M/s Punjab Information & Communication Technology, Chandigarh V. ACIT, Chandigarh

ITA 747/CHANDI/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5462 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 28-07-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: D K GOYAL
• Keywords: Capital asset; Business income; Wholly owned subsidiary; Bad and doubtful debts; Revenue expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS.SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.747 /CHD/2009 (ASSESSMENT YEAR : 2005-06) PUNJAB INFORMATION & COMMUNICATION, VS. THE A.C. I.T., TECHNOLOGY CORPORATION LTD. CIRCLE 2(1) UDYOG BHAWAN 18, CHANDIGARH. SECTOR 17, CHANDIGARH. PAN: AABCP3373K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI D.K.GOYAL RESPONDENT BY : SHRI S.K.MITTAL, CIT DR O R D E R PER SUSHMA CHOWLA, J.M, : THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF THE COMMISSIONER OF INCOME-TAX (A), DATED 02.04.2009 RE LATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UN DER SECTION 143(3) OF THE INCOME-TAX ACT. 2. THE ISSUE IN THE PRESENT APPEAL IS AGAINST THE D ISALLOWANCE OF RS.8.65 CRORES BEING THE AMOUNTS WRITTEN OFF. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS ESTABLISHED WITH AN OBJECT TO DEVELOP AND PROMOTE T HE ELECTRONICS, TELECOMMUNICATION, I.T. AND ITES INDUSTRIES IN THE STATE OF PUNJAB. THE ASSESSEE IS ALSO ENGAGED IN DEVELOPMENT AND SALE OF INDUSTRIAL PLOT AND SHED. DURING THE YEAR UNDER CONSIDERATION THE ASSE SSEE HAD DEBITED A 2 SUM OF RS.8.65 CRORES UNDER THE HEAD :AMOUNT WRITTE N OFF IN THE PROFIT & LOSS ACCOUNT. DURING THE COURSE OF ASSESSMENT PR OCEEDINGS, THE CLAIM OF THE ASSESSEE WAS THAT THE SAID AMOUNT WRITTEN OF F WAS ON ACCOUNT OF LOAN PROVIDED TO THE SUBSIDIARY COMPANIES AND/OR FO R PROMOTION OF INDUSTRY, WHICH WAS DULY APPROVED BY THE BOARD OF D IRECTORS. THE SAID SUBSIDIARY COMPANIES WERE EITHER UNDER LIQUIDATION OR CLOSED AND RETRENCHMENT/URS HAVE BEEN PAID TO THE EMPLOYEES OF THESE COMPANIES BY THE GOVT. OF PUNJAB. THE ASSETS AND LIABILITIES OF THESE COMPANIES ARE AT DISPOSAL OF OFFICIAL LIQUIDATOR; THE ASSESSEES LOAN BEING UNSECURED CREDITORS, AS PER THE ASSESSEE COULD NOT BE REALIZE D AND HENCE THE WRITE OFF. THE MINUTES OF MEETING OF BOARD OF DIRECTORS APPROVING THE WRITE OFF ARE INCORPORATED AT PAGE 2 OF THE ASSESSMENT OR DER. THE A.O. OBSERVED THAT THE ASSESSEE HAD CLAIMED WRITE OFF OF LOANS AS THE SAME HAD BECOME BAD DEBTS. APPLYING THE PROVISIONS OF SECTI ON 36(2) OF THE ACT THE A.O. OBSERVED THAT THE BAD DEBTS ARE ALLOWABLE AS REVENUE EXPENDITURE, IF THE INCOME RELATING TO THE DEBTS HA D BEEN ACCOUNTED FOR IN THE EARLIER YEARS. IN THE CASE OF THE ASSESSEE AS THE LOANS WERE ADVANCED