Mulye Engineering & Consultancy Pvt. Ltd., Pune V. Income-tax Officer,

ITA 1388/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2014 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 08-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Keywords: Bad and doubtful debts
• Section: 14A; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI PRADIP KUMAR KEDIA , AM . / ITA NO. 1 388 /PN/201 4 / ASSESSMENT YEAR : 20 0 7 - 08 MULYE ENGINEERING & CONSULTANCY PVT. LTD., 49/A/4, SUMALI, ERANDWANA, PUNE - 411037 . / APPELLANT PAN: A A BCM2662A VS. THE INCOME TAX OFFICER , WARD 11(1) , P UNE . / RESPONDENT / APPELLANT BY : SHRI C.H. NANIWADEKAR / RESPONDENT BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 31 . 0 3 .201 6 / DATE OF PRONOUNCEMENT: 07 . 0 4 .201 6 / ORDER PER SUSHMA CHOWLA, J M : TH IS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT (A) - I , PUNE , DATED 31 . 1 2 .20 1 3 RELATING TO ASSESSMENT YEAR 20 0 7 - 08 AGAINST ORDER PASSED UNDER SECTION 1 4 3(3) OF THE INCOME - TAX ACT , 1961 (IN SHORT THE ACT) . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - 1. THE LEARNED C. I . T(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.68,750 BEING BAD DEBTS FROM M / S GOODWILL ENGINEERING SERVICES, ESPECIALLY WHEN THE CONDITIONS AS R EQUIRED BY SEC. 36(1)(VII) R.W.S. 36(2) WERE DULY COMPLIED WITH. ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 2 2. THE LEARNED C. I. T(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.1,67,295 U / S 14A OF THE ACT. HE FAILED TO APPRECIATE THE CONTENTIONS AND ARGUMENTS ADVANCED BY THE ASSESSEE IN THIS BEHALF. IN ANY CASE, HE OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE AS COMPUTED BY THE A.O. IS WRONG AS IT CONSISTS OF EXPENSES ALREADY DISALLOWED ON OTHER GROUNDS AND AS SUCH THERE IS A DOUBLE DISALLOWANCE. 3. THE LEARNED C. I. T.(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF EXPENDITURE OF RS.6,49,798 ON GENUINE BUSINESS ACTIVITY ON THE GROUND THAT THE RELEVANT BUSINESS ACTIVITY IS SHAM AND IS A COLOURABLE DEVICE. HE ALSO ERRED IN DIRECTING THE A.O. TO ASSESS IT AS INCOME FROM OTH ER SOURCES. HE FAILED TO APPRECIATE THAT THE ENTIRE DISALLOWANCE MADE BY THE A.O. WAS BASED ON SURMISES AND CONJECTURES. HE ALSO FAILED TO APPRECIATE THE FACTS IN ITS PROPER PERSPECTIVE, AS ALSO THE ARGUMENTS AND CONTENTIONS ADVANCED BY THE ASSESSEE IN THI S BEHALF. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, DELETE OR SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE ISSUE IN GROUND OF APPEAL NO.1 IS AGAINST DISALLOWANCE OF RS.68,750/ - WRITTEN OFF AS BAD DEBTS UNDER SECTION 36(1)(VII) OF THE A CT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING, HIRING AND TRADING ACTIVITIES. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD WRITTEN OFF DEBTS IN RESPECT OF TWO PARTIES I.E. M/S. S.S. DEISEL OF RS. 14,997/ - AND M/S. GOODWILL ENGINEERING SERVICES OF RS.68,750/ - . THE ASSESSEE HAD CLAIMED THE DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT AFTER WRITING OFF OF SAID DEBTS. