Unreported Decisions – June 2021
By Ajay R. Singh, Advocate and CA Rohit Shah
1. S. 36(1)(vii): Bad Debts Written Off – Since, the debts had become irrecoverable – post amendment to clause (vii) of section 36(1) w.e.f. 1-4-1989, the only requirement is that the debt should be written off in the books:
The assessee is engaged in the business of supplyof chemicals. The business model of the assessee is that the assessee procures chemicals from M/s. Standard Mills Ltd. (in short ‘SML’) and supply the same to Ganesh Benzoplast Ltd. (in short ‘GBL’) and others on commission basis. The goods are directly supplied by SML to GBL. The transport of goods is organized by the assessee. The payment of goods is directly made by GBL to SML and the transporter. In one of the transactions in FY : 2002-03, an amount of Rs.1,66,806/- due from GBL for supplies made by SML was outstanding on account of some dispute. GBL did not pay the said amount to SML. SML adjusted the said amount due from GBL against the commission payable to the assessee. The assessee in its books debited the said amount to GBL’s account as recoverable and reflected the same under the schedule ‘Sundry Debtors’ since FY : 2003-04. During the period relevant to assessment year under appeal, the assessee written off said amount as bad debt irrecoverable.
Assessing Officer rejected assessee’s claim of bad debts written off u/s 36(1)(vii) of the Act . CIT(A) also rejected the contentions of the assessee and confirmed the addition.
Before Hon’ble ITAT, the ld. DR submitted that the assessee has failed to produce invoices raised on the said parties to show that the amount was outstanding.
Hon’ble ITAT noted that the amount written off is reflected in the books of the assessee since FY: 2003-04. This fact has not been disputed by the Revenue and therefore, followed the decision of Hon’ble SC in the case of TRF Ltd. held that post amendment to clause (vii) of section 36(1) w.e.f. 1-4- 1989, the only requirement is that the debt should be written off in the books.
Editors Note: Assessee being a commission agent and considering Business model/ modus operandi Invoices are not required for claiming bad debts.
Shri Hanuman International Corporation vs. ITO Ward25(3)(4), Mumbai [ITA No. 4450/Mum/2019, Bench. “SMC”, AY: 2012-13 dt :05/04/2021]
2. S. 250: Admission of fresh claim- MAT credit not claimed in return – claim of assessee regarding carry forward of MAT credit was to be allowed :
Brief facts of the case are that the assessee had undisputedly MAT credit of ` 54,21,075/- which the assessee did not claim in the assessment year under consideration. Therefore, when the assessee’s return was processed and intimation given u/s. 143(1) of the Act, it was not granted to the assessee. Therefore, the assessee moved an application u/s. 154 of the Act before the assessing officer for rectification of the same which was denied on the reason that the Hon’ble Supreme Court in Goetz (India) Ltd. v. CIT 284 ITR 323 has held that the assessing officer cannot entertain a claim unless the assessee has put forward such claim by filing return u/s. 139(1) of the Act. Aggrieved, the assessee preferred an appeal before the ld. CIT (Appeals), who was of the view that there was no error in the order of rectification passed by the assessing officer and since the issue is a debatable one, he refused to interfere and dismissed the appeal of the assessee.
It was submitted by the AR that there is no provision that the assessing officers should determine the tax credit, which shall be carried forward and set off. It is an inbuilt mechanism of the law of the credit and set off. Therefore, on application of a particular formula, if the tax payable under the normal computation is higher than the minimum alternate tax payable by the assessee, and if the assessee has MAT credit available, same shall be granted as a credit to the assessee against the tax liability.There is no option available either to the assessing officer or to the assessee. It is automatic.
Hon’ble ITAT held that even though the Hon’ble Supreme court in Goetz (India) Ltd. (supra) held that the assessing officer is not competent to grant any claim without the assessee claiming it in its return of income u/s. 139(1) of the Act has specifically clarified that the embargo on the power of assessing officer not to entertain claims which was not claimed by assessee while filing of return u/s. 139(1) of the Act, is not there for the appellate authorities. Therefore, claim of assessee regarding carry forward of MAT credit was accepted and matter was remanded back to AO so that he can verify the claim of the assessee and if found to be correct then AO should allow the claim of assessee in accordance with law.
The Hanuman Estates Ltd. v. Dy. CIT [ITA NO.: 1872/ KOL/2019, A.Y. 2015-16, Date: 19/08/2020 (Kolkata) (Trib)]