Question 1

What are the key legal issues in Income Tax Officer, Ward-6(1), R. No.380 C, Third Floor, CR Building, ITO, Delhi 110002 Vs. Continental Construction Ltd., 28, Continental House, Nehru Place, Delhi 110019?

Accepted Answer

1. Allowability of assessee’s claim of bad debts written off.

Question 2

What are the facts of Income Tax Officer, Ward-6(1), R. No.380 C, Third Floor, CR Building, ITO, Delhi 110002 Vs. Continental Construction Ltd., 28, Continental House, Nehru Place, Delhi 110019?

Accepted Answer

The assessee company was engaged in the business of civil contracting and was also a partner in a joint venture under the name and style of M/s Continental Foundation Joint Venture. The assessee was primarily executing civil construction projects in Iraq and Libya since 1976. Consequent to Gulf War, the situation in Iraq deteriorated significantly, resulting in substantial losses to the assessee, as no amounts were received in respect of the projects executed for the Government of Iraq. The assessee had taken a comprehensive insurance cover under “Construction Works Policy” (CWP) covering all risks and ensuring payment of contractual dues. The said policy was issued by the Export Credit Guarantee Corporation Ltd. (ECGC), a body set up by the Government of India under the Ministry of Commerce. As per the terms of CWP, delay in payment of contractual dues beyond 120 days by Iraq was required to be indemnified by ECGC. Consequent to default by Iraq, the assessee along with other Indian contractors operating in Iraq approached ECGC for settlement of their claims. Considering magnitude of the claims and quantum of dues recoverable from the Government of Iraq, ECGC found it difficult to honour its commitments due to inadequacy of financial resources. Thereafter, a Deferred Payment Agreement (DPA) was entered into between the Government of India and the Government of Iraq, whereby foreign currency dues were deferred and were payable in instalments with effect from 01.01.1983, in the

Income Tax Officer, Ward-6(1), R. No.380 C, Third Floor, CR Building, ITO, Delhi 110002 Vs. Continental Construction Ltd., 28, Continental House, Nehru Place, Delhi 110019

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Facts Summary

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