The Jt.CIT., Navsari Range, Navsari V. M/s. Naran Lala Metal Works Ltd., Navsari

ITA 1776/AHD/2007

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 7788 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-06-2009
• Assessment Year: 1994-1995
• Appeal Filed On: 30-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL H TALATIAR
• Assessee Lawyers: GOVIND SINGHAL
• Keywords: Bad and doubtful debts; Revenue expenditure; TDS
• Section: 37; 28

Judgement Text

IN THE INC O ME TAX APPELLATE TRIBUNAL, A - BENCH, AHMEDABAD . BEFORE : SHRI T.K.SHARMA, JUDICIAL MEMBER , AND SHRI D.C.AG RAWAL , ACCOU NTANT MEMBER. ITA NO. 1776/AHD/2007 (ASSESSMENT YEAR 1994 - 95) ITA NOS.1257 AND 1258/AHD/2009 (AYS 1997 - 98 & 1998 - 99) JT. CIT, NAVSARI RANGE, NAVSARI .. APPELLANT - VERSUS - NARAN LALA METAL WORKS LTD., NR. RAILWAY STATION, NAVSARI. .. RESPONDENT NARAN LALA METAL WORKS LTD., NR. RAILWAY STATION, N AVSARI. .. APPELLANT - VERSUS - JT.CIT, NAVSARI RANGE, NAVSARI .. APPELLANT FOR THE ASSESSEE : SHRI GOVIND SINGHAL, DR FOR THE DEPARTMENT : SHRI SUNIL H. TA LATI,AR ORDER SHRI T.K.SHARMA, JUDICIAL MEMBER : ALL THESE THREE APPEALS WERE HEARD ON THE SAME DATE, ARGUED BY COMMON REPRESENTATIVES. THEREFORE, ALL THESE APPEALS ARE DECIDED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ASSESSMENT YEAR 1994 - 95. I TA NO.1776/AHD/2007 (FILED BY THE REVENUE) : 2. GROUND NO.1 IS AGAINST THE ORDER OF THE LEARNED CIT(A) ALLOWING DEDUCTION U/S.35AB OF RS.15,08,792 . 3. IN THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSING OFFICER FRAMED THE ASSESSMENT U/S.143(3) ON 263.1997 A SSESSING TOTAL INCOME AT RS.61,20,672. IN THIS ORDER, THE ASSESSING OFFICER OBSERVED THAT RS.218,11,750 WHICH CONSISTED OF TWO PARTS (1) RS.15,74,500 WAS PAID FOR TECHNOLOGY AND (2) RS.2,36,625 WAS TAX DEDUCTIBLE ON THE ABOVE AMOUNT. THE AMOUNT OF TECHNICA L KNOW - HOW WAS REMITTED ON 14.2.94 WHILE TDS DEDUCTED WAS PAID IN SBI, NAVSARI. THE DEDUCTION U/S.35AB WAS, THEREFORE, ALLOWED AT RS.3,01,958 HOLDING THAT 1/6 TH OF THE AMOUNT PAID WAS ALLOWABLE U/S.143(3) FOR VARIOUS REASONS GIVEN IN THE ASSESSMENT ORDER. THEREAFTER ASSESSEE TOOK UP THE MATTER IN APPEAL BEFORE THE CIT(A) AND FURTHER APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDER ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 2 DT.31.5.2005 RESTORED THE MATTE TO THE FILE OF TH E ASSESSING OFFICER. SUBSEQUENTLY, THE ASSESSING OFFICER RE - FRAMED THE A SSESSMENT U/S.143(3) R.W.S. 254 ON 7.8.2006 WHEREIN THE ASSESSING OFFICER AGAIN DISALLOWED