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Judgment
The appeal is preferred on the following questions:
(i) Whether on the facts and in the circumstances of the case and in law, the Hon''ble Tribunal is right in confirming the order of CIT(A) in deleting the disallowance of Rs. 79,27,211 on account of bad debt despite the debt has not become bad?
(ii) Whether on the facts and in the circumstances of the case and in law, the Hon''ble Tribunal is right in confirming the order of CIT(A) in directing the AO not to exclude interest on bank deposit of Rs. 3.64 lakhs from the business profit for the purpose of computing deduction u/s 80HHC?
The issue arises from the amendment to Section 36(1)(vii) of the IT Act. Subsequent to the amendment the Board has issued Circular No. 551, dt. 23rd Jan., 1990 [(1990) 82 CTR (St) 325 : (1990) 183 ITR 7]. The issue pertained to bad debt in para 6.6. The relevant portion of the direction reads as under:
In order to eliminate the disputes in the matter of determining the year in which a bad debt can be allowed and also to rationalise the provisions, the Amending Act, 1987 has amended Clause (vii) of Sub-section (1) and Clause (i) of Sub-section (2) of the Section to provide that the claim for bad debt will be allowed in the year in which such a bad debt has been written off as irrecoverable in the accounts of the assessee.
It is thus clear from the reading of the Section itself and the circular that if the assessee has written off the debt as bad debt, that would satisfy the purpose of the section. The view that we have taken has also been followed by the Delhi High Court in Commissioner of Income Tax Vs. Autometers Ltd., which followed the earlier judgment in Commissioner of Income Tax Vs. Morgan Securities and Credits (P) Ltd., . The same view was also taken in DEPUTY COMMISSIONER OF INCOME TAX Vs. PATIDAR GINNING and PRESSING CO., . Considering the law as stated insofar as question No. 1, the view taken by the Tribunal cannot be faulted. Consequently, the question of law would not arise.
Insofar as question No. 2 is concerned, the Tribunal has modified the order of the CIT(A) and directed the AO to readjudicate the issue in terms of what it has set out. Considering that the issue is open for consideration question of law does not arise and consequently appeal stands dismissed.