Joseph Davaraj Koilpillai , Bangalore V. Income Tax Officer Ward-6(3)(4), Bangalore

ITA 3239/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5233 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-10-2020
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R PREMI JT BENGALU RU
• Assessee Lawyers: V SRINIVASAN
• Keywords: Bad and doubtful debts
• Section: 113; 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N V VASUDEVAN, VICE PRESIDENT AND SHRI B R BASKARAN , ACCOUNTANT MEMBER IT A NO. 3239 /BANG/20 18 ASSESSMENT YEAR: 20 14 - 15 JOSEPH DAVARAJ KOILPILLAI, NO.225, HOLYWOOD TOWN, SADAHALLI POST, BANGALORE 562 127. PAN: AARPJ 0519L VS. THE INCOME TAX OFFICER, WARD 6(3)(4), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI V. SRINIVASAN, ADVOCATE REVENUE BY : S MT. R. PREMI, JT. CIT(DR)(ITAT), BENGALURU. DATE OF HEAR ING : 06 .10. 2020 DATE OF PRONOUNCEMENT : 09 . 1 0.2020 O R D E R PER N.V. VASUDEVAN, VICE PRESIDENT THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF CIT(APPEALS)-7, BENGALURU DATED 20.09.2018 IN RELA TION TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL BY THE ASSESSEE IS AS TO, WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN REJECTING THE CLAIM OF ASSESSEE FOR DEDUCTION OF A SUM OF RS.88,59,511 ON ACCOUNT OF BAD DEBTS WRITTEN OFF. 3. THE ASSESSEE IS AN INDIVIDUAL CARRYING ON BUSINE SS OF PROJECT MANAGEMENT AND CONSULTANCY SERVICES UNDER THE NAME AND STYLE ELHANAN ITA NO.3239/BANG/2018 PAGE 2 OF 10 MANAGEMENT SERVICES. FOR THE AY 2014-15, THE ASSE SSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.4,07,450. 4. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE AO N OTICED THAT IN ARRIVING AT THE INCOME FROM PROFESSION, THE ASSESSE E CLAIMED DEDUCTION OF RS.88,59,511 ON ACCOUNT OF BAD DEBTS WRITTEN OFF. THE DETAILS OF BAD DEBT WRITTEN OFF AS BAD DEBTS AND SHOWN AS INCOME OF THE ASSESSEE IN HIS BOOKS OF ACCOUNT IN THE EARLIER ASSESSMENT YEARS AS FURNI SHED BY THE ASSESSEE BEFORE THE REVENUE AUTHORITIES WAS AS FOLLOWS:- NAME AMOUNT IN RS. RELEVANT FY TO WHICH THE RECEIVABLE PERTAINS SALES REGISTER ENCLOSED IN PAGE NO. OF THIS ANNEXURE LEDGER IS ENCLOSED IN PAGE NO. OF WS MADE ON 07.02.2018 ETL INFRASTRUCTURE SERVICES LTD. 17,31,786 2007-08 11 104 L&T LTD. (ECC DIVISION) 10,63,495 2009-10 24 108-109 L&T TECH PARK LTD. 34,41,406 2007 - 08 11 111 - 112 L&T TECH PARK LTD. 2,92,500 2010 - 11 30 112 - 113 L&T TECH PARK LTD. 2,70,000 2011 - 12 36 113 MUTHOOT HOTELS & TOURISM VENTU 50,000 2006-07 4 114 OBERON EDIFICES 1,99,410 2007 - 08 11 116 RAYMONDS LIMITED 13,73,055 2008-09 18 117-118 RC ARCHITECTURE PVT LTD 29,515 2004 - 05 10 