THE CLAIM OF DEDUCTION U/S.35AB. ON FURTHER APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CIT(A) ALLOWED THE DEDUCTION FOR THE DETAIL REASON GIVEN IN PARAGRAPH 5.1 OF H IS ORDER, WHICH REPRODUCED AS UNDER: 5.1. I HAVE PERUSED THE ASSESSMENT ORDER. THE APPELLANT COMPANY HAS ENTERED INTO AN AGREEMENT WITH A BRAZILIAN COMPANY FOR ACQUISITION OF TECHNICAL KNOW - HOW FOR TOTAL CONSIDERATION OF RS. 1,08,64,500/ - AND A COPY OF A GREEMENT WAS SUBMITTED TO THE ASSESSING OFFICER. THE APPELLANT COMPANY HAS NOT TAKEN THIS AS AN ASSET BECAUSE THE TECHNICAL KNOW HOW IS AN INTANGIBLE ASSET. THE ASSESSING OFFICER ALSO OBSERVED THAT THE APPELLANT COMPANY HAD NOT PROVIDED FOR TOTAL LIABILITY IN ITS ACCOUNTS AND HAD SHOWN THE SAME AS CONTINGENT LIABILITY IN ITS ACCOUNTS THUS THE ASSESSING OFFICER IS OF THE VIEW THAT SINCE THE APPELLANT COMPANY ITSELF HAS BEEN SHOWING THE SAME AS A CONTINGENT LIABILITY, IT CANNOT TAKE A SHELTER NOW TO SHOW THAT THE ENTRIES ARE NOT DETERMINATIVE OF THE NATURE OF INCOME. THUS ACCORDING TO THE ASSESSING OFFICER SINCE THE APPELLANT COMPANY HAD NOT SHOWN THE WHOLE AMOUNT AS A FIXED ASSET UNDER THE HEAD TECHNICAL KNOW - HOW FEES AND THIS BEING A CONTINGENT LIABILITY THE QUESTION IS AS TO WHETHER THE APPELLANT COMPANY IS STILL ENTITLED FOR DEDUCTION U/S. 35AB ON SUCH PAYMENT. THE ASSESSING OFFICER HAS ALSO MADE AN OBSERVATION THAT THE APPELLANT COMPANY HAS NOT DEDUCTED THE TAX OR PAID TDS IN THE GOVERNMENT ACCOUNT, THE PR IMARY CONDITION WAS NOT SATISFIED IN TERMS OF SECTION 40(A)(I) OF THE ACT AND THE APPELLANT COMPANY IS NOT ENTITLED FOR BENEFIT OF DEDUCTION U/S. 35AB. THE ASSESSING OFFICER HOWEVER OBSERVED THAT THE AMOUNT WOULD BE ALLOWABLE AS DEDUCTION AS AND WHEN TDS I S DEDUCTED OR PAID. AS REGARDS THE DECISION OF TAIBROS AUTOMOTIVE COMPONENT P. LTD. REPORTED IN 56 LTD 312 THE ASSESSING OFFICER OBSERVED THAT SINCE THE DEPARTMENT HAS NOT ACCEPTED THE ITATS DECISION AND FURTHER APPEAL IS PENDING, THE SAID DECISION IS NOT BEING FOLLOWED IN THE PRESENT CASE. THE ASSESSING OFFICER ACCORDINGLY CONCLUDED THAT THE APPELLANT COMPANY IS NOT ENTITLED FOR DEDUCTION U/S. 35AB R.W.S. 40(A)(I) ALS O AND REJECTED THE CLAIM OF THE APPELLANT COMPANY. 