BY THE ASSESSEE TO SUBSIDIARY COMPANIES FO R THEIR PROMOTION, THE WRITE OFF OF CAPITAL LOANS AS REVENUE EXPENSE, IS NOT ALLOWABLE UNDER THE PROVISIONS OF THE INCOME-TAX ACT. FURTHER, APP LYING THE PROVISIONS OF SECTION 36(2) OF THE ACT, IT WAS HELD BY THE A.O . THAT THE SAID PROVISIONS ARE NOT APPLICABLE AS LOANS/ADVANCES WER E CAPITAL IN NATURE AND NOT PASSED THROUGH PROFIT & LOSS ACCOUNT. IN V IEW THEREOF THE ASSESSEE WAS HELD NOT ENTITLED TO THE CLAIM OF RS.8 .65 CRORES AND THE SAME WAS DISALLOWED BY THE A.O. THE CIT(A) UPHELD THE ORDER OF THE A.O. 4. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF T HE CIT(A). THE LEARNED A.R. FOR THE ASSESSEE POINTED OUT THAT IT W AS EXPLAINED BEFORE THE 3 CIT(A) BY WRITTEN SUBMISSIONS THAT THE LOANS AND AD VANCES WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION ALSO INCLUDED T HE INTEREST ON THE SAID LOAN AND DIVIDEND INCOME, WHICH WAS REFLECTED AS IN COME BY THE ASSESSEE IN THE RESPECTIVE ASSESSMENT YEARS. IT WAS POINTED OUT THAT ONCE THE SAID AMOUNT ON ACCOUNT OF INTEREST ON LOAN AND DIVIDEND INCOME WAS NOT RECOVERABLE BY THE ASSESSEE, THE SAME WAS WRITTEN O FF AND ACCORDINGLY THE CLAIM OF BAD DEBTS BY THE ASSESSEE IN RESPECT O F THE LOANS AND ADVANCES ADVANCED TO THE SUBSIDIARY COMPANIES, WHIC H WERE NOT RECOVERABLE. THE CLAIM OF THE ASSESSEE WAS THAT TH E SAID ADVANCES WERE MADE DURING THE COURSE OF THE CARRYING OF BUSINESS ACTIVITIES AND AS PER THE DIRECTIONS OF THE BOARD OF DIRECTORS AND HENCE, THE SAME WAS ALLOWABLE AS BUSINESS LOSS UNDER SECTION 29 OF THE INCOME-TAX ACT. 5. THE LEARNED D.R. PLACING RELIANCE ON THE ORDER O F THE AUTHORITIES BELOW, FURTHER PLACED RELIANCE ON THE RATIO LAID DO WN BY THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF NAHAR INTERNAT IONAL LTD. LUDHIANA VS. ADDL.CIT IN I.T.A.NO. 467/CHANDI/2007. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD WR ITTEN OFF RS.8.65 CRORES. THE BEAK UP OF THE SAID WRITE OFF PARTY-WI SE IS AS UNDER : S.NO. NAME OF COMPANY AMOUNT(RS) NATURE OF INVESTMENT 1. PUNJAB POWER PACK LTD. 6,04,95,838/- LOAN AND AD VANCES 2. PUNJAB RECORDERS LTD. 1,83,95,754/- LOAN AND AD VANCES 3. PUNJAB DIGITAL INDUSTRIAL SYSTEM LTD. 21,05,824/- LOAN AND ADVANCES 4. EXPENSE ON I.T.PARK 40,91,450/- EXPENSES 5. EXPENSE ON INDIAN INSTITUTE INFORMATION TECHNOLOGY(IIIT) 12,59,844/- EXPENSES 6. EXPENSE ON SOFTWARE TECHNOLOGY PARK(STP) 60,513/- EXPENSES 4 7. EXPENSES ON INCOMNET LTD. 42,660/- EXPENSES 8. SUNDRY DEBTOR WATER SERVICES 1,06,828/- EXPENSES 7. NOW COMING TO THE WRITE OFF OF THE AMOUNT PARTY- WISE, WE FIND THAT A SUM OF RS.6.05 CRORES HAS BEEN WRITTEN OFF AGAINS T THE AMOUNT DUE FROM M/S PUNJAB POWER PACK LTD. THE SAID COMPANY WAS WH OLLY