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO HOW THESE DEBTS HAD BECOME BAD DURING THE YEAR. IN RESPECT OF M/S. S.S. DEISEL , THE CONTENTION OF ASSESSEE THAT THE PARTY HAD REFUSED TO MAKE THE PAYMENT BECAUSE CHE MICAL SOLUTION SUPPLIED TO IT WAS FOUND TO BE INFERIOR QUALITY , WAS NOT ACCEPTED BY THE ASSESSING OFFICER . TH E SECOND CONTENTION OF THE ASSESSEE THAT THE PAYMENT FOR MACHINERY SOLD TO M/S. GOODWILL ENGINEERING SERVICES WAS NOT RECEIVED FROM THE SAID PARTY WAS NOT ACCEPTED, SINCE THE ASSESSEE WAS MAINTAINING THE BUSINESS TRANSACTIONS WITH ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 3 THE SAID CONCERN. THE AS SESSING OFFICER WAS OF THE VIEW THAT WHERE THE ASSESSEE HAS FAILED TO JUSTIFY THAT THE DEBTS HAD BECOME BAD, MERE WRITING OFF OF DEBTS IN THE BOOKS WAS NOT ENOUGH TO CLAIM THE DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT, HENCE, ADDITION WAS MADE TO THE E XTENT OF RS.83,747/ - IN THE HANDS OF ASSESSEE. 5. THE CIT(A) AFTER TAKING NOTE OF THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, OBSERVED THAT INCLUSION OF WORD BAD PRIOR TO THE DEBT COULD NOT BE IGNORED AND THE DEBT WRITTEN OFF HAS TO BE BAD DEBT, WH ICH WAS THE PRIOR CONDITION FOR ADMISSIBILITY OF DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. THE CIT(A) ALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF WRITING OFF OF BAD DEBT OF RS. 14,997/ - . HOWEVER, IN RESPECT OF SECOND DEBT OUTSTANDING FOR ONLY ONE YEA R, THE CIT(A) OBSERVED THAT THERE WAS NO NEGATION OF CLAIM NOR HAD THE DEBTOR WRITTEN THAT THEY WOULD NOT PAY THE SAID AMOUNT TO THE ASSESSEE . HENCE, IT COULD NOT BE SAID THAT THE WRITING OFF OF DEBT IN THE BOOKS BY THE ASSESSEE WAS HONEST JUDGMENT OF SIT UATION . CONSEQUENTLY, THE CIT(A) HELD THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED REPORTED IN 190 TAXMAN 391 WAS APPLICABLE ONLY TO SUCH DEBTS WHICH HAVE BECOME BAD DEBT AND NOT ANY DEBT AND ADDITION TO THE EXTENT OF RS.68,750/ - WAS CONFIRMED. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IT WAS THE DECISION OF ASSESSEE AS TO THE DEBT BECOM ING BAD AND SAME CANNOT BE OVERTURNED BY THE AUTHORITI ES . W HERE SUCH A DEBT HAS BEEN WR ITTEN OFF AS IRRECOVERABLE, THEN THE CLAIM OF ASSESSEE BEING FAIR AND PROPER, IS TO BE ALLOWED AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. RELIANCE IN THIS REGARD WAS ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 4 PLACED ON THE RATIO LAID DOWN BY PUNE BENCH OF T RIBUNAL IN CROSS APPEALS IN DCIT VS. NICHROM INDIA LTD. AND NICHROM INDIA LTD. VS. ADDL.CIT IN ITA NOS.870/PN/2014 AND 919/PN/2014 , RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER DATED 29.01.2016 . 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE PLA CED RELIANCE ON THE ORDER OF CIT(A). