M/s Woodlands Medical Centre Ltd., Kolkata V. D.C.I.T. Cir - 11,Kolkata., Kolkata

CO 106/KOL/2012

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1269 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 28-08-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 15-11-2012
• Court: TRIBUNAL
• Department Lawyers: PIYUSH DEY
• Assessee Lawyers: SANJAY MUKHERJEE JCITSR
• Keywords: Bad and doubtful debts
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM ] ITA NO.1578/KOL/2012 ASSESSMENT YEAR : 2008 - 09 ( A PPELLANT ) (RESPONDENT) D.C.I.T., CIRCLE - 1 1 , - VERSUS - M/S. WOODLANDS MEDICAL KOLKATA CENTRE LTD., KOLKATA (PAN: AAACW 4144Q) C.O.NO.106/KOL/2012 A/O ITA NO.1578/KOL/2012 ASSESSMENT YEAR : 2008 - 09 M/S. WOODLANDS MEDICAL - VERSUS - D.C.I.T., CIRCLE - 11, CENTRE LTD., KOLKATA KOLKATA (PAN AAACW 4144 Q) (CROSS OBJECTOR) (RESPONDENT) FOR THE APPELLANT : SHRI SANJAY MUKHERJEE ,JCIT,SR.DR FOR THE RESPONDENT : SHRI PIYUSH DEY DATE OF HEARING : 26 .08 .2015. DATE OF PRONOUNCEMENT : 07.09.2015. ORDER PER SHRI M.BALAGANESH, AM THIS APPEAL OF REVENUE ARISES OUT OF ORDER OF LD. CIT(A) - XI I, KOLKATA IN APPEAL NO . 151/XII/CIR - 11/10 - 11 DATED 20.07.2012 FOR A.Y. 2008 - 09 AGAINST THE ORDER OF ASSESSMENT PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 2. THE ISSU E TO BE DECIDED IS AS TO WHETHER THE LD. CIT(A) IS CORRECT IN DELETING THE DISALLOWANCES OF LEAVE ENCASHMENT AMOUNTING TO RS.16,40,000/ - BY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LIMITED 292 ITR 470 (CAL). THE ASSESSEE HAS ALSO RAISED CROSS OBJECTIONS IN C.O.NO.106/KOL/2012 FOR A.Y.2008 - 09 ON A DIFFERENT GROUND WITH REGARD TO BAD DEBTS AMOUNTING TO RS.3,01,256/ - . ITA NO. 1578/KOL/2012 M/S. WOODLANDS MEDICAL CENTRE LTD. A.YR. 2008 - 09 2 3. BOTH THE REVENUE S APPEAL AND CROSS OBJECTION OF THE ASSESSEE ARE TAKEN TOGETHER FOR THE PU RPOSE OF CONVENIENCE AND DISPOSED OFF BY THIS COMMON ORDER. 4. THE BRIEF FACTS OF THIS CASE AR E THAT THE ASSESSEE CLAIMED PROVISION FOR LEAVE ENCA SHMENT TO THE TUNE OF RS.16,40,000/ - AND CLAIMED THE SAME AS DEDUCTION BY RELYING ON THE DECISION OF THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LIMITED VS UNION OF INDIA REPORTED IN 292 ITR 470 (CAL). THE LD. AO DISALLOWED THE SAME ON THE GROUND THAT THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IS CHALLENGED BY THE REVENUE BY WAY OF SPECIAL LEAVE PETITION IN THE SUPREME COURT. ON FIRST APPEAL, THE LD. CIT(A) DELETED THE DISALLOWANCE MADE BY THE LD. AO ON THE GROUND THAT THE ISSUE IS COVERED BY THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LIMITED VS UNION OF INDIA REPORTED IN 292 ITR 470(CAL). AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND : - 1. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF R S.16,40,000/ - MADE U/S 43B O N ACC OUNT OF PROVISION FOR LEAVE ENCASHMENT IGNORING THE PROVISIONS OF THE SAID SECTION. 5. SHRI SANJAY MUKHERJEE, JCIT, SR.DR ARGUED ON BEHALF OF THE REVENUE AND SHRI PIYUSH DEY, CA, THE LD. AR ARGUED ON BEHALF OF THE ASSESSEE. 6. WE HAVE HEARD THE R IVAL SUBMISSIONS AND THE CITATION QUOTED BY THE LD. AR. WE FIND THAT IT IS RELEVANT TO GET INTO THE OPERATIVE PORTION OF THE DECISION OF HON BLE CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTRIES LIMITED VS UNION OF INDIA 292 ITR 470(CAL). IT WAS HELD AS UNDER : - 11. IN THIS REGARD THE OBSERVATION OF THE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS (SUPRA) IS QUOTED BELOW: THE LAW IS SETTLED: IF A BUSINESS LIABILITY HAS DEFINITELY ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SHOULD BE ALLOWED ALTHOUGH T HE LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. WHAT SHOULD BE CERTAIN IS THE INCURRING OF THE LIABILITY. IT SHOULD ALSO BE CAPABLE OF BEING ESTIMATED WITH REASONABLE CERTAINTY THOUGH THE ACTUAL QUANTIFICATION MAY NOT BE POSSIBLE. I F THESE REQUIREMENTS ARE SATISFIED THE LIABILITY IS NOT A CONTINGENT ONE. THE LIABILITY IS IN PRAESENTI THOUGH IT WILL BE DISCHARGED AT A FUTURE DATE. IT DOES NOT MAKE ANY DIFFERENCE IF THE FUTURE DATE ON WHICH THE LIABILITY SHALL HAVE TO BE DISCHARGED IS NOT CERTAIN.... ITA NO. 1578/KOL/2012 M/S. WOODLANDS MEDICAL CENTRE LTD. A.YR. 2008 - 09 3 APPLYING THE ABOVE SAID SETTLED PRINCIPLES TO THE FACTS OF THE CASE AT HAND WE ARE SATISFIED THAT THE PROVISION MADE BY THE APPELLANT COMPANY FOR MEETING THE LIABILITY INCURRED BY IT UNDER THE LEAVE ENCASHMENT SCHEME PROPORTIONATE WITH THE ENTITLEMENT EARNED BY EMPLOYEES OF THE COMPANY, INCLUSIVE OF THE OFFICERS AND THE STAFF, SUBJECT TO THE CEILING ON ACCUMULATION AS APPLICABLE ON THE RELEVANT DATE, IS ENTITLED TO DEDUCTION OUT OF THE GROSS RECEIPTS FOR THE ACCOUNTING YEAR DURING WHICH THE PROVISION IS MADE FOR THE LIABILITY. THE LIABILITY IS NOT A CONTINGENT LIABILITY. THE HIGH COURT WAS NOT RIGHT IN TAKING THE VIEW TO THE CONTRARY. 13. THE APPEAL SUCCEEDS AND IS ALLOWED. SECTION 43B(F) IS STRUCK DOWN BEING ARBITRARY, UNCONSCIONABLE AND DE HORS THE APEX COURT DECISION IN THE CASE OF BHARAT EARTH MOVERS (SUPRA). IT IS OBSERVED THAT THE REVENUE HAD PREFERRED SPECIAL LEAVE PETITION BEFORE THE HON BLE SUPREME COURT AGAINST THE JUDGMENT OF T HE HON BLE CALCUTTA HIGH COURT. THE HIGH COURT IN SPECIAL LEAVE PETITION TO APPEAL (CIVIL) CC.12060/2008 DATED 08.09.2008 HAD HELD AS UNDER : - THE PETITION WAS CALLED ON FOR HEARING TODAY. UPON HEARING COUNSEL THE COURT MADE THE FOLLOWING ORDER. ISSUED NO TICE. IN THE MEANTIME, THERE SHALL BE STAY OF THE IMPUGNED JUDGMENT, UNTIL FURTHER ORDERS. LATER THE HON BLE SUPREME COURT IN SPECIAL LEAVE TO APPEAL (CIVIL) NO.