M/S BHARAT TRADING COMPANY V. THE ADDITIONAL COMMISSIONER OF INCOME TA

ITA/10/2005

AI Insights

The case involves M/S Bharat Trading Company appealing against the decision of the Tribunal concerning the tax treatment of amounts written off in the previous year. The amounts in question were related to goods supplied to M/s Rathi Hospital and M/s Pratap Higher Secondary School. The Tribunal had found that the goods were supplied in the last year, and both parties were sound financially, with regular returns submitted. The main legal issue was whether the written-off amounts should be treated as debts for the purpose of section 36(2)(i) of the Income-tax Act. The High Court dismissed the appeal, emphasizing that the legal technicalities should not allow the assessee to avoid tax liability.

• Counselvise Citation: [2008] 140 COUNSELVISE.COM (IT) 691364 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 27-03-2008
• Assessment Year: misc
• Laws Referred To: Income-tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: K K BISSA
• Assessee Lawyers: ANJAY KOTHARI
• Keywords: Debt Write Off; Double taxation; Income Tax; Tax Deduction
• Section: 36(1)(vii); 36(2)(i)

Judgement Text

" IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- INCOME TAX APPEAL No. 10 of 2005 M/S BHARAT TRADING COMPANY V/S THE ADDITIONAL COMMISSIONER OF INCOME TA Mr. ANJAY KOTHARI, for the appellant / petitioner Mr. KK BISSA, for the respondent Date of Order : 27.3.2008 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI DEO NARAYAN THANVI,J. ORDER ----- Heard learned counsel for the parties. This appeal by the assessee has been filed against the judgment of the Tribunal dated 13.12.2004 and was admitted by this Court vide order dated 24.10.2005 by framing the following substantial question of law:- “Whether the subject amount which has been written off in the previous year of the assessee should not be treated as a debt for the purpose of section 36(2)(i) as amended of the Income-tax Act?” The amount relates to the goods supplied to the two parties being M/s.Rathi Hospital worth Rs.2,48,586/-, and other being M/s.Pratap Higher Secondary School worth Rs.30,673/-. The learned Tribunal has discussed the provisions of Section 36(1)(vii) as also considered the circular No.551 dated 23.1.90, and has examined the facts of the case, and has found that the goods were supplied last year only, both the parties are very sound parties, they are submitting their regular returns, and in case of M/s.Rathi Hospital there is a letter of Mr.Pankaj Choudhary assuring that the payment would be made by his firm M/s.Build Craft. This letter is dated 31.3.1997. It is argued that notwithstanding all this, since the assessee has written off the amount in the books of accounts, he was entitled to have the deduction thereof. During course of arguments, learned counsel revealed that in subsequent year, the amount has been received from M/s.Rathi Hospital, and that amount was offered for tax, but then the tax was not levied on that amount, obviously on the ground that in the present case, the amount has already been taxed, and taxing thereof would amount to double taxation. In our view, by standing to legal technicalities, if interference is made in the impugned order in this appeal, it would result into allowing the assessee to go scot free from the liability of this tax amount, inasmuch as, it would not be taxed this year, and has not been taxed in the year in which it has been recovered either. The legal technicalities could not be allowed to be invoked for this purpose. Of course, the learned counsel for the assessee submits that the assessee is prepared to pay tax on the amount in the year in which it is received, but then ought we know that in view of the fact, that the assessment for that year has already been finalised, whether it will be open to the department to reopen that assessment, or not, or to rectify that order, or not, the possibilities are not ruled out that taking shelter under some other hyper- technicalities, the assessee may get free from the liability of tax. In that view of the matter, we are not inclined to interfere with the impugned order. The appeal is, therefore, dismissed. ( DEO NARAYAN THANVI ),J. ( N P GUPTA ),J. /tarun/ "