119 SRK GROUPS 4,08,343 2007-08 11 120 88,59,511 5. THE AO DID NOT ALLOW CLAIM OF ASSESSEE FOR DEDUC TION ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO SHOW AS TO HOW TH E DEBTS THAT WERE WRITTEN OFF AS BAD DEBTS HAD IN FACT BECOME BAD AND IRRECOVERABLE. THE FOLLOWING WERE THE RELEVANT OBSERVATIONS OF THE AO: - ITA NO.3239/BANG/2018 PAGE 3 OF 10 5. DETAILS OF THE SAME WERE SOUGHT FOR AND THE ASS ESSCE HAS ONLY FURNISHED A LIST AND LEDGER ACCOUNTS OF SUCH C ASES IN WHOSE CASES, THE DEBTS ARE WRITTEN OFF AND NO OTHER DETAI LS REGARDING STEPS INITIATED TO RECOVER THE SAME LIKE ANY CORRES PONDENCE WITH THE ENTITIES IN WHOSE CASES, THE BAD DEBTS ARE WRIT TEN OFF, WERE PRODUCED BY THE ASSESSEE. IN THE ABSENCE OF THIS, T HE BAD DEBTS WRITTEN OFF BY THE ASSESSEE COMPANY IS CONSIDERED A S NON- GENUINE. DEBT IN THE ORDINARY COURSE OF BUSINESS DE NOTES NOT ONLY AN OBLIGATION OF THE DEBTOR TO PAY BUT ALSO THE RIG HT OF THE CREDITOR TO RECEIVE AND ENFORCE PAYMENT. IN THE CASE OF THE ASSESSEE, IT HAS NOT FURNISHED ANY PROOF FOR EFFECTIVE STEPS HAVING BEEN TAKEN TO RECOVER THE DEBT TO THE EXTENT OF RS.88,59,511/-. I T IS ALSO OBSERVED FROM THE LEDGER ACCOUNTS THAT THE DEBTS AR E TOO EARL: TO BE WRITTEN. OFF. THE VERY ACT OF WRITING OFF SUCH H UGE AMOUNT WITHOUT ANY EFFORTS TO COLLECT THE DEBTS, ONLY SHOW S ASSESSEE'S PRETEXT TO EVADE TAX. HENCE. CONSIDERING THE AMOUNT TO BE WRITTEN OFF IE., RS.88,59,511/- TO BE VERY HUGE IN THE ABSE NCE OF ANY EFFECTIVE STEPS TAKEN FOR RECOVERING THE SAME AND F UR THE REASON THAT THEY ARE CONSIDERED TO BE TOO EARLY TO BE WRIT TEN OFF, SAID WRITING OFF IS NOT ALLOWED AND RS.88,59,511/- IS AD DED BACK TO THE INCOME OF THE ASSESSEE U/S.36(1)(VII) OF THE INCOME TAX ACT, 1961. 6. BEFORE THE CIT(APPEALS), THE ASSESSEE SUBMITTED THAT AFTER THE AMENDMENT OF PROVISIONS OF SECTION 36(1)(VII) OF TH E INCOME TAX ACT, 1961 [THE ACT] W.E.F. 1.4.2008, IT IS NOT NECESSARY THAT THE ASSESSEE SHOULD ESTABLISH THAT THE WRITTEN OFF BAD DEBTS HAS IN FAC T BECOME BAD. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO AND IN HIS R EMAND REPORT DATED 23.4.2018, THE AO SUBMITTED THAT THE COMPANIES IN R ESPECT OF WHICH ASSESSEE CLAIMED THAT DEBT HAS BECOME BAD WERE PRES TIGIOUS REPUTED COMPANIES AND CANNOT BE TREATED AS A COMPANY IN LIQ UIDATION NOR WERE THEY LOSS MAKING COMPANIES. THE AO REITERATED HIS STAND AS REFLECTED IN THE ORDER OF ASSESSMENT. 