Examining ITA No.5086/Del/2019, this article explores the tribunal’s decision where Husk Power Systems Pvt. Ltd. contests the tax assessment on bad debts written off during the assessment year 2014-15.
Husk Power Systems Pvt. Ltd., engaged in power generation and distribution in rural areas, faced an assessment under Section 147 for unexplained cash credits. The primary contention involved the allowability of bad debts written off amounting to Rs.13,87,981, which were initially claimed under Section 68 but were reassessed under Section 69A.
The case unfolded with the ITAT examining the validity of the bad debts written off. The tribunal analyzed the claims in the context of the company’s operational model, which includes generating power using crop husk and selling mini power plants. The dispute centered on whether the written-off amounts qualified as bad debts under the provisions of the Income Tax Act.
The ITAT, after reviewing submissions and evidence, upheld the company’s claim, allowing the bad debts deduction. This decision was based on the recognition that the sales initially recorded as income were indeed not realized and were justifiably written off as bad debts, adhering to the stipulations of Section 36(1)(vii).
The tribunal’s ruling in favor of Husk Power Systems Pvt. Ltd. clarifies the conditions under which businesses can claim bad debts. It provides significant insights into the treatment of such financial issues within the framework of the Income Tax Act, aiding other entities in similar sectors.
Assessment of Bad Debts in Husk Power Systems Pvt. Ltd., AY 2014-15
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