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE ARISING IN THE PRESENT APPEAL IS IN RELATION TO THE CLAIM OF DEDUCTION ON ACCOUNT OF WRITING OFF OF DEBTS BY THE ASSESSEE DURING THE YEAR UNDER C ONSIDERATION. ADMITTEDLY, THE ASSESSEE HAD WRITTEN OFF CERTAIN DEBTS AS UNRECOVERABLE WHICH WERE DUE FROM M/S. GOODWILL ENGINEERING SERVICES TO THE TUNE OF RS.68,750/ - . THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT IT HAD SUPPLIED MACHI NERY TO M/S. GOODWILL ENGINEERING SERVICES WHICH WAS NOT UP TO THE MARK AND HENCE, THE TOTAL AMOUNT WAS NOT PAID BY THE SAID CONCERN. THE COST OF MACHINERY WAS RS.1,68,750/ - , OUT OF WHICH RS.1 LAKH WAS RECEIVED BY THE ASSESSEE IN THE NEXT YEAR I.E. ASSESS MENT YEAR 2008 - 09 AND THE BALANCE SUM OF RS.68,750/ - WAS WRITTEN OFF AS BAD DEBTS BY THE ASSESSEE WHILE CLOSING THE BOOKS ENDING 31 ST MARCH, 2007. THE ASSESSEE HAS PLACED COPY OF THE LEDGER ACCOUNT OF THE SAID PARTY IN ITS BOOKS AT PAGE 6 OF THE PAPER BOO K. THE ASSESSING OFFICER HAD DENIED THE CLAIM ON THE GROUND THAT THE DEBT HAD NOT BECOME BAD AND ALSO THAT THE ASSESSEE WAS OTHERWISE DEALING WITH THE SAID CONCERN. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE DURING THE COURSE OF HEARING POIN TED OUT THAT WRITE OFF WAS PREMATURE AS SUM OF RS.1 LAKH WAS RECEIVED BY THE ASSESSEE IN THE NEXT YEAR. THE ASSESSEE HAD WRITTEN PART OF THE SPECIFIC BILL WHICH WAS DUE FROM M/S. GOODWILL ENGINEERING SERVICES. ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 5 THE ASSESSEE WAS OTHERWISE ENGAGED IN THE BU SINESS OF MANUFACTURING, HIRING AND TRADING ACTIVITIES AND HAD ONLY SOLD ONE MACHINERY TO M/S. GOODWILL ENGINEERING SERVICES ON 30.11.2005 I.E. DURING THE PRECEDING YEAR. HOWEVER, THE PAYMENT AGAINST THE SAID MACHINERY COULD NOT BE REALIZED BY THE ASSESSE E IN FULL AND ONLY SUM OF RS.1 LAKH AFTER NEGOTIATIONS WAS PAID BY THE SAID CONCERN THAT TOO IN ASSESSMENT YEAR 2008 - 09 . AT THE CLOSE OF THE YEAR, THE ASSESSEE HAD WRITTEN OFF OF RS. 68,750/ - I.E. AMOUNT IN QUESTION BY TREATING IT AS IRRECOVERABLE AND SUCH ACT OF WRITE OFF OF IRRECOVERABLE AMOUNT CANNOT BE FAULTED WITH AND THE CLAIM OF ASSESSEE AGAINST WRITING OFF OF SUCH AMOUNT IS TO BE ALLOWED AS DEDUCTION UNDER SECTION 36(1)(VII) OF THE ACT. IN THIS REGARD, WE FIND SUPPORT FROM THE RATIO LAID DOWN BY PU NE BENCH OF TRIBUNAL IN DCIT VS. NICHROM INDIA LTD. (SUPRA) , WHEREIN THE TRIBUNAL IN TURN, HAD RELIED ON ITS EARLIER DECISION IN ASSESSMENT YEAR 2007 - 08. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER: - 7. WE FIN D THAT THE ISSUE RAISED BY THE DEPARTM ENT IN PRESENT APPEAL IS SIMILAR TO THE ISSUE THAT WAS RAISED IN CROSS APPEALS IN THE CASE OF NICHROME INDIA LTD. VS. DCIT IN ITA NO.1623/PN/2012 AND ITA NO.1639/PN/2012 FOR THE ASSESSMENT YEAR 2007 - 08 . THE TRIBUNAL VIDE ORDER DATED 31 - 10 - 2013 ADJUDICATED THE MATTER AS FOLLOWS: 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. SECTION 36(1)(VII) OF THE ACT PROVIDES THAT SUBJECT TO THE PROVISIONS OF SUB - SECTION (2) OF SECTION 36 OF THE ACT, THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN - OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL BE ALLOWED AS DEDUCTION IN COMPUTING THE INCOME OF THE RELEVANT PREVIOUS YEAR. FURTHER, SUB - SECTION (2) OF