5.2. ON THE OTHER HAND THE APPELLANT COMPANY HAS SUBMITTED BEFORE ME AND HAS STRONGLY REPLIED UPON THE DECISION OF HONORAB LE ITAT DELHI IN THE CASE OF TAL BROS AUTOMOTIVE COMP ONENT PVT. LTD. REPORTED IN 56 I TD 312. IT WAS SUBMITTED BEFORE ME THAT THE FACTS OF THE CITED CASE ARE SIMILAR TO THE FACTS OF THE CASE OF THE APPELLANT COMPANY. IN THE CITED CASE, ACCORDING TO THE APPELLANT COMPANY, THE TOTAL AMOUNT OF USD 2,50,000 WAS PAYABLE IN 5 INSTALLMENTS AND THE PAYMENT OF THE FIRST INSTALLMENT WAS MADE IN THE RELEVANT YEAR. THE TRIBUNAL HELD IN T HAT CASE ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 3 U/S. 35AB 116TH OF THE TOTAL LIABILITY I.E. 2,50,000 WAS ALLOWABLE IF THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE APPELLANT COMPANY ALSO SUBMITTED THAT THE TRIBUNAL HAS ALSO HELD THAT THE DEFINITION OF THE WORD PAID IN SECTIO N 43(2) APPLIES FOR INTERPRETING THE WORD PAID IN SECTION 35AB. IN VIEW OF THE DECISION OF TRIBUNAL IT WAS SUBMITTED THAT IN THE CASE OF THE APPELLANT COMPANY ALSO DEDUCTION OF RS. 18,10,750/ - IS ALLOWABLE AND IT WAS REQUESTED THAT THE DISALLOWANCES MADE BY THE ASSESSING OFFICER BE DELETED. WITHOUT PREJUDICE TO THE ABOVE SUBMISSION IT WAS ALSO SUBMITTED BY THE APPELLANT COMPANY THAT THE COMPANY HAS PAID RS. 18,11,125/ - IN THE ABOVE YEAR AND DEDUCTION FOR THIS AMOUNT IS ALLOWABLE AS REVENUE EXPENDITURE U/S . 37 ON THE BASIS OF PRINCIPLES LAID DOWN BY THE HONORABLE SUPREME COURT IN THE CASE OF CIT VS. CIBA OF INDIA (69 ITR 692). 5.3. I H AVE PERUSED THE FACTS OF THE CASE AS OBSERVED BY THE ASSESSING OFFICER AND SUBMISSION MADE BY THE APPELLANT COMPANY AND JUD ICIAL DECISIONS AS RELIED UPON BY BOTH THE PARTIES. THE APPELLANT COMPANY SUBMITTED BEFORE ME THAT THE ASSESSING OFFICER HAS WRONGLY OBSERVED THAT THE APPELLANT COMPANY HAS NOT DEDUCTED TAX AT SOURCE ON PAYMENT TO GOVERNMENT IN RESPECT OF KNOW - HOW PAYMENT. IT WAS SUBMITTED BEFORE ME THAT TDS WAS NOT T O DEDUCTE BUT WAS PAID IN TIME T O THE CREDIT OF THE CENTRAL GOVERNMENT. 5.4. I HAVE PERUSED THE DECISION OF DE LHI TRIBUNAL IN THE CASE OF TA L B ROS AUTOMOTIVE COMPONENT PVT. LTD. , REPORTED IN 56 I TD 312. THE APP ELLANTS CASE PERTAINS TO THE YEAR 1994 - 1995 AND THE DECISION OF DELHI TRIBUNAL AS RELIED UPON BY THE APPELLANT AND AS DIRECTED BY THE HONO R ABIE ITAT, AHMEDABAD PERTAINS TO THE YEAR 1986 - 1987. ACCORDING TO THE ASSESSIN G OFFICER, THE APPELLANT COMPANY IS FO LLOWING MER CANTILE SYSTEM OF ACCOUNTING. TH E ASSESSING OFFICER HAS FURTHER STATED THAT THE APPELLANT HAS NOT ACCOUNTED FOR THE CREATION OF THE ASSET OR THE CORRESPONDING LIABILITY IN ITS BOOKS OF ACCOUNTS AND INSTEAD HAS TREATED THE SAME AS A CONTINGENT LI ABILITY AND ON THAT BASIS THE ASSESSING OFFICER DISALLOWED THE AMOUNT PAID TO THE TUNE OF RS. 15,08,792/ - . THE ASSESSING OFFICER HAS ALSO RELIED UPON SECTION 40(A)(I) STATING THAT TDS HAS NOT BEEN DEDUCTED ON THE SAID PAYMENT. 