D.K. Seth, J. - (1.) The question involved in this case is very short, viz., whether the allowance of claim of Rs. 1,84,375 as bad debt out of the dues shown at Rs. 6,61,723 in the books of account could be justified under Section 36(1)(vii) r/w Section 36(2) of the IT Act, 1961.
(2.) Relying on the facts Mr. Sailen Dutta, learned counsel for the Revenue, submitted that from the relevant materials available on record that in the present case the assessee was unable to establish that the debt became irrecoverable for the purpose of being written off simply on the ground that the assessee had agreed to accept the award of the arbitrator and which ultimately it had accepted. Therefore, according to him, the assessee had waived or foregone its claim by its conduct without attempting to recover the said amount of difference between the claim and the award. Therefore, once the claim is waived or foregone, there cannot be any question of there being any due. Therefore, the AO and the learned Tribunal was right in disallowing the said claim.
(3.) Mr. J.P. Khaitan, learned counsel for the assessee, on the other hand, points out that once a dispute arises and it is referred to arbitration, one is bound by the award passed by the arbitrator which is subject to challenge in an appropriate proceedings and which was attempted in a company petition and ultimately the assessee had to accept the amount of the award when it found further attempt to recover the same futile. Such a decision was taken with ordinary commercial expedience after exhausting all avenues for recovery of the said amount, and as such the provision contained in Section 36(2) was definitely satisfied. He further pointed out that the analogy on which the learned Tribunal had proceeded is preposterous and cannot be accepted. The dues always were there but it could not be realised despite the attempt to recover the same, through statutorily recognised and established legal method and manner of recovering a disputed claim.;