SECTION 36 PRESCRIBES THE CONDITIONS IN ORDER TO CLAIM DEDUCTION FOR WRITE - OFF OF BAD DEBT S. IN SO FAR AS THE PRESENT CASE IS CONCERNED, THE CONDITION APPLICABLE IS TO THE EFFECT THAT SUCH DEBT OUGHT TO HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME EITHER IN THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF WRITTEN - OFF O R OF AN EARLIER PREVIOUS YEAR. 10. WITH RESPECT TO THE AFORESAID STATUTORY REQUIREMENT THERE IS NO DISPUTE IN THE PRESENT CASE. FIRSTLY, THE DEBTS IN QUESTION HAVE BEEN WRITTEN - OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE; AND, SECONDLY IT IS ALSO NOT IN DISPUTE THAT THE SAME HAVE ALREADY BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE PRECEDING YEARS. HOWEVER, THE STAND OF THE REVENUE IS THAT, ON FACTS, ASSESSEE HAS NOT BEEN ABLE TO ESTABLISH THAT THE DEBTS HAVE BECOME IRREC OVERABLE. THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAVE PROCEEDED ON THE PROPOSITION THAT THE ASSESSEE WAS REQUIRED TO ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 6 ESTABLISH THAT THE DEBTS HAD BECOME BAD; OR, IN OTHER WORDS, THAT THE DEBTS WERE IRRECOVERABLE AND ONLY THEN THE WRITTE - OFF OF SUCH BAD DEBTS WOULD QUALIFY FOR DEDUCTION U/S. 36(1)(VII) OF THE ACT. IN OUR CONSIDERED OPINION, THE CONTROVERSY ON THIS POINT HAS BEEN ANSWERED BY THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA). THE HONBLE SUPREME COURT COMPARED THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT WHICH EXISTED PRIOR TO 01.04.1989 WITH THAT WHICH ARE ON STATUTE POST 01.04.1989. ASSESSMENT YEARS BEFORE THE HONBLE SUPREME COURT WERE 1990 - 91 AND 1993 - 94, I.E. BOTH POST 01.04.1989. AS PER THE HONBLE SUPREME COURT, PRI OR TO 01.04.1989, EVERY ASSESSEE HAD TO ESTABLISH, AS MATTER OF FACT, THAT THE DEBT ADVANCED BY THE ASSESSEE HAD, IN FACT, BECOME IRRECOVERABLE. FURTHER, EXPLAINING THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT AS AMENDED W.E.F. 01.04.1989, THE HONBLE S UPREME COURT OBSERVED THAT UNDER THE AMENDED PROVISIONS IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH THAT THE BAD DEBT IS WRITTEN - OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. IN ORDER TO EMPHASIZE THE POINT SOUGHT TO BE MADE OUT, WE REPRODUCE HEREUNDER THE RELEVANT PORTION OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) : - 2. .. PRIOR TO APRIL 1, 1989, EVERY ASSESSEE HAD TO ESTABLISH, AS A MAT TER 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 (THE ACT, FOR SHORT). 3. FOR THE SAKE OF CLARITY, WE REPRODUCE HEREINBELOW THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, BOTH PRIOR TO APRIL 1, 1989 AND POST APRIL 1, 1989 : 1989 AND POST APRIL 1, 1989 : PRE - APRIL 1, 1989 : 36. OTHER DEDUCTIONS. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWING CLAUSES SHA LL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 . . (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 - APRIL 1, 1989 : 36. OTHER DEDUCTIONS. (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 . . (VII) SUBJ ECT 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. 