5.5. THE HONORABLE TRIBUNAL IN ITS ORDER HAD DIRECTED THE ASSESSING OFFICER TO CONSIDER THE MEANING OF THE WORD PAID AS PER SECTION 43(2). THE APPELLANT COMPANY HAS ST ATED IN ITS SUBMISSION AS UNDER: THE ABOVE DEFINITION OF THE WORD PAID APPLIES TO SECTIONS 28 TO 41 WHERE EVER, THIS WORD IS USED. IN OTHER WORDS, IT APPLIES TO THE WORD PAID USED IN SECTION 35AB. IT IS SUBMITTED THAT THE COMPANY IS FOLLOWING MERCANTILE METHOD OF ACCOUNTING. UNDER THIS METHOD WHEN A LIABILITY IN INCURRED UNDER ANY AGREEMENT IN ANY PREVIOUS YEAR, T HE SAME IS ALLOWABLE AS DEDUCTION IN THAT YEAR WHETHER PROVISION FOR THE SAME IS MADE IN THE BOOKS OR NOT. ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 4 THE ASSESSING OFFICER HAS STATED THAT THE COMPANY HAS NOT MADE PROVISIONS FOR THE ENTIRE LIABILITY OF RS. 1,08,64,500/ - IN THE BOOKS AND THEREFORE THE DEDUCTION IS NOT ALLOWABLE WITH REFERENCE TO THIS AMOUNT. IT IS SUBMITTED THAT MERELY BECAUSE THE PROVISION OF A LIABILITY IS NOT MADE, THE DEDUCTION CANNOT BE DENIED IF IN LAW THE LIABILITY IS INCURRED. IN THE CASE OF THE APPELLANT THE LIABILITY IS IN CURRED FOR THE ENTIRE AMOUNT UNDER THE AGREEMENT DATED 23.12.1993. THEREFORE DEDUCTION CANNOT BE DENIED MERELY ON THE GROUND THAT PROVISION IS NOT MADE. THE APPELLANT RELIED UPON THE FOLLOWING JUDGMENTS IN SUPPORT OF ITS CONTENTION. A. SUTLAJ COTTON MI LLS LIMI TED V/S. CIT 116 ITR 1 (S.C..) B. PUNJAB DISTILLING INDUSTRIES LIMITED V/S. CIT 35 ITR 519 (SC) C. KEDARNATH JUTE MFG. CO. LTD. V/S. CIT 82 - 363 (SC) D. CIT V/S. CENTRAL PROVINC ES MANGANES E ORE CO. LTD. 112 ITR 734 (BOM ) E. CIT V/S. SWARUP VEGET ABLE PRODUCTS 210 ITR 716 (ALL) 6.6. FROM A PERUSAL OF SECTION 35AB IT CAN BE OBSERVED THAT THE DEDUCTION FOR EXPENDITUR E ON KNOW - HOW IS ALLOWABLE AT 1/ 6 TH OF THE AMOUNT PAID AS LUMP SUM CONSIDERATION FOR ACQUIRING ANY KNOW - HOW FOR USE FOR THE PURPOSE OF BUSINESS. THE ASSESSING OFFICER HAS NOT DISPUTED THE AMOUNT OF L UMP SUM CONSIDERATION OR THE USABILITY OF SUCH KNOW - HOW FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. THE ASSESSING OFFICER HAS NOT DISTINGUISHED THE FACTS OF THE CASE OF DELHI TRIBUNAL VI S A VIS THE FACTS OF THE CASE OF THE APPELLANT THE ASSESSING OFFICER OUGHT TO HAVE CONTRADICTED THE FACTS OF THE APPELLANT COMPANY WITH THAT OF THE CITED CASE. THE APPELLANT COMPANY ON THE OTHER HAND DURING THE COURSE OF ASSESSMENT PROCEEDINGS SUBMITTED AS TO HOW THE FACTS OF THE CASE OF THE CITED CASE ARE APPLICABLE TO THE FACTS OF THE CASE OF THE APPELLANT COMPANY. THE ASSESSING OFFICER HAS MERELY STATED THAT THE DEPARTMENT HAS GONE IN APPEAL AGAINST THE DECISION OF THE DELHI TRIBUNAL IN THE CASE OF TAIBR OS AUTOMOTIVE COMPONENT PVT. LTD. REPORTED IN 56 LTD 312 WHICH WAS RELIED UPON BY THE HONORABLE ITAT ABMEDABAD IN A GENERAL MANNER. 