Case: 1. ACIT, 2. Srinivasa Ferro Alloys Ltd. Vs 1. Srinivasa Ferro Alloys Ltd., 2. ACIT. ITAT (Income Tax Appellate Tribunal)

JudgesSunil Kumar Yadav, J.M. and B.R. Baskaran, A.M.
IssueDirect Taxation
Judgement DateFebruary 01, 2010
CourtITAT (Income Tax Appellate Tribunal)

Order:

B.R. Baskaran, A.M., (Visakhapatnam Bench)

  1. These cross appeals are directed against the order dated 27-03-2007 passed by the Ld CIT (A)-II Visakhapatnam and they relate to the assessment year 2004-05.

  2. The issue contested in the appeal of the department is Whether Ld CIT (A) is justified in deleting the disallowance of bad debt claim of Rs. 1,63,81,975/-relating to a debtor named M/s Metallic Alloys.

  3. The following two issues are contested in the appeal filed by the assessee:

    a) Whether the Ld CIT (A) is justified in confirming the disallowance of bad debt claim of Rs. 1,26,79,998/-

    b) Whether the Ld CIT (A) is justified in not accepting the plea of the assessee that the credit balances written off should not be treated as income.

  4. The facts of the case are stated in brief. The assessee company is engaged in manufacture of Ferro Alloys, Polyester and Cotton Gray Fabric. During the year under consideration the assessee made a claim for deduction of bad debt to the tune of Rs. 2,78,85,988/-. The break up details of said amount and their respective explanations are extracted below from the order of the Ld CIT (A):

    ____________________________________________________________

     Debit Credit
    ____________________________________________________________
    Group-- A Rs. 3,28,67,080
    ____________________________________________________________
    Group-B Rs. 1,26,79,998
    ____________________________________________________________
    Group-C Rs. 26,61,090
    ____________________________________________________________
    Group-D Rs. 1,50,00,000
    ____________________________________________________________
     Rs.4,55,47,078 Rs. 1,76,61,090
    ____________________________________________________________

    Net Amount written off as bad debts Rs. 2,78,85,988/-

    In this context, it was submitted as under:

    Group-A: This consists of debtors to whom goods are sold and money is due but not received due to various reasons. The company is of the opinion that the chances of receiving the amount are negligible. If and when the amounts are received, they would be offered as income in the year of receipt. The total amount under this head is Rs. 3,28,67,080/-

    Group-B: this group consists of debit balance of debtors for which evidence of sale is not available. This list consists of advance given to creditors which for some reason remain in the books uncollected and are in the nature of unrecoverable advances. The amount in this group is Rs. 1,26,79,998/-.

    Group-C: These are credit...

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