OWNED SUBSIDIARY OF THE ASSESSEE WHICH WAS PROMOTED BY TH E ASSESSEE AND THE FOLLOWING AMOUNTS AS PER THE ASSESSEE COMPRISED OF THE SAID OUTSTANDING BALANCE : 1) PUNJAB POWER PACK LTD . : A) RS. 384 LACS PAID BY THE ASSESSEE UNDER THE ONE TIME SETTLEMENT SCHEME (OTS) WHICH WAS INTRODUCED I N CONSEQUENCE TO THE BIFER AWARD DATED 12.01.1996. B) RS.75.56 LACS WERE PAID BY THE ASSESSEE BEING TH E PROMOTER COMPANY, ON ACCOUNT OF RETRENCHMENT COMPENSATION, GRATUITY, LEAVE ENCASHMENT, OUTSTANDI NG DUES OF PROVIDENT FUND ETC. TO ALL THE EMPLOYEES OF THE SAID COMPANY. REST OF THE AMOUNT WAS GIVEN AS WORK ING CAPITAL LOAN IN EARLIER YEARS. C) RS.15,64,145/- BEING INTEREST ON LOAN ADVANCED B Y THE ASSESSEE TO THE SAID COMPANY AND DISCLOSED IN T HE RETURN OF INCOME SINCE 1984-85 TO 1990-91 WAS NOT P AID BY THE SAID COMPANY HENCE INCLUDED IN THE TOTAL AMO UNT OF LOAN. D) DIVIDEND DECLARED BY THE SAID COMPANY FOR THE A. Y. 1988-98 AND 1989-90 AT AN AMOUNT OF RS.7.54 LAS AND 10.05 LACS RESPECTIVELY WHICH HAS BEEN DISCLOSED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, ON WHICH TDS BY T HE SAID COMPANY WAS DEDUCTED. 5 8. THE ASSESSEE HAS WRITTEN OFF RS.1.84 CRORES DUE FROM PUNJAB RECORDERS LTD. WHICH COMPRISED OF AN INVESTMENT OF RS.1.84 CRORES ON ACCOUNT OF LOANS AND ADVANCES. THE SAID COMPANY WA S WHOLLY OWNED SUBSIDIARY OF THE ASSESSEE. THE ASSESSEE CLAIMS IN TEREST ON LOAN ADVANCED TO THE SAID COMPANY SINCE 1983-84 TO 1993- 94 AMOUNTING TO RS.22.54 LACS WAS ALSO NOT PAID BY THE SAID COMPANY HAD BEEN INCLUDED IN THE TOTAL LOAN. THE SAID INTEREST FROM LOAN WAS SHOWN BY THE ASSESSEE IN THE RESPECTIVE YEARS AS PART OF ITS INCOME. 9. THE THIRD WRITE OFF IS IN RESPECT OF PUNJAB DIGI TAL INDUSTRIAL SYSTEM LTD. AMOUNTING TO RS.21.05 LACS. THE SAID C OMPANY WAS WHOLLY SUBSIDIARY OF THE ASSESSEE WHOSE OPERATIONS WERE CL OSED AND ALL THE EMPLOYEES WERE RETRENCHED. THE SAID AMOUNT WAS AD VANCED AS LOAN TO THE SAID COMPANY. FURTHER, THERE WAS A CLAIM THAT THE INTEREST WAS CHARGED ON THE SAID LOAN ADVANCED AND DISCLOSED IN THE RETURN OF INCOME BUT THE DETAILS OF THE SAME WERE NOT FURNISHED BY T HE ASSESSEE. AS PER THE ASSESSEE, PROPOSAL FOR WRITE OFF WAS APPROVED A S THERE WAS NO POSSIBILITY FOR RECOVERING THE LOAN AMOUNT. 10. IN ADDITION TO THE ABOVE SAID WRITE OFF, CERTAI N AMOUNTS ARE CLAIMED TO BE WRITTEN OFF BY THE ASSESSEE ON ACCOUNT OF CER TAIN EXPENSES INCURRED, WHICH WERE WRITTEN OFF AS THE PROJECTS FAILED. TH E BREAK-UP OF THE SAME ARE AS UNDER : 4) EXPENSE ON I.T.PARK: PRELIMINARY EXPENSES INCURRED TO BRING THE I.T. PAR K PROJECT AT MOHALI. 5) EXPENSE ON INDIAN INSTITUTE INFORMATION TECHNOLO GY(IIIT) : EXPENSES INCURRED TO BRING THE IIT AT MOHALI. 