higher, and the assessee has paid taxes on MAT liability.
The case was selected for scrutiny under CASS and Notice under Section 143(2) of the Act was issued. On perusal of Audited financial statements, the Assessing Officer found that the assessee company has international transactions exceeding Rs.15 Crores and with the prior approval of CIT, the matter was referred to the TPO for determination of Arm’s Length Price (ALP).
The Assessing Officer found that the assessee has debited a sum of Rs.23,11,27,517 towards the bad debts written off in respect of maintenance unit, non80 IC units and non 10A units.
The Assessing Officer found that the bad debts written off pertains to sales and maintenance charges and are written off in the same year. The Assessing Officer further observed that the number of Bad debts written off include amounts pertaining to companies like Infosys Technologies Ltd., Wipro Limited, and TCS Ltd where sale transactions itself taken place within one year before the date of write-off.
The Coram consisting of B.R. Baskaran and Pawan Kumar Gadale found that the assessee company has written off Bad debts in respect of Infosys Limited, TCS Ltd., and Wipro Limited which are in existence till today.
Further, it was also submitted that the assessee company has provided the support services, where the value of services provided are more than the actual amount paid.
Hence, the difference is treated as irrevocable and written off to the profit and loss account, the ITAT added.
The ITAT in absence of the details of the transaction restored the disputed issue to the file of CIT(A) to decide a fresh with similar directions.
The tribunal directed that the assessee should be provided adequate opportunity of hearing and shall cooperate in submitting the information for early disposal of appeal and allows the ground of appeal of the assessee for statistical purposes.
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