7. THE CIT(APPEALS) FIRSTLY ACCEPTED THE FACT THAT AFT ER THE AMENDMENT TO THE LAW W.E.F. 1.4.1989 AND IN THE LIGHT OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LD. [2010] 190 TAXMAN 391 (SC) , IT IS ITA NO.3239/BANG/2018 PAGE 4 OF 10 NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT TH E DEBTS WRITTEN OFF AS BAD DEBT HAS IN FACT BECOME BAD AND IRRECOVERABLE AND T HAT A MERE WRITE OFF IN THE BOOKS OF ACCOUNT OF ASSESSEE IS SUFFICIENT TO C LAIM DEDUCTION. THE CIT(A), HOWEVER, PLACED RELIANCE ON THE DECISION OF THE ITAT HYDERABAD BENCH IN THE CASE OF NATCO PHARMA LTD., 29 TAXMANN.COM 297 WHICH IN TURN RELIED ON THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF TRAVANCORE TEA ESTATES CO. LTD., 233 ITR 203 (SC) WHEREIN A VIEW WAS EXPRESSED THAT THE ASSESSEE HAS TO ESTABLISH THAT T HE DEBT HAS BECOME BAD AND IRRECOVERABLE TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS. THE CIT(A) ALSO REFERRED TO A DECISION OF THE ITAT BANG ALORE BENCH IN THE CASE OF EMBASSY CLASSIC (P) LTD., 20 TAXMANN.COM 291 WHEREIN IT WAS HELD THAT WRITING OFF A DEBT AS A BAD DEBT IS NOT AN EMPTY FO RMALITY AND THAT THE ASSESSEE HAS TO SHOW THAT THE DEBT HAS BECOME BAD A ND THAT THE ASSESSEE CANNOT CONVERT ANY LIVE AMOUNT INTO A BAD DEBT ONLY ON THE BASIS OF A TECHNICAL RULE OF WRITING OFF. THE CIT(A) THEREAFT ER ATTEMPTED TO RECONCILE THE BALANCE OF DEBTS THAT WERE WRITTEN OFF AS BAD D EBTS AS APPEARING IN THE BOOKS OF ACCOUNT FROM AY 2007-08. THE CIT(A), HOWE VER, HAS NOT COME OUT WITH ANY SPECIFIC ADVERSE FINDING ON THE CLAIM OF ASSESSEE. THE CIT(A) DID NOT DISPUTE THE FACT THAT THE SUM WHICH WAS WRI TTEN OFF AS BAD DEBT WAS SHOWN AS INCOME BY THE ASSESSEE IN THE EARLIER ASSE SSMENT YEAR. THE CHART IN THIS REGARD HAS ALREADY BEEN EXTRACTED IN EARLIER PART OF THIS ORDER. THE CIT(A) FINALLY CAME TO THE CONCLUSION THAT THE WRITE OFF OF DEBT AS BAD DEBTS WAS ONLY AN EFFORT TO REDUCE THE ASSESSEES T AX LIABILITY. THE CIT(A) ACCORDINGLY CONFIRMED THE ORDER OF AO. 8. AGGRIEVED BY THE ORDER OF CIT(APPEALS), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NO.3239/BANG/2018 PAGE 5 OF 10 9. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LD. CO UNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS WERE MADE BE FORE THE REVENUE AUTHORITIES. THE LD. DR RELIED ON THE ORDER OF CI T(APPEALS). 10. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS. THE FIRST ASPECT WHICH WE NOTICE IS THAT THE AO HAS NOT DISPUTED THE FACT THAT THE THERE WAS AN ACTUAL WRITE OFF OF DEBTS AS BAD DEBTS AND THE SUMS WRITTEN OFF AS BAD DEBTS WERE IN FACT SHOWN AS INCOME OF THE AS SESSEE IN THE EARLIER ASSESSMENT YEARS. THE ONLY REASON GIVEN BY THE AO W AS THAT THE ASSESSEE DID NOT ESTABLISH THAT THE DEBTS IN QUESTION HAVE I N FACT BECOME BAD. THE CIT(APPEALS) ALSO ADOPTED THE SAME REASONING. THE CIT(A), HOWEVER, HAS ATTEMPTED TO FIND SOME