4. THE POSITION IN LAW IS WELL - SETTLED. AFTER APRIL 1, 1989, IT IS NOT NECE SSARY 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. .. ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 7 11. THUS, IN SO FAR AS THE ASSESSMENT YEAR BEFORE US IS CONCERNED, W HICH IS POST 01.04.1989, IN TERMS OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA), THE STAND OF THE REVENUE THAT ASSESSEE WAS REQUIRED TO ESTABLISH THAT THE DEBTS IN QUESTION, IN - FACT, HAD BECOME IRRECOVERABLE IN ORDER TO AL LOW THE CLAIM U/S. 36(1)(VII) OF THE ACT, IS QUITE MISPLACED. 12. NEVERTHELESS, EVEN ON FACTS ALSO, WE FIND THAT IN SO FAR AS THE IRRECOVERABILITY OF THE IMPUGNED DEBTS IS CONCERNED, THERE CANNOT BE ANY DOUBT. IN THIS CONTEXT, WE HAVE PERUSED THE DETAILS OF AMOUNTS DUE FROM DIFFERENT DEBTORS WHICH HAS BEEN WRITTEN - OFF AS BAD DEBTS AMOUNTING TO RS.40,89,838/ - , THE RELEVANT DETAILS ARE AT PAGES 4 TO 9 OF THE PAPER BOOK. AGAINST EACH AND EVERY ENTRY ASSESSEE HAS EXPLAINED THE REASONS FOR TREATING THE SAME AS A BAD DEBT. A PERUSAL OF THE SAME REVEALS THAT AMOUNTS WRITTENOFF ARE OUTSTANDING FOR RECOVERY FOR PERIODS RANGING FROM 2 TO 10 YEARS. IN - FACT, AN OVERWHELMING MAJORITY OF THE ENTRIES ARE OF SMALL AMOUNTS AND ARE OUTSTANDING FOR 4 YEARS AND ABOVE. NO DO UBT, WITH SOME OF THE PARTIES IN QUESTION, ASSESSEE HAS UNDERTAKEN DEALINGS IN THE INSTANT YEAR ALSO. SO, HOWEVER, THE AMOUNTS THAT HAVE BEEN WRITTEN - OFF, AS DETAILED IN THE PAPER BOOK, ARE SPECIFIC BILLS OR PART OF SPECIFIC BILLS RAISED BY THE ASSESSEE, W HICH HAVE NOT BEEN COLLECTED FROM SUCH PARTIES. THEREFORE, MERELY BECAUSE ASSESSEE HAD DEALING WITH THAT PARTICULAR CONCERN OR THAT THE CONCERNS ARE OTHERWISE FINANCIALLY VIABLE DOES NOT DISTRACT FROM THE FACT THAT THE AMOUNTS IN QUESTION, WHICH ARE INDIVI DUALLY OF SMALL VALUES, WERE SPECIFIC BILLS OF THE ASSESSEE OR PART THEREOF, WHICH WERE OUTSTANDING FOR A LONG PERIOD OF TIME AND THEREFORE CONSIDERING THE AFORESAID ASPECT, ON FACTS, THE JUDGMENT OF THE ASSESSEE OF TREATING THEM AS IRRECOVERABLE CANNOT BE FAULTED. THUS, IN OUR CONSIDERED OPINION, THE CLAIM OF THE ASSESSEE FOR WRITING - OFF OF SUCH AMOUNTS U/S. 36(1)(VII) OF THE ACT AS IRRECOVERABLE WRITING - OFF OF SUCH AMOUNTS U/S. 36(1)(VII) OF THE ACT AS IRRECOVERABLE WAS FAIR AND PROPER. 13. IN SO FAR AS THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT RELIED UPON BY THE REV ENUE IN THE CASE OF SOUTH INDIA SURGICAL CO. LTD. (SUPRA) IS CONCERNED, THE SAME, IN OUR VIEW, DOES NOT HELP THE REVENUE. THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) HAS OPINED THAT POST 01.04.1989, IT IS NO LONGER NECESSARY FOR THE ASSESS EE TO ESTABLISH THAT THE DEBT, IN - FACT HAS BECOME IRRECOVERABLE BEFORE CLAIMING DEDUCTION U/S.36(1)(VII) OF THE ACT. THUS, CANVASSING TO THE CONTRARY, BASED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF SOUTH INDIA SURGICAL CO. LTD. (SUPR A), IN OUR VIEW, DOES NOT HELP THE REVENUE. 