6 6) EXPENSE ON SOFTWARE TECHNOLOGY PARK(STP) : EXPENSES INCURRED TO BRING THE SAID PROJECT AT MO AHLI. 7) EXPENSES ON INCOMNET LTD. : EXPENSES INCURRED ON THE SAID JOINT SECTOR PROJECT WITH THE SAID CO. WHICH LATER ON FAILED. 8) SUNDRY DEBTOR WATER SERVICES : EXPENSES INCURRED ON ACCOUNT OF PROVIDING WATER SER VICES TO THE INDUSTRY LOCATED AT PHASE VIII. 11. THE PERUSAL OF THE DETAILS FURNISHED BY THE ASS ESSEE REVEALED THAT THE DISPUTE IN THE PRESENT APPEAL IS IN CONNECTION WITH THE WRITE OFF OF BALANCES OUTSTANDING AGAINST CERTAIN PARTIES. THE SAID BALANCES HAVE BEEN WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF AC COUNT AND HAS BEEN CLAIMED AS A REVENUE EXPENDITURE. THE CLAIM OF THE ASSESSEE BEFORE THE A.O. WAS THAT THE SAID EXPENDITURE WAS ALLOWANCE OF A BAD DEBT, WHICH WAS REJECTED BY THE A.O. BEFORE THE CIT(A) THE PLE A OF THE ASSESSEE WAS THAT THE SAID EXPENDITURE WAS IN THE NATURE OF BUSI NESS LOSS AND THE SAME WAS TO BE ALLOWED. HOWEVER, IN RESPECT OF WRITE OF F ON ACCOUNT OF INTEREST OF LOANS AND DIVIDEND INCOME SHOWN BY THE ASSESSEE, THE CLAIM WAS MADE BEING WRITE OFF OF BAD DEBTS. FROM THE P ERUSAL OF THE FACTS OF THE PRESENT CASE IT IS EVIDENT THAT CERTAIN AMOUNTS WHICH WERE ADVANCED AS LOANS BY THE ASSESSEE COMPANY TO ITS SUBSIDIARY COMPANIES HAVE BEEN WRITTEN OFF AFTER THE SAID COMPANIES HAVE BEEN CLOS ED AND THE EMPLOYEES RETRENCHED. THE AMOUNTS SO ADVANCED ARE CLEARLY CA PITAL LOSS IN THE HANDS OF THE ASSESSEE WHICH IS NOT ALLOWABLE AS A R EVENUE EXPENDITURE. 12. WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE CHA NDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF NAHAR INTERNATIONAL LTD . LUDHIANA VS. ADDL.CIT IN I.T.A.NO. 467/CHANDI/2007 RELATING TO A SSESSMENT YEAR 7 2002-03. THE TRIBUNAL VIDE ORDER DATED 30.9.2008 R ELYING ON THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN CIT VS. M YSORE SUGAR CO. LTD., 46 ITR 649 HELD AS UNDER : 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFU LLY. IN THIS CASE, AS NOTED BY US IN THE EARLIER PARAGRA PHS, THE DISPUTE REVOLVES AROUND THE BALANCE OUTSTANDING OF THE PARTIES WHICH HAVE BEEN WRITTEN OFF BY THE ASSESSEE IN THE ACCOUNT BOOKS. IT IS EVIDENT FROM THE FACTS NARRAT ED BY THE ASSESSING OFFICER IN HIS ORDER THAT A SUM OF RS.30,27,364/- HAS BEEN WRITTEN OFF AS IRRECOVERABL E ON ACCOUNT OF ADVANCES MADE FOR PURCHASE OF CAPITAL G OODS. ON THIS ASPECT, WE FIND NO JUSTIFICATION TO NEGATE THE POSITION CANVASSED BY THE REVENUE. UNDOUBTEDLY, TH E MONIES IN QUESTION HAVE BEEN LAID OUT FOR ACQUIRING CAPITAL ASSETS AND THEREFORE IF ANY LOSS IS INCURRE D IN SUCH SITUATION, THE SAME IS LIABLE TO BE CLASSIFIED AS A CAPITAL LOSS. IN THIS CONNECTION, IT WOULD BE USEF UL TO REFER TO