Ambey Laboratories Limited Vs ACIT (ITAT Delhi)
Assessee wrote off dues from a Thai customer due to quality disputes. AO & CIT(A) disallowed the claim citing lack of evidence of recovery efforts & write-off.
Tribunal observed that Sec 36(1 )(vii) provides that any bad debt written off in the books of account as irrecoverable is an allowable deduction. It has been settled by the Apex Court in TRF Ltd. v. CIT [2010] 323 ITR 397 that writing off of debt in the books of account is the only condition for claiming deduction of bad debt under section 36(1 )(vii) & it is not necessary for the assessee to establish that the debt become irrecoverable for allowance of deduction. This position in law is well-settled. After 1-4-1989. 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.
Due to quality differences, the party refused to make payment to the extent of Rs1,91,02,915/-. As per the ledger account assessee in fact exported the goods worth Rs.40 crores during the period. The tax authorities denied the bad debts claimed by the assessee on the basis that the assessee has not submitted relevant documents proving the efforts made by the assessee to recover the same. Hon’ble Supreme Court in the case of TRF Limited had settled this issue that writing off of debt in the books of account is the only condition for claiming deduction of bad debts u/s 36(1)(vii) & it is not necessary for the assessee to establish that the debt become irrecoverable for allowance of deduction. Assessee has credited the relevant export sales in its Profit & Loss account & paid due tax & due to non-recovery of the same certain amount, the assessee claimed the same as bad debts. Since the issue is already settled what is relevant is only the condition for claiming bad debt u/s 36(1)(vii) is to establish that it is not recoverable. The addition was deleted.