5.7. CONSIDERING THE ABOVE FACTUAL MATRIX OF THE CASE I AM IN AGREEMENT WITH THE APPELLANT COMPANYS CONTENTION THAT THE EX PENDITURE ON KNOW - HOW HAS BEEN PAID OR INCURRED BY THE APPELLANT AS CLAIMED BY IT WITHIN THE MEANING OF SECTION 43(2) OF THE ACT. THE APPELLANT COMPANY SUBMITTED BEFORE ME THAT IT HAS DEDUCTED AND PAID THE APPLICABLE TDS TO THE GOVERNMENT OF INDIA. THE ASS ESSING OFFICER HAS STATED THAT IT HAS NOT BEEN PAID. THE APPELLANT COMPANY ON THE OTHER HAND THE APPELLANT ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 5 COMPANY SUBMITTED BEFORE ME THAT THE TDS WAS NOT ONLY DEDUCTED BUT WAS PAID IN TIME TO THE CREDIT OF THE CENTRAL GOVERNMENT. THE APPELLANT COMPANY SU BMITTED BEFORE ME RELEVANT CHALLANS OF THE SAID AMOUNT. I AGREE WITH THE APPELLANT COMPANYS CONTENTION THAT IF THE APPLICABLE TDS HAS BEEN PAID TO THE GOVERNMENT, THE ADDITION IS UNWARRANTED. 5.8. CONSIDERING THE DIRECTIONS OF THE HONORABLE ITAT AHMEDABA D N THE CASE OF THE APPELLANT COMPANY AND THE FACTUAL MATRIX OF THE CASE AS DISCUSSED ABOVE THIS GROUND OF APPEAL IS ALLOWED. ANYHOW THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE GENUINENESS OF TAX PAYMENTS (TDS) AND GRANT DEDUCTION TO THE APPELLANT ACCO RDINGLY AS HELD IN THIS ORDER. THE APPELLANT COMPANY SUCCEEDS I THIS GROUND OF APPEAL. AGGRIEVED, THE REVENUE IS IN APPEAL. 4 . AT THE TIME OF HEARING, ON BEHALF OF THE REVENUE SHRI GOVIND SINGHAL, DR APPEARED AND CONTENDED THAT IN THIS CASE LEARNED CIT( A) HAS DELETED THE ADDITION HOLDING THAT IF APPLICABLE TDS HAS BEEN PAID TO THE GOVERNMENT THE ADDITION IS UNWARRANTED. THE LEARNED DR POINTED OUT THAT FROM THE PERUSAL OF THE DETAILS SUBMITTED BY THE ASSESSEE IN RESPECT OF TDS PAYMENT, IT IS CLEAR THAT ASSESSEE HAS MADE PAYMENT AFTER RECEIPT OF THE ORDER OF THE ITAT WHICH IS NOT PAID IN DUE COURSE AND HENCE, THE CIT(A) HAS ERRED IN ALLOWING DEDUCTION TO THE ASSESSEE. ON THE OTHER HAND, SHRI SUNIL H TALATI, LEARNED AR OF THE ASSESSEE POINTED OUT THAT I TAT, C BENCH, AHMEDABAD VIDE ORDER DT.31.5.2005 RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER TAX HAS BEEN DEDUCTED OR PAID, THEN ALLOW DEDUCTION U/S.35AB. IN THIS CASE, TAX WAS DEDUCTED WHICH IS NOT DISPUTED BY THE REVENUE. I T HAS ALSO BEEN PAID, THEREFORE, THE VIEW TAKEN BY THE LEARNED CIT(A) SHOULD BE UPHELD. 