The Tax Publishers2012 TaxPub(DT) 0738 (Raj-HC) : (2012) 246 CTR 0243 : (2012) 065 DTR 0217

Income Tax Act, 1961

--Appeal [Tribunal]--Substantial question vis-a-vis writ petitionRejection of miscellaneous petition--The last contention of the revenue may be dealt with first. The contention that appeal would have lied before this Court under section 260A against the order passed under section 254(2), by which the miscellaneous application for rectification was rejected by the Tribunal, was not correct in law. The said order did not decide the rights of the parties finally at the hands of the Tribunal; and it is only for substantial questions of law arising out of any order of the Tribunal under section 254(1) that an appeal on substantial question of law, could be filed before the Division Bench of the High Court. Where final order under section 254(1) of the Tribunal was recalled and matter was directed to be decided afresh by the Tribunal, it cannot be said to be an order appealable under section 260A, and therefore, a writ petition against such a recall order of Tribunal would be maintainable under article 226 of the Constitution of India before the High Court.

An order passed by the Tribunal on application for rectification under section 254(2), rejecting rectification application cannot be said to be order passed in appeal by the Tribunal within the meaning of section 260A. The expression employed in section 260A provides for appeal to the High Court is materially different from the expression used in section 256 that empowers the assessee and the revenue to require the Tribunal to refer to High Court any question of law. In the given case, where as a consequence of an order passed on the rectification application under section 254(2), amendment in the order passed in appeal under section 254(1) takes place, such amended order in appeal as a consequence of the order passed, in the rectification application, however, shall be amenable to appeal under section 260A. [Para 12]

Income Tax Act, 1961 Section 254(2)

Constitution of India, 1950 Article 226

Income Tax Act, 1961

--Business deduction under section 36(1)(vii)--Bad debtsDebt written off in books of account--Assessee claimed deduction of Rs. 2,29,70,959 on account of bad advances written off to the extent of Rs. 1,82,89,333 and bad debts written off to the extent of Rs. 46,81,625.88. The assessing authority vide his assessment order disallowed the said deduction under section 36(1)(vii). However, the first appellate authority, namely, Commissioner (Appeals) on an appeal filed by assessee, allowed the said deduction. The revenue went up in second appeal before the Tribunal, which allowed the revenue's appeal. The Tribunal held that such bad advances or bad debts could not be claimed as deduction since assessee had failed to establish primarily that such advances were related and had a nexus to the business carried out by it and also while computing the income for the period when they were given and that these transactions were taken into account while computing the profit chargeable to tax. Both the ingredients were not satisfied by assessee before the Departmental Authorities. Accordingly, the Tribunal disallowed this deduction for the assessment year 1999-2000. Assessee filed miscellaneous application under section 254(2) seeking rectification of the order passed by the Tribunal but the said miscellaneous application also came to be rejected by the Tribunal by its impugned order. Held: It was only when sch a debt or advance turns bad or irrecoverable in the opinion of the assessee, as per amendment in law after 1-4-1989, a simple book-keeping entry to write off the same was enough to entitle the assessee to claim such a deduction. It was not in dispute from the side of the revenue that such a write off entry was made in the present case by the assessee in its books of accounts. In case even after such a writing off entry was made, if assessee recovers back any part of such bad debts, it will naturally be credited again in his books and will be taxed in the year of its receipt on recovery.

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