TRF Ltd.
Vs. Commnr. of Income Tax [2010] INSC 119 (9 February 2010)
Judgment
CIVIL
APPELLATE JURISDICTION CIVIL APPEAL NO.5293 OF 2003 T.R.F. Limited
...Appellant(s) Versus Commissioner of Income Tax, Ranchi ...Respondent(s) With
Civil Appeal No.5294 of 2003
O R D E R
Heard
learned counsel on both sides.
In these
appeals, we are concerned with Assessment Year 1990-1991 and Assessment Year
1993-1994. Prior to 1st April, 1989, every assessee had to establish, as a
matter of fact, that the debt advanced by the assessee had, in fact, become
irrecoverable. That position got altered by deletion of the word
"established", which earlier existed in Section 36(1)(vii) of the
Income Tax Act, 1961 [`Act', for short].
For the
sake of clarity, we re-produce hereinbelow provisions of Section 36(1)(vii) of
the Act, both prior to 1st April, 1989 and post-1st April, 1989:
"Pre-1st
April, 1989:
Other
deductions.
36.(1)
The deductions provided for in the following clauses shall be allowed in
respect of the matters dealt with therein, in computing the income referred to
in section 28-- (i) to (vi) xxxx xxxx xxxx (vii) subject to the provisions of
sub-section (2), the amount of any debt, or part thereof, which is established
to have become a bad debt in the previous year.
Post-1st
April, 1989:
Other
deductions.
36.(1)
The deductions provided for in the following clauses shall be allowed in
respect of the matters dealt with therein, in computing the income referred to
in section 28-- (i) to (vi) xxxx xxxx xxxx (vii) subject to the provisions of
sub-section (2), the amount of any bad debt or part thereof which is written
off as irrecoverable in the accounts of the assessee for the previous
year."
This
position in law is well-settled. After 1st April, 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.
However,
in the present case, the Assessing Officer has not examined whether the debt
has, in fact, been written off in accounts of the assessee. When bad debt
occurs, the bad debt account is debited and the customer's account is credited,
thus, closing the account of the customer.
In the case
of Companies, the provision is deducted from Sundry Debtors. As stated above,
the Assessing Officer has not examined whether, in fact, the bad debt or part
thereof is written off in the accounts of the assessee.
This
exercise has not been undertaken by the Assessing Officer. Hence, the matter is
remitted to the Assessing Officer for de novo consideration of the
above-mentioned aspect only and that too only to the extent of the write off.
Subject
to above, the civil appeals filed by the assessee are disposed of with no order
as to costs.
......................J.[S.H. KAPADIA]
......................J.[AFTAB ALAM]
New Delhi,
February 09, 2010.
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.5292 OF
2003 T.R.F. Limited ...Appellant(s) Versus Commissioner of Income Tax, Ranchi
...Respondent(s) O R D E R In view of our Order passed today in Civil Appeal
No.5293 of 2003 and Civil Appeal No.5294 of 2003, we remit this case concerning
Assessment Year 1994-1995 also to the Assessing Officer, who is directed to
consider the question as to whether the write off is done by the assessee in
its accounts in accordance with the law declared by us in the above order.
The civil
appeal filed by the assessee, accordingly, stands disposed of with no order as
to costs.
......................J.[S.H. KAPADIA]
......................J.[AFTAB ALAM]
New Delhi,
February 09, 2010.
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