The Louis Berger Group Inc. vs DCIT, Int. Taxation: Bad Debts Appeal for AY 2014-15

The Louis Berger Group Inc. vs DCIT, Int. Taxation: Bad Debts Appeal for AY 2014-15

Case Number: ITA 5739/DEL/2019

Appellant: The Louis Berger Group Inc., Gurgaon

Respondent: DCIT, Int. Taxation, Gurgaon

Assessment Year: 2014-15

Case Filed On: 2019-07-01

Order Type: Final Tribunal Order

Date of Order: 2020-02-28

Pronounced On: 2020-02-28

Background

The case involves The Louis Berger Group Inc. as the appellant and the Deputy Commissioner of Income Tax (DCIT), International Taxation, Gurgaon, as the respondent. The dispute pertains to the disallowance of bad debts claimed under Section 36(1)(vii) of the Income Tax Act for the assessment year 2014-15. The appeal was filed on 2019-07-01, and the final tribunal order was pronounced on 2020-02-28.

Reason for Filing the Case

The Louis Berger Group Inc. filed the appeal against the disallowance of the bad debts claimed under Section 36(1)(vii) of the Income Tax Act. The appellant argued that the disallowance was based on a misinterpretation of the provisions of the Act, which clearly specify that deduction shall be allowed for amounts written off as irrecoverable in the books of accounts.

Tribunal Proceedings

On 28th February 2020, the tribunal, comprising Ms. Sushma Chowla, Vice President, and Dr. B.R. R. Kumar, Accountant Member, heard the case. The appellant was represented by Sh. Gaurav Singhal and Sh. Khushhal Batra, Chartered Accountants, while the respondent was represented by Sh. Saras Kumar, Senior Departmental Representative (Sr. DR).

Arguments Presented

The appellant’s counsel argued that the disallowance was unjustified as the provisions of Section 36(1)(vii) had been misinterpreted. They cited the Supreme Court ruling in T.R.F. Ltd. vs CIT [2010] 323 ITR 397 (SC), which held that it is not necessary for a taxpayer to establish that a debt has become irrecoverable before writing it off as bad debts. The counsel pointed out that the appellant had raised bills amounting to approximately Rs. 11.65 crores and had written off a sum of approximately Rs. 1.49 crores as bad debts.

The respondent’s counsel, on the other hand, relied on the orders of the lower authorities, arguing that the appellant had not established that the debts had become bad.

Tribunal’s Decision

The tribunal considered the arguments presented by both parties and reviewed the case records. The key points from the tribunal’s order are as follows:

Previous Decisions

The tribunal noted the Supreme Court’s decision in T.R.F. Ltd. vs CIT, which clarified that there is no requirement to prove that the amount is actually irrecoverable before writing it off as bad debts.

Conclusion

The tribunal held that where the appellant had written off debts as bad debts, the same could not be disturbed by the Revenue authorities, especially where the appellant had fulfilled the condition laid down in Section 36(2) of the Income Tax Act. Consequently, the tribunal allowed the claim of the appellant under Section 36(1)(vii) of the Act.

Conclusion

The tribunal upheld the appellant’s arguments and concluded that the disallowance of bad debts was not sustainable. The appeal of the assessee was allowed, and the disallowance was reversed.

Order pronounced on: 28/02/2020

Signatories:

Dr. B.R. R. Kumar, Accountant Member

Ms. Sushma Chowla, Vice President

Dated: 28/02/2020

Copy forwarded to:

• Appellant
• Respondent
• CIT
• CIT(A)
• DR, ITAT

By Order

Assistant Registrar, ITAT, New Delhi

The Louis Berger Group Inc. vs DCIT, Int. Taxation: Bad Debts Appeal for AY 2014-15