THE PARITY OF REASONING ENUNCIATED BY THE HON'BLE SUPREME COURT IN THE CASE OF MYSORE SUGAR CO.LTD. (SUPRA). IN THE CASE BEFORE THE SUPREME COURT, THE ASSESSEE WHO WAS A MANUFACTURER OF SUGAR, USED TO ADVANCE SEEDLINGS, FERTILIZERS AND MONEY TO SUGAR G ROWERS UNDER AN AGREEMENT BY WAY OF WHICH SUCH GROWERS SOL D THEIR ENSUING CROP OF SUGARCANE TO THE ASSESSEE EXCLUSIVELY AT THE RELEVANT MARKET PRICE. IN CERTA IN YEAR, OWING TO DROUGHT, THE SUGARCANE GROWERS COULD NOT G ROW SUGARCANE AND THE ADVANCES MADE BY THE ASSESSEE REMAINED UN-RECOVERED. THE UN-RECOVERIES WERE CLAI MED AS A DEDUCTION WHILE COMPUTING THE BUSINESS INCOME. THE ISSUE WAS AS TO WHETHER SUCH A LOSS WAS CAPITAL OR A REVENUE EXPENDITURE. THE SUPREME COURT OBSERVED TH AT SINCE THERE WAS NO ELEMENT OF CAPITAL INVESTMENT EMBEDDED IN THE MAKING OF ADVANCES, THEREFORE THE L OSS INCURRED BY THE ASSESSEE WAS DEDUCTIBLE AS REVENUE EXPENDITURE. IF THE REASONING WEIGHING WITH THE SU PREME COURT IS APPLIED TO THE FACTS OF THE CLAIM OF THE A SSESSEE 8 OF A SUM OF RS.30,27,364/-, THE SAME CLEARLY EMERGE S TO BE A CAPITAL LOSS AND WHICH IS NOT ALLOWABLE AS REV ENUE EXPENDITURE. THEREFORE, FOLLOWING THE AFORESAID PA RITY OF REASONING, ON THIS ASPECT WE HEREBY SUSTAIN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. THUS, THE CIT(APPEALS) IS CORRECT IN SUSTAINING THE DISALLOWA NCE AS MADE BY THE ASSESSING OFFICER. ON THIS LIMB THE AS SESSEE HAS TO FAIL. 13. SIMILAR ISSUE AROSE BEFORE THE BOMBAY HIGH COUR T IN THE CASE OF SALEM MANGNESITE (P) LTD. VS. CIT (2009) 22 DTR (BO M) 319. 14. FOLLOWING THE ABOVE PARITY OF REASONING WE UPHO LD THE ORDER OF THE CIT(A) IN DISALLOWING THE AMOUNTS WRITTEN OFF ON AC COUNT OF LOANS AND ADVANCES MADE TO THE SUBSIDIARY COMPANIES. HOWEVER , WE FIND MERIT IN THE PLEA OF THE ASSESSEE THAT THE AMOUNTS RECEIVED BY WAY OF INTEREST ON LOAN AND DIVIDEND INCOME, WHICH HAS BEEN REFLECTED BY THE ASSESSEE IN ITS RETURN OF INCOME IN THE RESPECTIVE ASSESSMENT Y EARS, IF NOT RECOVERED, ON ITS WRITE OFF IS TO BE ALLOWED AS A DEDUCTION UN DER THE PROVISIONS OF SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE I NCOME-TAX ACT. HOWEVER, WE FIND THAT NECESSARY DETAILS HAVE NOT BE EN LOOKED INTO BY THE A.O. IN THIS REGARD. THEREFORE, FOR THE LIMITED PU RPOSE OF VERIFYING THAT WHETHER PART OF THE SAID LOAN AND ADVANCES WRITTEN OFF BY THE ASSESSEE ARE DUE ON ACCOUNT OF INTEREST ON LOANS AND DIVIDEN D INCOME, WHICH WAS EARLIER SHOWN AS INCOME IN THE RESPECTIVE YEARS, NE EDS VERIFICATION. ACCORDINGLY, WE DIRECT THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEE ONLY IN RESPECT OF INTEREST ON LOAN AND DIVIDEND INCOME, WHICH IS PART OF THE AMOUNTS WRITTEN OFF AND FULFILLS THE CONDITION OF S ECTION 36(2) OF THE ACT. HOWEVER, IN RESPECT OF WRITE OFF OF AMOUNTS A DVANCED AS LOANS AND ADVANCES TO THE SUBSIDIARY COMPANIES, AS HELD BY US IN THE PARAS ABOVE, IS A CAPITAL LOAN IN THE HANDS OF THE ASSESSEE AND HENCE, NOT ALLOWABLE AS 9 A DEDUCTION, WHILE COMPUTING THE INCOME FOR THE YEA R UNDER CONSIDERATION. 