Short Payment received allowed to be claimed as Business Loss by ITAT

The appeal by the assessee for Assessment Year (AY) 2008-09 arises out of the order of CIT(A) in the matter of assessment framed by Ld. AO u/s. 143(3) r.w.s. 254 of the Act. The sole grievance of the assessee is the disallowance of a write-off of Rs. 41.37 Lacs. It is the second round of appeal as, in the first round, the matter was remitted back by Tribunal to AO to adjudicate the issue afresh.

In the set-aside proceedings, the disallowance was again repeated. The write-off represents amounts due to the assessee by various state transport corporations. The assessee submitted that these amounts represent price difference/discounts deducted by the Government undertakings which were written off as bad debts since they were not recoverable.

It was also submitted that it was the normal practise of any government transport undertaking to deduct amounts from invoices as volume discounts/turnover discounts at the time of releasing the payments. The assessee could not produce any details such as copies of invoices to prove the claim relating to the claim of discounts and any correspondence to show that the Government undertaking claimed discounts on the invoices raised by the assessee. These were government undertakings and the failure of the assessee in furnishing the relevant details to demonstrate that the bad debts were discounts in nature, which would disentitle the assessee to claim such a deduction. Finally, the claim was rejected.

On appeal, the position was reiterated. The disallowance was upheld against which the assessee filed a further appeal before the tribunal.

It is undisputed fact that the assessee had received short payment against invoices from various transport undertakings which is evident from the ledger extract furnished by him. These undertakings are the customer of the assessee and the shortfall of the amount so received by the assessee has been claimed as bad debts/discounts. So, the tribunal held that to claim the same, it was not necessary for the assessee to map each of the amounts against particular invoices. It was sufficient to show that there was a shortfall in receipt of the amount against the invoices. As this fact has already been established by the assessee, the expenditure is clearly allowable as business loss. Hence, the Appeal was allowed.