DISCREPANCIES IN THE BALANCE S, BUT THOSE DISCUSSIONS IN THE ORDER OF CIT(A) ARE VERY VAGUE A ND DOES NOT SHOW ANY CONCLUSION OR EFFECT ON THOSE OBSERVATIONS ON THE C LAIM OF ASSESSEE FOR DEDUCTION ON ACCOUNT OF BAD DEBTS. THE CIT(A) HAS ALSO PLACED RELIANCE ON THE DECISION OF THE ITAT HYDERABAD BENCH IN THE CASE OF NATCO PHARMA LTD. (SUPRA) WHICH WAS BASED ON THE DECISION OF HONBLE SUPREME COURT IN TRAVANCORE TEA ESTATES CO. LTD. (SUPRA) WHICH IS A DECISION RENDERED PRIOR TO THE AMENDMENT OF PROVISIONS OF SECTION 36(1)(VII ) W.E.F. 1.4.1989. THE LATER DECISION IN THE CASE OF TRF LTD. (SUPRA) SUPPORTS THE PLEA OF ASSESSEE. 11. FOR THE SAKE OF CLARITY, WE RE-PRODUCE HEREINBE LOW 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 THE REIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28- ITA NO.3239/BANG/2018 PAGE 6 OF 10 (I) TO (VI) 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 THE REIN, IN COMPUTING THE INCOME REFERRED TO IN SECTION 28- (I) TO (VI) XXXX XXXX (VII) SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF A S IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YE AR.' 12. IN THE CBDT CIRCULAR NO.551 DATED 23-01-1990 (1 990) 183 ITR ST. 37, THE PROVISIONS OF SECTION 36(1)(VII) WAS EXPLA INED POST THE AMENDMENT BROUGHT VIDE DIRECT TAX LAWS (AMENDMENT)ACT, 1987. THE CIRCULAR READS AS UNDER :- AMENDMENTS TO SECTIONS 36(1)(VII) AND 36(2) TO RAT IONALISE PROVISIONS REGARDING ALLOWABILITY OF BAD DEBTS - THE OLD PROVISIONS OF CLAUSE (VII) OF SUB-SECTION (1) READ WITH SUBSECTION (2) OF THE SECTION LAID DOWN CONDITIONS NECESSARY F OR ALLOWABILITY OF BAD DEBT. IT WAS PROVIDED THAT THE DEBT MUST BE ESTABLISHED TO HAVE BECOME BAD IN THE PREVIOUS YEAR. THIS LED TO E NORMOUS LITIGATION ON THE QUESTION OF ALLOWABILITY OF BAD D EBT IN A PARTICULAR YEAR, BECAUSE THE BAD DEBT WAS NOT NECES SARILY ALLOWED BY THE ASSESSING OFFICER IN THE YEAR IN WHICH THE S AME HAD BEEN WRITTEN OFF ON THE GROUND THAT THE DEBT WAS NOT EST ABLISHED TO HAVE BECOME BAD IN THAT YEAR. IN ORDER TO ELIMINATE THE DISPUTES IN THE MATTER OF DETERMINING THE YEAR IN WHICH A BAD D EBT CAN BE ALLOWED AND ALSO TO RATIONALISE THE PROVISIONS, THE AMENDING ACT, 1987 HAS AMENDED CLAUSE (VII) OF SUBSECTION (1) AND CLAUSE (I) OF SUB-SECTION (2) OF THE SECTION TO PROVIDE THAT THE CLAIM FOR THE BAD DEBT WILL BE ALLOWED IN THE YEAR IN WHICH SUCH A BAD DEBT ITA NO.3239/BANG/2018 PAGE 7 OF 10 HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUN TS OF THE ASSESSEE. 