The very fact that balances were shown under sundry debts itself went to prove that same had emanated out of sales of assessee and hence, income relatable thereto in the form of sales and services had been duly offered to tax in the earlier years in accordance with section 36(2) and therefore, disallowance made towards bad debts was not justified.
Indo Nabin Projects Ltd. (Formerly Indo Power Projects Ltd.) Vs DCIT (ITAT Kolkata)
The assessee stated that M/s Andrew Yule & Co. Ltd., Central Government Undertaking had closed their project division. M/s Gridco is a State Government Undertaking, Government of Orissa. The assessee further stated that despite the efforts taken by the assessee to recover this sundry debtor dues from these three parties, the assessee could not recover the same. Accordingly, the said trade debts were duly written off in the books of accounts of the assessee during the year under consideration by duly crediting the balance outstanding to the concerned parties’ account (sundry debtors’ account).
We find lot of force in the argument of the Ld. AR that these balances were reflected under the head sundry debtors in the balance sheet of the assessee and from the very fact that the same are shown under sundry debtors itself goes to prove that they had emanated out of sales of the assessee and hence, the income relatable thereon in the form of sales and services had been duly offered to tax in the earlier years in accordance with Section 36(2) of the Act.
Respectfully following the decision of the Hon’ble Supreme Court in the case of TRF Limited reported in 323 ITR 397 (SC) and in view of the fact that the assessee had duly written off this trade debts by crediting the concerned sundry debtors accounts in its books of accounts, we direct the Ld. AO to delete the disallowance made towards bad debts. In the sum of Rs. 8,86,029/- accordingly ground no. 2 raised by the assessee is allowed.
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