Per N. Bharathvaja Sankar, Accountant Member - This is an appeal preferred by the assessee, M/s. Newdeal Finance and Investment Ltd., Chennai for the assessment year 1995-96 against the appellate order dated 2-1-1999 of the Commissioner of Income-tax (Appeals)-X, Chennai-34.

2. The assessee-company had raised 4 grounds of appeal relating to—

(i)disallowance of claim of bad debts in a sum of Rs. 5,31,097,

(ii)disallowance of claim of depreciation at 100% in a sum of Rs. 75,00,100,

(iii)disallowance of T.D.S. credit of Rs. 5,45,031 and

(iv)levy of interest under sections 234B and 234C in sums of Rs. 20,60,496 and Rs. 1,84,656 respectively.

3. Out of the above four grounds, at the time of hearing, the assessee’s learned counsel informed the Court that the assessee-company was not pressing the ground relating to disallowance of T.D.S. credit of Rs. 5,45,031, as rectification order was passed by the lower authorities in this regard. Hence this ground of appeal is dismissed as not pressed for.

4. Let us take up the ground relating to disallowance of bad debts. Briefly stated, the facts of the case are that while processing the assessment of the assessee-company under section 143(3) of the Income-tax Act, 1961, the Assessing Officer noticed that the assessee had claimed a sum of Rs. 5,31,097 as bad debts. The Assessing Officer found that the assessee-company had leased certain assets to M/s. Narang Industries Ltd. of New Delhi. After certain initial payment of lease amount, they were not paying the lease amount to the assessee-company. The assessee’s correspondence did not produce any result. Therefore, the assessee-company had filed a legal notice and a petition for winding up under sections 434, 433 and 439 of the Companies Act, 1956 in the Delhi High Court. On these facts available on records, the Assessing Officer addressed a letter to M/s. Narang Industries Ltd. for which the said company replied that though there was some delay in making the lease instalments, it could not be said that it was bad debt. The company had no intention of stopping the payment to the assessee. The Assessing Officer noticed that the said company, viz. M/s. Narang Industries Ltd. was a live company and recovering the lease amount was not difficult. Hence the Assessing Officer in view of the letter of M/s. Narang Industries Ltd. and the fact that this was a live company, held that the debt had not become bad and hence disallowed the claim of the assessee as bad debt in a sum of Rs. 5,31,097.

5. The assessee was aggrieved and moved the matter in appeal before the first appellate authority who also endorsed the view of the Assessing Officer for the same reasons recorded by the Assessing Officer and confirmed the disallowance. Still aggrieved, the assessee has preferred this second appeal before this Tribunal on this issue.

6. The learned counsel for the assessee submitted that the amount claimed as bad debt was on account of lease rentals which had been outstanding, from the lessee M/s. Narang Industries Ltd. for a consider-able period of time, and this had been confirmed by the lessee. He further submitted that the amount receivable from the lessee, viz. M/s. Narang Industries Ltd. was in the ordinary course of business carried on by the appellant and had been taken into account in computing the income of the appellant in an earlier previous year. The appellant had not only initiated legal proceedings against the lessee under section 434 of the Companies Act for winding up of their company as it was unable to pay its debt, but had also undertaken steps vigorously to recover the said amounts. It was also submitted that in the subsequent years, when certain amounts had been recovered from the lessee, the same had been offered for tax in the year of recovery.

7. On the other hand, the learned departmental representative strongly supported the orders of the authorities below and contended that no interference was warranted in this regard.

8. We have heard the riv