13. IT IS THUS CLEAR THAT THE DEDUCTION ON ACCOUNT OF BAD DEBT AS ALLOWED U/S 36(L)(VII) READ WITH SECTION 36(2), AFTER AMEND MENT BY THE DIRECT TAX LAWS (AMENDMENT) ACT 1987, ENVISAGE MERELY WIRING O FF THE DEBT AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE AS A CONDITION FOR SUCH AN ALLOWANCE. BEFORE THE AMENDMENT BY THE DTL (AMENDME NT) ACT 1987, OF COURSE, THERE WAS A CONDITION TO ESTABLISH THAT THE DEBT HAS BECOME BAD. 14. THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED VS C.I.T REPORTED IN 323 ITR 397(SC) HAS CLEARLY OBSERVED THAT AFTER 01.04.1989, 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. 15. THE LD. DR PLACED RELIANCE ON THE DECISION OF B ANGALORE BENCH OF THE TRIBUNAL IN THE CASE OF EMBASSY CLASSIC P. LTD. VS. ACIT 20 TAXMANN.COM 291. 16. IN THE AFORESAID CASE, THE FACTS WERE THAT, TH ERE WAS A SEARCH ACTION IN THE CASE OF THE ASSESSEE ALONG WITH A SIMULTANEO US SEARCH IN THE CASE OF ONE SHRI. K. M. VISWANATH AND SMT. K. M. PARVATHAMMA . IN THE LIGHT OF THE MATERIALS AND INFORMATION COLLECTED IN THE COURSE O F SEARCH, THE ASSESSEE WAS ASKED TO FILE RETURNS. IN SUCH RETURNS FILED BY THE ASSESSEE, IT CLAIMED DEDUCTION BY WAY OF BAD DEBTS TO THE TUNE OF RS.3.6 7 CRORES. THE ASSESSEE EXPLAINED THAT AS AGAINST THE SALES CONSIDERATION O F RS.8,60,69,500/- THE BUYERS HAD PAID AN AMOUNT OF RS.4,93,97,650/- AND A CHEQUE FOR RS.4 CRORES WAS ISSUED FOR THE BALANCE CONSIDERATION. AC CORDING TO THE ASSESSEE, THE CHEQUE SO RECEIVED FROM SHRI. K. M. V ISWANATH AND SMT. K. M. PARVATHAMMA BOUNCED ON PRESENTATION BEFORE ITS B ANKERS AND THE ASSESSEE WAS UNABLE TO REALIZE THE AFORESAID SUM. A CCORDING TO THE ITA NO.3239/BANG/2018 PAGE 8 OF 10 ASSESSEE COMPANY, CERTAIN LEGAL PROCEEDINGS WERE AL SO INITIATED AGAINST THE DEFAULTERS. AS ON THE DATE OF THE FINALIZATION OF THE BALANCE-SHEET, THE REALIZATION OF THE BALANCE MONEY WAS DOUBTFUL AND T HE ASSESSEE TOOK A DECISION TO WRITE OFF THE AMOUNTS AS BAD DEBTS. ACC ORDINGLY, THE ASSESSEE COMPANY WROTE-OFF A SUM OF RS.3,66,71,850/- AS BAD DEBTS ON ACCOUNT OF SHRI. K. M. VISWANATH AND SMT. K. M. PARVATHAMMA. T HE TRIBUNAL FOUND THAT THE SUM WRITTEN OFF AS BAD DEBT WAS IN FACT RE ALIZED BY THE ASSESSEE BEFORE THE DATE OF FILING OF RETURN OF INCOME AND H ENCE THE TRIBUNAL DID NOT ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION, OBSE RVING AS FOLLOWS:- EVEN THOUGH WRITING OFF A DEBT AS BAD AND DOUBTFUL MAY BE A SUFFICIENT MODE OF DISCHARGING THE PROOF, THE SAID FORMAT OF STATUTORY EVIDENCE IS NOT AN EMPTY FORMALITY. IT IS NOT NECESSARY FOR THE ASSESSEE TO PROVE THAT THE DEBT HAS BECOME BAD. BUT AT THE SAME TIME, THE ASSESSEE CANNOT CONVERT ANY LIVE AMO UNT INTO A BAD DEBT ONLY ON THE BASIS OF THE TECHNICAL RULE OF WRITING OFF. IN THE PRESENT CASE, EVEN THOUGH THE