(S), CC - 22889/2008 DATED 8.5.2009 HAD HELD AS UNDER : - THE PETITION WAS CALLED ON FOR HEARIN G TODAY. UPON HEARING THE COUNSEL THE COURT MADE THE FOLLOWING ORDER DELAY CONDONED. LEAVE GRANTED. PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL APPEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AND INTEREST WHICH IS APPROVED TILL DAY. IT IS MAD E CLEAR THAT AS FAR AS OUTSTANDING INTEREST PAYMENT AS ON DATED, IT WOULD BE OPEN TO HAVE THE DEPARTMENT TO RECOVER THAT AMOUNT IN CASE CIVIL APPEAL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAK E IT CLEAR THAT THE ASSESSEE WOULD, DURING THE PENDENCY OF THI S CIVIL APPEAL, PAY TAX AS IF SECTION 43B(F) IS ON TH E STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTITLED TO MAKE A CLAIM IN ITS RETURNS. HENCE FROM THE AFORESAID JUDGMENT, IT CAN BE INFERRED THAT THE HON BLE SUPREME COURT HAD NOT STAYED THE JUDGMENT OF THE HON BLE CALCUTTA HIGH COURT DURING THE LEAVE PROCEEDINGS. HENCE AS ON DATE, THE HON BLE CALCUTTA HIGH COURT SHALL HAVE TO BE FOLLOWED. ACCORDINGLY, RELIANCE PLACED ON THE CALCUTTA HIGH COURT DECISION BY THE ITA NO. 1578/KOL/2012 M/S. WOODLANDS MEDICAL CENTRE LTD. A.YR. 2008 - 09 4 ASSESSEE IS SQUARELY APPLICABLE IN THE FAC TS AND CIRCUMSTANCES OF THIS CASE. HOWEVER, WE DEEM IT FIT AND APPROPRIATE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, TO SET ASIDE THIS ISSUE TO THE LD. AO TO PASS ORDERS BASED ON THE OUTCOME OF THE MAIN APPEAL ON MERITS BY HON BLE SUPREME COURT AS STATED SUPRA. ACCORDINGLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. C.O.NO.106/KOL/2012 (BY THE ASSESSEE) 7. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND IN ITS CROSS OBJECTION : - 1.0. THAT, ON THE FACTS AS WELL AS ON LAW, THE LEARNED COM MISSIONER (APPEALS) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.3,01,256 ON THE GROUND THAT SUCH AMOUNT REPRESENTED BAD DEBTS WRITTEN OFF IN EXCESS OF THE PROVISION FOR DOUBTFUL DEBTS MADE IN THE ACCOUNTS AND THE SAID AMOUNT WAS N OT PROVIDED IN THE DEBTOR S ACCOUNT ON 31 - 03 - 2007, IN TOTAL DISREGARD OF THE PROVISIONS OF SECTION 36(1)(VII) READ WITH SECTION 36(2)(I) OF THE INCOME TAX ACT AND THE JUDICIAL PRONOUNCEMENTS ON THE MATTER. 