JUDGMENT
G. Sivarajan, J.
1. The matter arises under the IT Act, 1961 (for short, the Act). The appellant is a private limited company engaged in the business of canvassing advertisement for newspapers, periodicals, etc. and is an assessee to income-tax under the Act, The assessment year concerned is 1992-93. According to the appellant, the modus operandi adopted by it is that it, as an agent, canvasses advertisement for Malayala Manorama, Mathrubhoomi and other periodicals from customers; after advertisement made in the newspapers/periodicals the newspaper company will issue bills towards advertisement charges; the ‘ appellant will then raise bills on their customers by adding its commission of 15 per cent, and the appellant has to make payment of the bill amount of the newspaper company. However, in the books maintained by the appellant, only the commission receipt is recorded. The appellant is relying on Clauses 24 and 29 of the Rules and Regulations governing accreditation of advertising agency issued by the newspaper society.
2. In the assessment for the year 1992-93, the assessee claimed deduction of a sum of Rs. 13,28,380 under Section 37 of the Act representing bad debts. According to the appellant, the said amount should have been allowed as bad debt or, at any rate, as a business expenditure. The assessing authority did not allow the deduction. The appellant filed appeal before the CIT(A) Cochin, against such disallowance. However, the first appellant authority dismissed the appeal and the same was confirmed by the Tribunal in further appeal by the appellant.
3. Shri V. Ramachandran, senior counsel appearing for the appellant, submits that though the appellant was maintaining accounts only in respect of the commission received from the business, since the customers in certain cases have not paid the advertisement charges, the appellant’ had to pay the same to the newspaper and, therefore, since the payments so made had become irrecoverable and a bad debt, is a permissible deduction under Section 37 of the Act. The senior counsel further submits that the authorities’ and the Tribunal did not dispute the fact that the appellant had made such payment, but, however, the authorities have rejected the contention only on the ground that the assessee had not shown the advertisement charges received/receivable from the customers in its books, The senior counsel also pointed out that the assessee had contended before the authorities that the turnover of the advertisement charges cannot be taken in for the purpose of special audit under Section 44A(B) of the Act, and the same was accepted. The senior counsel further submits that the assessing authority was bound to grant the deduction, since he did not have a case that the expenses incurred are not incurred in connection with the business of the assessee. Shri P.K.R. Menon, senior Central Government standing counsel for the respondents, submits that since the assessee has not shown the advertisement charges in the books of accounts maintained by it and in the absence of evidence regarding the non-payment of the advertisement charges by the customer as also evidence to prove that the same was paid by the assessee, the authorities and the Tribunal were fully justified in rejecting the claim.
4. As we have already noted, the appellant had not included the advertisement charge received from the customers in the books of accounts maintained by it. It only disclosed the commission received on such advertisements. There is also no material or evidence to show that the customers from whom the advertisements are received have not paid any portion of the advertisement charges or that the appellant had paid advertisement charges in respect of such advertisements to the newspapers. There is also (sic-no) material to show that the payments if any, had been made during the accounting period relevant to the assessment year in question. In the above circumstances, so far as the claim is concerned, it is not possible for us to say that the authorities and the Tribunal had erred in disallowing the claim for deduction of the payment of advertisement charges made by the appellant due to the default committed by its customers. At any rate, no substantial question of law, much less, any question of law does arise in this situation. In the above circumstances, there is no merit in the appeal and the same is dismissed.