N. Kumar, J.—This is an appeal by the revenue, challenging the order passed by the Tribunal, which set aside the order passed by the authorities and granted the benefit of deduction under the heading 'bad debts' under Section 36 of the Income Tax Act, 1961 ('the Act').

2. The Assessee entered into an agreement with Vinayaka Enterprises, to develop and handover 84 Acres and 23 Guntas of land in Jakkur and Shivanahalli village around Bangalore, under an agreement dated 1-2-1995. Subsequently, on 27-6-1998, the earlier agreement came to be terminated and yet another agreement of even date came into existence under which, Vinayaka Enterprises agreed to repay Rs. 12 crores and an additional compensation of Rs. 6 crores and out of Rs. 12 crores, a sum of Rs. 2 crores was repaid by Vinayaka Enterprises. The balance amount was not paid. Therefore, the Assessee filed a return of income for the assessment year 2001-02 claiming the following debts as written off:

3. The Assessing Officer who processed the returns disallowed the claim of the Assessee in respect of the bad debt claimed on the ground, that the debtor had not become insolvent and had resources to pay money and had also not