The Tax Publishers2012 TaxPub(DT) 1205 (Mad-HC) : (2012) 047 (I) ITCL 0131 : (2012) 341 ITR 0641

INCOME TAX ACT, 1961

--Business deduction under section 36(1)(vii)--Bad debtsBad debts written off in books--While completing the assessment, AO allowed the claim of bad debt being the lease amount to be received from State Transport Corporation. CIT set aside the order of the assessment on the ground that AO did not consider the ratio of the judgment of South India Surgical Co. Ltd. (2006) 287 ITR 62 (Mad) which was squarely applicable to the facts of the case. Therefore, CIT directed AO to pass fresh assessment order. Assessee argued that the claim of bad debt was justifiable in law as the same was written off as irrecoverable in the accounts of assessee. Tribunal held that the decision of jurisdictional court was squarely applicable to the facts of the case and rejected the appeal filed by assessee. Held: Apex Court in the case of T.R.F. Ltd. v. CIT (2010) 323 ITR 397 (SC) held that it was enough if the bad debt was written off as irrecoverable in the accounts of the assessee but the said decision was not brought to the notice of Tribunal by both the parties. Therefore, Tribunal was directed to rehear the matter afresh and decide the matter in the light of the Apex Court judgment and in accordance with law.

Income Tax Act, 1961 Section 36(1)(vii)

IN THE MADRAS HIGH COURT

D. MURUGESAN & P.P.S. JANARTHANA RAJA JJ.

First Leasing Company of India Ltd. v. CIT

Tax Case (Appeal) No. 363 of 2011 and M. P. Nos. 1 & 2 of 2011

24 January, 2012

Appellant by : Amvind P. Datar, Senior Counsel, for V.S. Jayakumar

Respondent by : T. Ravikumar

JUDGMENT

P.P.S. Janarthana Raja J.

The assessee has filed the present appeal against the order of the Income Tax Appellate Tribunal under section 260A of the Income Tax Act, 1961, for the assessment year 2006-07, raising the following questions of law :

'1. Whether the Tribunal erred in upholding the order passed by the Commissioner of Income-tax under section 263 of the Income Tax Act, 1961, when the same was based on mere change of opinion and audit objection?

2. Whether the Tribunal erred in rejecting the claim for bad debts on the ground that the amounts were borrowed by the Madhya Pradesh State Transport Corporation that was allegedly managed or enrolled by the State of Madhya Pradesh ?'

The appellant-assessee also moved M. P. for injunction restraining the Revenue from collecting tax and submitted that the main issue in the tax case is covered by the Apex Court judgment in the case of T R. F. Limited v. CIT reported in (2010) 323 ITR 397 (SC) : 2010 TaxPub(DT) 1481 (SC), Therefore, by consent of both parties, the tax case appeal itself is taken up for final disposal.

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