Commissioner Of Income Tax-Vi v. Times Business Solution Ltd

THE HIGH COURT OF DELHI AT NEW DELHI % Judgment delivered on: 09.04.2013 +ITA No. 209/2013 COMMISSIONER OF INCOME TAX-VI ... Appellant versus TIMES BUSINESS SOLUTION LTD.... RespondentAdvocates who appeared in this case:For the Appellant: Mr Sanjeev RajpalFor the Respondent: None CORAM:-HON’BLE MR JUSTICE BADAR DURREZ AHMEDHON’BLE MR JUSTICE R.V.EASWAR JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1.This appeal by the revenue is directed against the order of IncomeTax Appellate Tribunal dated 31.08.2012 in ITA No. 629/Del/2012pertaining to the assessment year 2007-08.The assessing officer haddisallowed a sum of `. 3,63,31,532/- which had been shown by theassessee as bad debts written off. 2.The assessee company, consequent upon a scheme of demergerunder section 391 to 394 of the Companies Act, 1956, had acquired all the assets and liabilities of two web based portals that were hitherto beingoperated by the assessee’s holding company. Those web based portalswere acquired as going concerns. Shareholders of the holding companywere issued shares in the assessee company pursuant to the demerger.The assessee thereafter continued to run and operate the two web portalsand derived income by way of online services, co-branded income,advertisements and management of events.In the very first year ofoperation, after the said demerger, the assessee company had written offbad debts amounting to `. 3,63,31,432/- in its books. According to theassessing officer these debts related to the years 2003 to 2006 when theweb portals were run and operated by the holding company and that theassessee could not have written off the bad debts as such act contravenedsection 36(1)(vii) of the Income-tax Act, 1961. Consequently, he rejectedthe claim in respect of the bad debts written off. 3.Thereupon, the assessee filed an appeal before the Commissionerof Income Tax (Appeals) who, following the decision of the SupremeCourt in the case ofCIT v. Veerabhadra Rao:155 ITR 152 (SC), heldthat the assesse was entitled to write off the irrecoverable bad debtsalthough, the said debts had been acquired from the holding company.The Supreme Court in the said decision in the case of Veerabhadra Rao(supra) observed that if a business, along with its assets and liabilities, istransferred by one owner to another, there was no reason as to why thedebts so transferred should not be entitled to the same treatment in thehands of the successors. It is clear that the Supreme Court held that whenthe original owner would have been entitled to write off the bad debts, the successor who acquires the assets and liabilities from the previous ownerwould also be entitled to treat the bad debts in the same manner in whichtheoriginalownerwasentitledunderlaw.Consequently,theCommissioner of Income Tax (Appeals), following the decision of theSupreme Court in the case of Veerabhadra Rao (supra) allowed theappeal of the assessee and permitted the assessee to write off the baddebts. 4.Before the Commissioner of Income Tax (Appeals) a point wasalso raised by the revenue that there must be some evidence to show thatthe debts had in fact become bad. A similar argument was also sought tobe raised by the learned counsel for the revenue before us. However, wefind that the Commissioner of Income Tax (Appeals) has adequatelyaddressed this issue by placing reliance on the Supreme Court decision inthe case of T.R.F. Limited v. CIT: 323 ITR 397(SC) wherein theSupreme Court clearly held that after the amendment which took effectfrom 01.04. 1989, it was not necessary for the assessee to establish that adebt, in fact, had become irrecoverable.The Supreme Court furtherobserved that it was enough if the bad debts were written off asirrecoverable in the accounts of the assessee. There is no dispute aboutthis fact insofar as the present case is concerned.The assessee hadwritten off the debts in question as irrecoverable in its accounts. 5.The Income Tax Appellate Tribunal has merely confirmed thedecision of the Commissioner of Income Tax (Appeals).We find noinfirmity in the decision of the Commissioner of Income Tax (Appeals) or in the decision of the Tribunal. No question of law, what to speak ofsubstantial question of law, arises for our consideration. 6.The appeal is dismissed. BADAR DURREZ AHMED, J R.V.EASWAR, JAPRIL 09, 2013kb