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.                                   ... Respondent

Advocates who appeared in this case:
For the Appellant            : Mr Sanjeev Rajpal
For the Respondent           : None


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR

                                  JUDGMENT

BADAR DURREZ AHMED, J (ORAL)


1.      This appeal by the revenue is directed against the order of Income
Tax Appellate Tribunal dated 31.08.2012 in ITA No. 629/Del/2012
pertaining to the assessment year 2007-08. The assessing officer had
disallowed a sum of `. 3,63,31,532/- which had been shown by the
assessee as bad debts written off.

2.      The assessee company, consequent upon a scheme of demerger
under section 391 to 394 of the Companies Act, 1956, had acquired all






ITA 209/2013                                                         Page 1 of 4
the assets and liabilities of two web based portals that were hitherto being
operated by the assessee's holding company. Those web based portals
were acquired as going concerns. Shareholders of the holding company
were issued shares in the assessee company pursuant to the demerger.
The assessee thereafter continued to run and operate the two web portals
and derived income by way of online services, co-branded income,
advertisements and management of events. In the very first year of
operation, after the said demerger, the assessee company had written off
bad debts amounting to `. 3,63,31,432/- in its books. According to the
assessing officer these debts related to the years 2003 to 2006 when the
web portals were run and operated by the holding company and that the
assessee could not have written off the bad debts as such act contravened
section 36(1)(vii) of the Income-tax Act, 1961. Consequently, he rejected
the claim in respect of the bad debts written off.

3.      Thereupon, the assessee filed an appeal before the Commissioner
of Income Tax (Appeals) who, following the decision of the Supreme
Court in the case of CIT v. Veerabhadra Rao: 155 ITR 152 (SC), held
that the assesse was entitled to write off the irrecoverable bad debts
although, 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, is
transferred by one owner to another, there was no reason as to why the
debts so transferred should not be entitled to the same treatment in the
hands of the successors. It is clear that the Supreme Court held that when
the original owner would have been entitled to write off the bad debts, the




ITA 209/2013                                                       Page 2 of 4
successor who acquires the assets and liabilities from the previous owner
would also be entitled to treat the bad debts in the same manner in which
the original owner was entitled under law.               Consequently, the
Commissioner of Income Tax (Appeals), following the decision of the
Supreme Court in the case of Veerabhadra Rao (supra) allowed the
appeal of the assessee and permitted the assessee to write off the bad
debts.

4.       Before the Commissioner of Income Tax (Appeals) a point was
also raised by the revenue that there must be some evidence to show that
the debts had in fact become bad. A similar argument was also sought to
be raised by the learned counsel for the revenue before us. However, we
find that the Commissioner of Income Tax (Appeals) has adequately
addressed this issue by placing reliance on the Supreme Court decision in
the case of T.R.F. Limited v. CIT: 323 ITR 397(SC) wherein the
Supreme Court clearly held that after the amendment which took effect
from 01.04. 1989, it was not necessary for the assessee to establish that a
debt, in fact, had become irrecoverable. The Supreme Court further
observed that it was enough if the bad debts were written off as
irrecoverable in the accounts of the assessee. There is no dispute about
this fact insofar as the present case is concerned. The assessee had
written off the debts in question as irrecoverable in its accounts.






5.       The Income Tax Appellate Tribunal has merely confirmed the
decision of the Commissioner of Income Tax (Appeals). We find no
infirmity in the decision of the Commissioner of Income Tax (Appeals)




ITA 209/2013                                                          Page 3 of 4
or in the decision of the Tribunal. No question of law, what to speak of
substantial question of law, arises for our consideration.

6.      The appeal is dismissed.

                                        BADAR DURREZ AHMED, J




                                                R.V.EASWAR, J
APRIL 09, 2013
kb




ITA 209/2013                                                  Page 4 of 4