7.1. T HE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESSEE HAD SUFFERED BAD DEBT AMOUNTING TO RS.34 ,03,407/ - AND DEBITED THE SAME IN ITS INCOME AND EXPENDITURE ACCOUNT DURING THE ASSESSMENT YEAR UNDER APPEAL UNDER THE HEAD ADMINISTRATIVE AND OTHER EXPENSES (SCHEDULE - IV) AS BAD DEBTS WRITTEN OFF. T HIS WA S CLAIMED AS DEDUCTION BY THE ASSESSEE. SIMULTANEOUSLY, THE ASSESSEE HAD ALSO WRITTEN BACK THE PROVISION FOR DOUBTFUL DEBTS AMOUNTING TO RS.31,02,151/ - DURING THE ASSESSMENT YEAR UNDER APPEAL AND CREDITED THE SAME UNDER THE HEAD OTHER INCOME IN ITS INCO ME AND EXPENDITURE ACCOUNT. SINCE THE ASSESSEE HAD DISALLOWED A SUM OF RS.31,02,151/ - IN THE EARLIER YEAR WHILE MAKING THE PROVISION FOR DOUBTFUL DEBTS, IT RESORTED TO REDUCE THIS SUM IN THE STATEMENT OF TOTAL INCOME TO AVOID DOUBLE TAXATION IN THE ASSESSM ENT YEAR UNDER APPEAL. THE LD. AO WITHOUT APPRECIATING THIS FACT SOUGHT TO DISALLOW A SUM OF RS.3,01,256/ - ON THE GROUND THAT THE BAD DEBTS WRITTEN OFF IN THE SUM OF RS.34,03,407/ - WAS MORE THAN THE PROVISION MADE IN THE EARLIER YEARS TO THE TUNE OF RS.31 ,02,151/ - WHICH WAS ALSO UPHELD BY THE LD. CIT(A). AGGRIEVED, THE ASSESSEE HAS FILED THIS CROSS OBJECTION BEFORE US. ITA NO. 1578/KOL/2012 M/S. WOODLANDS MEDICAL CENTRE LTD. A.YR. 2008 - 09 5 7.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD DULY MADE PROVISION FOR BAD AND DOUBTFUL DEBTS IN THE EARLIER YEAR AMOUNTING TO RS.31,02,151/ - AND THE SAME WERE DULY DISALLOWED IN THE ASSESSMENT WHICH FACT IS NOT DISPUTED BY THE LD. AO. THIS SUM WAS WRITTEN BACK TO THE INCOME AND EXPENDITURE ACCOUNT DURING A.Y.2008 - 09 BY THE ASSESSEE BUT SINCE THE SAME WAS ALREADY OFFERED TO TAX BY WAY OF VOLUNTARY DISALLOWANCE IN THE EARLIER YEAR, IT WAS REDUCED IN THE STATEMENT OF TOTAL INCOME FOR A.Y.2008 - 09 TO AVOID DOUBLE TAXATION. THE ASSESSEE ALSO CORRESPONDINGLY SOUGHT TO WRITE OFF THE DOUBTFUL DEBTS IN ITS BOOKS OF ACCOUNT AS IR RECOVERABLE IN ACCORDANCE WITH SECTION 36(1)(VII) OF THE ACT TO THE TUNE OF RS.34,03,407/ - AND CLAIMED THE SAME AS DEDUCTION IN A.Y.2008 - 09. WE FIND THAT BOTH AO AND LD. CIT(A) HAD NOT LOOKED AT THIS ISSUE I N THE CORRECT PERSPECTIVE. FROM THE AFORESAID FACTUAL MATRIX AND THE TREATMENT GIVEN IN THE BOOKS AS WELL AS IN THE RETURN, WE FIND NO INFIRMITY IN THE ACTION OF THE ASSESSEE AND ACCORDINGLY THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. 8. IN THE R ESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICA L PURPOSES AND THE CROSS OBJECTI ON OF THE ASSESEE IS ALLOWED. ORDER PRONOUNC ED IN TH E COURT ON 07.09.2015 . SD/ - SD/ - [MAHAVIR SINGH] [M.BALAG ANESH] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 07/09/2015. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO : 1 . M/S. WOODLANDS MEDICAL CENTRE LTD., 8/5, ALIPORE ROAD, KOLKATA - 700027. 2 THE D.C.I.T., CIRCLE - II, KOLKATA. 3 . THE CIT - I V , KOLKATA , 4. THE CIT(A) - XI I, KOLKATA. 5 . DR, KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES ITA NO. 1578/KOL/2012 M/S. WOODLANDS MEDICAL CENTRE LTD. A.YR. 2008 - 09 6