ORDER
A.M. Sapre, J.
1. This is an appeal filed by Revenue (CIT) under Section 260A of the IT Act against an order dt. 1st June, 1999, passed by Income-tax Appellate Tribunal (for brevity hereinafter referred to as Tribunal) in ITA No. 792/Ind/1995. This appeal was admitted for final hearing on following substantial question of law :
1. Whether the Tribunal was justified in allowing the deduction amounting to Rs. 4,13,108 treating it to be bad debts, as required under Section 36(1)(vii) of the IT Act ?
2. Heard Shri R.L. Jain, learned senior counsel with Ku. V. Mandlik, learned Counsel for the appellant and Shri S.C. Bagadia, learned senior counsel with Shri D.K. Chhabra, learned Counsel for the respondent.
3. At the outset, learned Counsel for the assessee/respondent placing reliance on Section 260A(4) of the Act and the decision of Supreme Court, reported in Travancore Tea Estates Co. Ltd. v. CIT contended by raising an objection that the appeal does not involve any substantial question of law and secondly, the question framed supra, does not satisfy the requirement of Section 260A, i.e., it is not a substantial question of law but it is a pure question of fact. In other words, the submission of learned Counsel for the assessee was that the question, whether a particular debt is bad debt and/or at what point of time it has become a bad debt in the books of account of assessee is a pure question of fact as has been held to be so by Supreme Court in the case of Travancore (supra) and hence, this Court should dismiss this appeal as involving no substantial question of law. Though, learned Counsel for Revenue has made attempt to urge in reply to sustain the appeal, we are inclined to uphold the contention of learned Counsel appearing for assessee as in our opinion, it has a force.
4. Their Lordships of Supreme Court in Travancore’s case (supra) held as under:
It is well settled that whether a debt has become bad or the point of time when it became bad are pure questions of fact.
5. In our considered view, the aforesaid law laid down by the Supreme Court results in dismissal of this appeal, as involving no substantial question of law. This Court by taking recourse to Section 260A(4) ibid can look to this aspect of the case at the instance of respondent at the time of hearing of the appeal. Indeed, the legislature has given indulgence to respondent to urge this ground at the time of hearing. We are, therefore, under legal obligation to deal with this issue if urged by respondent at the time of hearing notwithstanding the fact that we have admitted the appeal and framed substantial question.
6. The question involved in this appeal relates to certain debts being declared as bad debts by the assessee in the assessment year in question and in consequence written off in the books of account. This issue was dealt with by Tribunal in paras 17 and 18 as follows :
17. The next grievance of the assessee is that the CIT(A) erred in maintaining disallowance of bad debts of Rs. 4,33,776.
18. We have heard the arguments advanced by the parties. We have also perused the orders of the authorities below. The Direct Tax Laws (Amendment) Act, 1987 brought about an amendment in Section 36(1)(vii) w.e.f. 1st April, 1989 applicable to the asst. yr. 1989-90 whereby the claim for any bad debt or part thereof is to be allowed for and from the asst. yr. 1989-90 in the year in which such bad debt or part thereof has been actually written off as irrecoverable in the accounts of the assessee for the relevant previous year. A perusal of the appellate order would reveal that it was claimed by the assessee that the impugned debts had actually been written off in the books of account and it was also stated before the CIT(A) that all the debts written off had entered into income of the assessee. These claims could not be controvered by the Revenue at any stage and, therefore, there is absolutely no justification to make the impugned disallowance which is hereby deleted in view of the amended position of law and applicability of the facts of the assessee’s case thereto. The assessee succeeds in this ground.
7. We do not find any error of law much less substantial error of law as contemplated in Section 260A ibid for answering the question in favour of Revenue. When the assessee has actually written off the debt in their books of account as being bad debt then unless the AO had rejected the entire books of account to be totally unreliable and finding extreme perversity in declaration of debt to be bad debt, there arose no occasion for AO for not accepting the stand of assessee on this issue. It is essentially for the assessee to decide as to whether they are able to recover the debt or that whether there are any viable chances to ensure its recovery or that all hopes have come to an end for recovery. This being in the nature of what is called commercial expediency depending upon the nature of transaction, capacity of debtor, etc., the stand of assessee cannot be ignored by Revenue unless there are very cogent reasons to reject.
8. In view of foregoing discussion and keeping in view the law laid down by Supreme Court, quoted supra, we concur with the finding so recorded by the Tribunal and dismiss the appeal.
9. As a consequence, the appeal fails and is dismissed on both the grounds noted supra. No costs.
