Tirupati Microtech Private Limited Vs DCIT (ITAT Jodhpur)
Jodhpur ITAT: NSEL Trading Loss Written Off as Bad Debt Allowable-Possibility of Future Recovery No Ground for Disallowance
In Tirupati Microtech Pvt. Ltd. v. DCIT, the Jodhpur ITAT dealt with the assessee’s appeals for AYs 2015-16 and 2017-18, principally concerning bad debts arising from commodity transactions on the National Spot Exchange Limited (NSEL) platform and deduction under section 80IA in respect of windmill operations.
The assessee had carried on commodity trading through NSEL and had approximately ₹16.19 crore receivable on the platform. Due to defaults by parties, it wrote off ₹1.64 crore in AY 2015-16 and ₹5.86 crore in AY 2017-18 as bad debts. The AO disallowed the claim on the grounds that the amount represented a capital investment and that recovery remained possible because assets of the defaulters were being attached and auctioned. The CIT(A), while confirming the disallowance, additionally characterised the transactions as speculative.
The Tribunal deleted the disallowance. It observed that the assessee had actually undertaken commodity trading on the NSEL platform and that the AO had not disputed compliance with the requirements of section 36(1)(vii). Once the debt had been written off in the books and the corresponding amount had been offered as income earlier, the deduction could not be denied merely because there remained a possibility that some amount might subsequently be recovered.
Importantly, the ITAT clarified that if any portion of the bad debt is subsequently recovered, it must be offered to tax in the year of recovery. Thus, the possibility of future recovery does not postpone or defeat an otherwise valid bad-debt deduction.
On the separate section 80IA windmill deduction, the AO had proportionately allocated head-office expenses and depreciation on common assets to the eligible windmill units, thereby reducing the deduction. The assessee contended that the entire operation, maintenance and management of its windmills had been outsourced to Suzlon Global Services Ltd. on a turnkey basis and therefore no head-office expenditure or depreciation on common assets was attributable to them.
The Tribunal found that the necessary factual material—including the outsourcing agreement, extent of control retained by the assessee and details regarding common assets and depreciation—was not available on record. It therefore restored the section 80IA issue to the AO for fresh adjudication after examining the relevant facts and giving the assessee reasonable opportunity of hearing. The appeals were accordingly partly allowed.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
The present appeals by the assessee arise out of two separate orders passed by National Faceless Appeal Centre, NFAC, Delhi for the Assessment Years 2015-16 and 2017-18.