AMOUNT WAS NOT RE CEIVED ON THE BALANCE-SHEET DATE, THE AMOUNT WAS RECEIVED BY THE ASSESSEE BEFORE FILING OF THE RETURN ITSELF. IN FACT, THE BA LANCE CONSIDERATION OF THE SALE TRANSACTION COVERED BY THE DISHONOUR OF THE CHEQUE WAS RECEIVED BY THE ASSESSEE COMPANY ON 30.08,2005. THE ASSESSEE HAD FILED THE RETURN OF INCOME ONLY THEREA FTER ON 29.10.2005. THEREFORE, IT IS VERY CLEAR THAT WHEN T HE RETURN OF INCOME WAS FILED BY THE ASSESSEE, NO DEBT WAS RECOV ERABLE FROM THE BUYERS OF THE PROPERTY. WE FIND A LOT OF FORCE IN THE ARGUMENT OF THE LEARNED COMMISSIONER OF INCOME-TAX REGARDING THE NON- COMMITTAL OF THE ASSESSEE COMPANY IN PURSUING THE L EGAL REMEDIES AVAILABLE BEFORE IT FOR THE RECOVERY OF THE AMOUNT. THEREFORE, IN THESE CIRCUMSTANCES, WE DO NOT FIND THAT THE DEBT H AS BECOME BAD DEBT. IT WAS ONLY A CASE OF DELAYED PAYMENT. THEREF ORE, WE FIND THAT THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF T R F LTD., DOES NOT APPLY TO THE FACTS OF THE PRESEN T CASE. IN SHORT, WE FIND THAT THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY CONFIRMED THE DISALLOWANCE OF RS.3,66,71,850/-. ITA NO.3239/BANG/2018 PAGE 9 OF 10 17. IT IS THUS CLEAR THAT THE FACTS OF THE CASE IN THE CASE OF EMBASSY CLASSIC (SUPRA) ARE DISTINGUISHABLE FROM THE FACTS OF THE ASSESSEES CASE BECAUSE IN THE CASE CITED, THE ASSESSEE HAD WRITTE N OFF BAD DEBTS IN THE BOOKS OF ACCOUNT. HOWEVER, THE AMOUNT WAS RECOVERED BY THE ASSESSEE BEFORE FILING OF THE RETURN ITSELF. THUS, AT THE TI ME OF FILING OF RETURN OF INCOME, NO DEBT WAS DUE. THE TRIBUNAL OBSERVED THAT THE ASSESSEE CANNOT CONVERT ANY LIVE AMOUNT INTO A BAD DEBT ONLY ON THE BASIS OF THE TECHNICAL RULE OF WRITING OFF. IT WAS NOT A CASE OF BAD DEBT BUT A CASE OF DELAYED PAYMENT. IT WAS IN BACKDROP OF THESE FACTS THE TRIB UNAL HELD, THAT THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE C ASE OF TRF LIMITED VS. CIT (SUPRA) WILL NOT APPLY. WE FIND THAT THE FACTS IN THE PRESENT CASE ARE ENTIRELY AT VARIANCE. THEREFORE, THE DECISION OF BA NGALORE BENCH OF THE TRIBUNAL IN THE CASE OF EMBASSY CLASSIC P. LTD. VS. ACIT (SUPRA) WILL HAVE NO APPLICATION IN THE FACTS AND CIRCUMSTANCES OF TH E PRESENT CASE. 18. FOR THE ABOVE REASONS, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF BAD DEBTS AND THE AO IS DIRECTED TO ALLOW CLAIM OF ASSESSEE. 19. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 9 TH DAY OF OCTOBER, 2020. SD/- SD/- ( B R BASKARAN ) ( N V VASUDEVA N ) ACCOUNTANT MEMBER VICE PRESIDENT BANGALORE, DATED, THE 9 TH OCTOBER, 2020. / DESAI S MURTHY / ITA NO.3239/BANG/2018 PAGE 10 OF 10 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.