The Tax PublishersITA No. 889/Chny/2018
2019 TaxPub(DT) 0227 (Chen-Trib) : (2018) 196 TTJ 0944INCOME TAX ACT, 1961
Section 36(1)(vii)
Where KCPL was collecting subscription fee from cable TV operators on behalf of assessee, unrecoverable amount was rightly treated by assessee-company as bad debts crediting to KCPL and debiting P&L A/c in its books of account, as earlier KCPL credited the same in its books in assessee-company's hands as such deduction under section 36(1)(vii) was allowable as bad debts to assessee.
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Business deduction under section 36(1)(vii) - Bad debts - Unrecoverable due amount from cable operators, not realised by the company authorized by and on behalf of assessee -
During the course of scrutiny assessment proceedings, it was observed by the AO that assessee had debited bad debts to its profit & loss account as 'bad debts written off. It was further observed that the bad debt was related to the amount receivable from M/s. KC (P) Ltd., in which the key management personnels were relatives of the shareholders of the assessee-company. AO disallowed the claim of bad debts in the hands of the assessee and made additions by rejecting the arguments of the assessee. Assessee contended that the write off of the debts standing in the name of M/s. KC (P) Ltd., in the books of the assessee-company was with respect to the dues receivable from cable operators towards pay channel revenue, which were earlier billed by M/s. KC (P) Ltd. on behalf of the assessee-company. CIT(A) confirmed the order of the AO. Held: M/s. KC (P) Ltd., raises the invoice towards cable TV subscription on behalf of the assessee-company and after collecting the subscription from the cable TV operators remit the same to the assessee-company. Hence, M/s. KC (P) Ltd. does not recognize the Invoice raised towards subscription fee as its income, consequently, the assessee-company recognizes the same as its income. When a part of the subscription becomes irrecoverable, it was treated as bad debts and written off in the books of the assessee-company by giving credit to M/s. KC (P) Ltd., because earlier it was treated as amount receivable from M/s. KC (P) Ltd. Assessee company had written off the bad debts in its books of account by debiting bad debts to profit & loss account and crediting the same amount to M/s. KC (P) Ltd., account, which was appropriate. Therefore, AO was directed to allow the claim of bad debts in the hands of the assessee company which was written off in the books of account of the assessee company by crediting to the account of M/s. KC (P) Ltd..
Followed:TRC Ltd. v. CIT (2010) 323 ITR 397 (SC) : 2010 TaxPub(DT) 1481 (SC).
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2008-09 & 2009-10
IN THE ITAT, CHENNAI 'B' BENCH
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