5 . HAVING HARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOT E THAT THE VIEW TAKEN BY THE LEARNED CIT(A ) IN THE IMPUGNED ORDER DIRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION CLAIMED U/S.35AB AMOUNTING TO RS.15,08,792 IS IN CONFORMITY WITH THE DIRECTION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1994 - 95. AS A MATTER OF FACT IN THE ASSESSMENT ORDER ITSELF THE ASSESSING OFFICER ADMITTED THAT TAX WAS DEDUCTED. AT THE RELEVANT TIME, THE CLAIM OF DEDUCTION U/S.35AB IS ALLOWABLE IF THE TDS HAS BEEN DEDUCTED OR PAID BY THE ASSESSEE. SINCE IN THE INSTANT CASE THE ASSESSEE HAS ADMITTEDLY DE DUCTED THE TAX ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 6 AT SOURCE, THE LEARNED CIT(A) IS JUSTIFIED IN THE CLAIM OF THE ASSESSEE. IN SUCH VIEW OF THE MATTER, GROUND NO.1 OF THE REVENUE IS DISMISSED. 6 . GROUND NO.2 READS AS UNDER : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING AN ADDITION OF RS.4,66,878 (WRONGLY MENTIONED AS RS.5,718 766) ON ACCOUNT OF BAD DEBTS MADE BY THE A.O. 7 . BAD DEBTS AMOUNTING TO R S.4,66,876 WAS DISALLOWED BY THE A.O IN THE ASSESSMENT FRAMED U/S.143(3) OF THE ACT. ON APPEAL , THE TR IBUNAL RESTORED THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER. CONSEQUENTLY AS PER DIRECTION OF THE TRIBUNAL ASSESSEE WAS ASKED TO FURNISH NECESSARY DETAILS REGARDING BAD DEBTS. BEFORE THE ASSESSING OFFICER THE ASSESSEE SUBMITTED THAT NO CIVIL SUITE WAS FILE FOR RECOVERY AS THE AMOUNTS WERE SMALL IN NATURE AND FILING OF SUITE WAS VERY COSTLY AFFAIRS. BEFORE THE ASSESSING OFFICER THE ASSESSEE ALSO RELIED ON THE DECISION OF MUMBAI SPECIAL BENCH IN THE CASE OF OMAN INTERNATIONAL LIMITED (100 ITD 285) AND CON TENDED THAT THE ASSESSEE HAS WRITTEN OFF THE DEBTS IN QUESTION, THEREFORE, THE SAME BE ALLOWED LOOKING TO THE SMALLNESS OF THE AMOUNTS. THE ASSESSING OFFICER AGAIN DISALLOWED THE BAD DEBTS ON THE GROUND THAT THE ASSESSEE FAILED TO ESTABLISH THAT ACTUALLY THE DEBTS WERE BECAME BAD PRIOR TO THEIR WRITTEN OFF ON WHICH REQUIREMENT AND LIABILITY WHICH SUBSISTS EVEN AFTER AMENDMENT TO SECTION W.E.F. 1.4.89. IN THE IMPUGNED ORDER, THE LEARNED CIT(A) ALLOWED THE SAME. 8 . AT THE TIME OF HEARING, LEARNED DR PLACING RELIANCE ON THE DECISION OF DHALL ENTERPRISES & ENGINEERS (P) LTD V. CIT (2007) 295 ITR 481 (GUJ) CONTENDED THAT SINCE THE ASSESSEE HAS FAILED TO ESTABLISH THAT DEBTS ACTUALLY B ECAME BAD PRIOR TO THEIR WRITTEN OFF, THE CIT(A) IS