APOLLO INTERNATIONAL LTD. Vs. ADDITIONAL COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
Apollo International Ltd.
ADDITIONAL COMMISSIONER OF INCOME TAX
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Pramod Kumar, Member (A) -
(1.) THIS appeal is directed against the order dated 25th September 2009, passed by the Additional Commissioner of Income Tax, Range 2, New Delhi (hereinafter referred to as 'the Assessing Officer') under section 143(3), read with section 144(C), of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'), for the assessment year 2006 -07.
(2.) GROUND no. lis general and it does not call for any adjudication. In the second ground of appeal, the assessee has raised the following grievance:
That learned Assessing Officer erred in law and on facts in making the addition of Rs. 28,65,157 on account of write off of bad debts relating to pharma division of the appellant company, which is legally and factually erroneous.
(3.) TO adjudicate on this grievance, it is necessary to first take note of the facts as recorded in the impugned assessment order. During the course of assessment proceedings, the Assessing Officer noted that even though the assessee has transferred its pharmaceutical unit, i.e. Vita Life Laboratories, on going concern basis and on slump sale to one Arch Pharmalab Limited, the assessee has written off its bad debts of Rs. 28,65,157 in respect of the business so sold. The AO was of the view that since the related business itself is sold, the related bad debts cannot be allowed as deduction. The AO was of the view that when both the assets and liabilities of a unit are transferred, there cannot be any justification for claiming bad debts in respect of the unit so transferred. It was noted that the assessee has not been able to establish that bad debts pertain to its own business, and, therefore, the claim is to be treated as inadmissible. The assessee did raise grievance, before the DRP, against the addition of Rs. 28,65,157 but without any success. The DRP, in a rather brief and somewhat cryptic order, declined to interfere on this issue. While doing so, the DRP observed as follows:
Before DRP, the matter was argued at length and detailed submissions on this point have been filed. A number of judicial precedents have also cited. Having considered the arguments and the submissions of the assessee, the DRP is of the view that the assessee has all along been pleading the issue on totally inadmissible lines. As observed by the AO, nowhere it has been established that the bad debts related to assessee's own business. Had that been the case, it would have been a meaningful claim. Its claim of bad debts written off, which admittedly does not pertain to its business, is, therefore, rightly held as inadmissible;
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