11. THE THIRD ASPECT OF THE AMOUNTS WRITTEN OFF ARE ON ACCOUNT OF CERTAIN PRELIMINARY EXPENSES BOOKED BY THE ASSESSEE WHICH WERE CLAIMED TO BE INCURRED IN THE COURSE OF CARRYING OF ITS BUSINESS. THE SAID AMOUNTS WERE OUTSTANDING FOR THE PAST MANY YEA RS AND WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT DURING THE YEAR UNDER C ONSIDERATION. THE PLEA OF THE ASSESSEE BEFORE US WAS THAT THE SAID EX PENDITURE IS ALLOWABLE AS A BUSINESS LOSS. THE A.O. IN THE ASSESSMENT ORD ER AND THE CIT(A) HAVE FAILED TO ADDRESS THE ISSUE RAISED BY THE ASSE SSEE IN COMPLETE PERSPECTIVE. THE CLAIM OF THE ASSESSEE WAS REJECTE D ON THE GROUND THAT THE SAME DO NOT REPRESENT BAD DEBT. HOWEVER, WHERE THE AMOUNTS HAVE BEEN ADVANCED DURING THE COURSE OF CARRYING ON THE BUSINESS AND HAVE BECOME IRRECOVERABLE, ITS LIABILITY IS TO BE LOOKED INTO IN VIEW OF THE PROVISIONS OF SECTION 37(1) OF THE ACT. MERE WRITI NG OFF OF THE BALANCES IN THE BOOKS OF ACCOUNT DOES NOT ESTABLISH THE RECO VERABILITY ON SUCH ADVANCES. THE ASPECT IS TO BE SEEN AS WHETHER OR N OT THE SAID ADVANCES WERE INCURRED IN THE COURSE OF CARRYING ON THE BUSI NESS. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARD AND RESTORE THE ISSUE BACK TO THE A.O. TO EXAMINE THE EVIDENCE AND RECORD A FINDING WHETHER THE AMOUNT HAD BEEN ADVANCED IN THE COURSE OF CARRY ING ON THE BUSINESS AND THE SAME BEING IRRECOVERABLE, HAD BEEN WRITTEN OFF BY THE ASSESSEE. THE SAID AMOUNTS IF INCURRED IN CONNECTION WITH THE BUSINESS OF THE ASSESSEE, WAS IRRECOVERABLE AND ON ITS WRITE OFF IS TO BE ALLOWED AS REVENUE EXPENDITURE UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT AND IF THE ASSESSEE IS UNABLE TO PROVE ITS CLAIM, THE A .O. SHALL BE AT LIBERTY TO DISALLOW THE SAME IN ACCORDANCE WITH LAW. THE A .O. SHALL AFFORD 10 REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 12. THE ASSESSEE IN ITS WRITTEN SUBMISSIONS HAD MAD E AN ALTERNATE CLAIM FOR ALLOWANCE OF DEDUCTION IN ACCORDANCE WITH PROVISIONS OF CHAPTER-VI UNDER SECTION 72 OF THE ACT. THE LEARNE D A.R. FOR THE ASSESSEE FAIRLY ADMITTED THAT THE ALTERNATE CLAIM M ADE IN THE WRITTEN SUBMISSIONS IS NOT PRESSED AND HENCE THE SAME IS DI SMISSED AS NOT PRESSED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF APRIL, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26 TH APRIL, 2011 RATI COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH .