Joseph Davaraj Koilpillai vs ITO
The assessee is an individual carrying on business of project management and consultancy services under the name and style ‘Elhanan Management Services’. The AO noticed that in arriving at the income from profession, the assessee claimed deduction on account of bad debts written off. The Hon’ble Supreme Court in the case of T.R.F. Limited vs C.I.T clearly observed that it is not necessary for the assessee to establish that the debt has become irrecoverable.
The Bangalore ITAT found that the sum written off as bad debt was in fact realized by the Assessee before the date of filing of return of income and hence the tribunal did not allow the claim for deduction. The Tribunal observed that the assessee cannot convert any live amount into a bad debt only on the basis of the technical rule of writing off. It was not a case of bad debt but a case of delayed payment. It was in backdrop of these facts the Tribunal held, that the judgment of Hon’ble Supreme Court of India in the case of TRF Limited Vs. CIT will not apply. For the above reasons, the assessee is entitled to claim deduction on account of bad debts and the AO is directed to allow claim of assessee.