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Judgment
Prabha Sridevan, J.—The following substantial questions of law are raised in this tax case:
Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the amounts of loans and advances outstanding
written off by the appellant as not recoverable is not deductible while computing its income?
Whether, on the facts and in the circumstances of the case, the Tribunal ought to have appreciated that the appellant had properly evaluated and
assessed the recoverability of the loans while arriving on the amount which in their opinion is not recoverable and hence was not right in holding that
the debts written off have not become bad during the year?
The assessee claimed deduction on the ground that it had written off certain bad debts. The details of the bad debts are as follows:
No. of Amount in
cases lakhs (Rs.)
Transport - non-owner driven cases 10 12.25
Fishing Trawlers 17 27.51
10 per cent, principal of CGC settled cases 1049 16.73
Investments 6 37.49
Companies under liquidation 2 33.82
Joint finance case 1 12.28
The Assessing Officer granted relief only with regard to some of the claims and disallowed most of them. On appeal, the Commissioner of
Income Tax (Appeals), partly allowed the appeal. He again accepted some of the claims of the assessee. The Tribunal also confirmed the finding
with regard to some of the heads. With regard to the write off raised for fishing trawlers, the Tribunal had remanded to the Assessing Officer to
examine each of the cases along with the note that is placed by the legal cell of the assessee. With regard to the investment, the Tribunal upheld the
claim. With regard to claim 5, companies under liquidation, the Tribunal held that the liquidation and liquidation proceedings will be invariably long
drawn and the write off claimed to the extent of 90 per cent, of the outstanding by the assessee was upheld.
With regard to others, joint finance case, the assessee had advanced loans to a company along with Indian Bank and Sipcot for its project at a
cost of Rs. 95,00,000. The company became a defaulter and the assessee took possession of the unit. The Assessing Officer did not allow
deduction on the ground the recovery value of the assessee plus the amount that was guaranteed by the directors should be sufficient to meet the
entire outstanding. The Commissioner of Income Tax (Appeals) also held that the landed value must have gone up.
We feel that the disallowance of the claim for write off is more on the basis of surmise and not on the basis of evidence available. Therefore, we
remand the matter to the Assessing Officer who will examine whether after the assessee had taken possession of the unit, any recovery had been
made.
As regards claim No. 1, ""non-owner driven case"", the matter has already been remanded to the Assessing Officer to determine in which of the
cases, the loans are recoverable and whether any guarantor has been proceeded against. In these circumstances, we are not answering the
question of law. We are remanding the matter to the Assessing Officer with regard to the case mentioned above, which is the joint finance case. It
is open to the assessee to produce necessary evidence to support its claim that its write off was bona fide. The Assessing Officer shall decide the
case in accordance with law.