NOT JUSTIFIED IN DELETING T HE ADDITION. LEARNED COUNSEL OF THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THESE AMOUNTS REPRESENT SALES MADE TO VARIOUS PARTIES. AMOUNTS BEING VERY SMALL AND VERY OLD, THEREFORE, THESE WERE WRITTEN OFF. HE FURTHER SUBMITTED THAT THE AMOUNT IN QUESTIO N FOR RECOVERY WAS APPROXIMATELY 2 TO 3% OF THE TOTAL BUSINESS WITH THE RESPECTIVE CLIENTS, THEREFORE, THE SAME MAY BE ALLOWED. 9 . AFTER HEARING BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOT E THAT THE ASSESSEE HAS ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 7 SUBMITTED COPY OF ACCOUNTS OF ALL THE DEBTORS. LOOKING TO THE SMALLNESS OF THE AMOUNT, IT IS NOT POSSIBLE TO FILE CIVIL SUITE FOR RECOVERY OF THE DEBT. IN THE IMPUGNED ORDER LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF BAD DEBTS TOWARDS SALES MADE BY THE ASSESSEE COMPANY TO THOSE PARTIES IN THE EARLIER YEAR WHICH ARE NOT RECOVERABLE NOW. LOOKING TO THE NATURE AND VOLUME OF BUSINESS, WE ARE OF THE VIEW THAT THE VIEW TAKEN BY THE LEARNED CIT(A) IS FAIR AND REASON ABLE. WE, THEREFORE, DECLINE TO INTERFERE WITH THE SAID ORDER OF THE LEARNED CIT(A). 10 . IN THE RESULT, ITA NO.1776/AHD/2007 FILED BY THE REVENUE IS DISMISSED . ITA NO.1257 AND 1258/AHD/2009 (FILED BY ASSESSEE) 11 . IN THE ASSESSMENT YEAR 1997 - 98 AND 1998 - 99, THE ONLY GROUND RAISED BY THE ASSESSEE IS AGAINST CONFIRMATION OF THE ADDITION/DISALLOWANCE OF RS.7,47,449 AND RS.7,39,806 U/S.35AB OF THE ACT. 12 . HAVING HEARD BOTH SIDES, WE HAVE CAREFULLY GONE THROUGH THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW. THE ABOVE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT(A) ON THE GROUND THAT THE ASSESSEE COMPANY HAS NOT PAID TDS ON TECHNICAL KNOW HOW FEES DURING THE RESPECTIVE ASSESSMENT YEARS UNDER CONSIDERATION. THE LEARNED AR OF THE A SSESSEE DID NOT DISPUTE THE FACT THAT THE ASSESSEE COMPANY HAS NOT PAID TDS. THEREFORE, WE CONFIRM THE IMPUGNED ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION/DISALLOWANCE MADE U/S.35AB OF THE ACT. 13 . IN THE RESULT, ITA NOS.1257 AND 1258/AHD/2009 FILED BY THE ASSESSEE ARE DISMISSED. T HIS ORDER IS PRONOUNCED IN OPEN COURT ON DT. 31.07.09 SD/ - SD/ - ( D.C.AG RAWAL ) ACCOUNTANT MEMBER. (T.K.SHARMA) JUDICIAL MEMBER DATE: 31.07.09 (H.K.PADHEE) SENIOR PRIVA TE SECRETARY. ITA NO. 1776/AHD/2007, ITA NOS.1257 AND 1258/AHD/2009 (CROSS APPEALS) 8 COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. THE DR, AHMEDABAD 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, DEPUTY.REGISTRAR.