14. IN CONCLUSION, WE HOLD THAT ON FACTS AND ALSO IN LAW, THE ENTIRE CLAIM OF THE ASSESSEE FOR WRITE - OFF OF BAD DEBTS U/S. 36(1)(VII) OF THE ACT AMOUNTING TO RS.40,89,838/ - WAS JUSTIFIED AND THE CIT(A) OUGHT TO HAVE ALLOWED IT, INSTEAD OF RESTRICTING IT TO RS.22,56,998/ - ONLY. THEREFORE, WE SET - ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE ENTIRE DISALLOWANCE OF RS.40,89,838/ - . WE FIND THAT THERE IS NO CHANGE IN THE FACTS IN THE IMPUGNED ASSESSMENT YEAR EXCEPT FOR THE AMOUNTS. THE LD. DR HAS NOT BEEN ABLE TO CONTROVERT THE FINDINGS OF THE TRIBUNAL ON THIS ISSUE. RESPECTFULLY FOLLOWING THE ORDER OF CO - ORDINATE BENCH IN ASSESSEES OWN CASE, WE UPHOLD THE FINDINGS OF THE COMMISSION ER OF INCOME TAX (APPEALS) ON THIS ISSUE AND DISMISS THE APPEAL OF THE REVENUE. ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 8 10. FOLLOWING THE SAME PARITY OF REASONING, WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW AND REVERSING THE ORDER OF CIT(A), WE ALLOW THE CLAIM OF ASSESSEE IN ENTIRE TY. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 11. THE SECOND ISSUE RAISED BY THE ASSESSEE IS AGAINST THE DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT TO THE TUNE OF RS. 1,67,295/ - . 12. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THE TOTAL INVESTMENT MADE BY THE ASSESSEE WAS RS.2,80,000/ - WHICH WAS FOR BUSINESS CONSIDERATION AS THE SAID AMOUNT WAS INVESTED IN SISTER CONCERN. THE ASSESSEE HAS FILED ON RECORD THE COPY OF BALANCE SHEET AS ON 31.03.2007 , IN WHICH THE SAID INVESTMENT IS REFLECTED AT RS.2,80,000/ - AND EVEN AS ON 31.03.2006 , THE INVESTMENT WAS RS. 2,80,000/ - . ADMITTEDLY, THE AFORESAID INVESTMENT HAS NOT BEEN MADE IN INSTANT ASSESSMENT YEAR AND IS BROUGHT FORWARD FROM THE PRECEDING YEAR. IN T HE EARLIER YEARS, NO DISALLOWANCE UNDER SECTION 14A OF THE ACT WAS MADE IN THE HANDS OF ASSESSEE. THE ASSESSEE ADMITTEDLY, HAS NOT RECEIVED ANY INCOME ON THE SAID INVESTMENT WHICH IS EXEMPT FROM TAX. THE YEAR UNDER APPEAL BEFORE US IS ASSESSMENT YEAR 200 7 - 08 AND THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES, 1962 WERE NOT ON STATUTE IN THE SAID ASSESSMENT YEAR. IN VIEW THEREOF, WE FIND NO MERIT IN THE AFORESAID DISALLOWANCE MADE UNDER SECTION 14A OF THE ACT. ACCORDINGLY, WE DELETE THE ADDITION OF RS. 1,67,295/ - . THE GROUND OF APPEAL NO.2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. ITA NO. 1 388 /PN/20 1 4 MULYE ENGG. & CONSULTANCY PVT. LTD. 9 13. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS NOT PRESSED AND HENCE, THE SAME IS DISMISSED AS NOT PRESSED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, PARTLY ALLOWED. 14 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 7 TH DAY OF APRIL , 201 6 . SD/ - SD/ - (PRADIP KUMAR KEDIA) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 7 TH APRIL , 201 6 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPEL LANT ; 2. / THE RESPONDENT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - I , PUNE ; 4. / THE CIT - I, PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE