COMMISSIONER OF INCOME TAX Vs. SAWHNEY EXPORTS

JUDGEMENT

(1.) The short question raised in this appeal filed by Revenue is as to whether the Income Tax Appellate Tribunal (in short as 'Tribunal') was right in deleting the addition of Rs.31,62,238/- made by the Assessing Officer with regard to the deduction claimed by Assessee for bad debts under Section 36(1)(vii) of the Income Tax Act, 1961 (hereinafter referred to as 'Act').

(2.) The Assessee is engaged in the business of exports of garments and the payments were being received in foreign exchange. For assessment year 1997-98, Assessee filed return claiming bad debts amounting to Rs.1,25,36,852/-. The Reserve Bank of India had allowed permission in respect of sum of Rs.90,36,518/- to be written off in the books of accounts. In respect of balance amount of Rs.31,62,238/-, the Assessing Officer denied the benefit of writing off the bad debts since Assessee has not furnished any evidence to this effect. ITA No.410 of 2007 Page 5 of 5

(3.) In appeal filed by the Assessee, the Commissioner of Income Tax (Appeal) held that amount of Rs.31,62,238/- has been written off during the year and the same should be allowed as deduction, even though the approval from the Reserve Bank of India has been received subsequently and the Assessing Officer has himself allowed the claim for the balance amount, even though approval has been received after the close of the previous year. It was further held that the approval from Reserve Bank of India is not mandatory condition for writing off, under the provisions of the Act and as such addition of Rs.31,62,238/- was deleted.