V.R.V. & Co., Kumbakonam V. ITO, Kumbakonam

CO 7/CHNY/2013

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9357 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-02-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 08-01-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S SRIDHAR
• Assessee Lawyers: SHAJI P JACOB IRS
• Keywords: Bad and doubtful debts
• Section: 143(3); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . . ! , '!#$ BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NOS.2252, 2253 AND 2254/MDS/2012 &C.O.NOS.06, 07 & 08/MDS/2013 ( IN ITA NOS. 2252, 2253 AND 2254/MDS/2012) ( / ASSESSMENT YEARS :2004-05, 2006-07 & 2008-2009) THE INCOME TAX OFFICER, WARD I(1), KUMBAKONAM. ( %& /APPELLANT) VS M/S. V.R.V. & COMPANY, NO.40, T.H.S.S. ROAD, KUMBAKONAM. [PAN: AAAFV4135D] (RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : SHRI. SHAJI . P. JACOB, IRS, ADDL. CIT / RESPONDENT BY : SHRI. S. SRIDHAR, ADVOCATE /DATE OF HEARING : 18.02.2014. /DATE OF PRONOUNCEMENT : 18.02.2014 !' / O R D E R PER BENCH: THESE APPEALS BY THE REVENUE AND CROSS OBJECT IONS AT THE BEHEST OF THE ASSESSEE, EMANATE FROM THE ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS), TIRUCHIRAPALLI ALL DATED 27.0 9.2012 IN ITA NOS. : :2: I.T.A. NOS.2252, 2253 AND 2254/MDS/2012 &C.O.NOS.06, 07 & 08/MDS/2013 258/07-08, 324/08-09, 341/08-09, 213/10-11 & 212/10 -11, FOR ASSESSMENT YEARS 2004-05, 2006-07 & 2008-2009 . THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE INCOME TAX A CT 1961 [IN SHORT THE ACT]. 2. A COMBINED PERUSAL OF THE GROUNDS RAISED I N ALL APPEALS AND CROSS OBJECTIONS MAKE IT CLEAR THAT THE REVENUE CH ALLENGES THE CIT(A) ORDER ACCEPTING ASSESSEES CLAIM OF BAD DEBTS WRITT EN OFF WHICH WERE DISALLOWED/ ADDED BY THE ASSESSING OFFICER. IN CRO SS OBJECTIONS, THE ASSESSEE/FIRM PRAYS FOR ALLOWING SALARY PAID TO PAR TNERS IN THEIR INDIVIDUAL CAPACITY. IN VIEW OF THE FACT THAT THE ISSUES RAISED IN APP EALS AND CROSS OBJECTIONS ARE COMMON, WE TAKE UP ITA NO.2252/MDS/2 012 AND CO NO.06/MDS/2013 AS THE LEAD CASES. 3. THE ASSESSEE, A FIRM, IS ENGAGED IN THE BUSINESS OF FINANCING AND MERCHANTS. ON 30.10.2004, IT HAS DECLARED LOSS OFG10,99,710/- WHICH WAS SUMMARILY PROCESSED. IN COURSE OF SCRU TINY, THE ASSESSING OFFICER NOTICED THE ASSESSEE TO HAVE WRITTEN OFF B AD DEBTS AMOUNTING TO G27,90,421/-. IN THE ASSESSMENT ORDER 31.12.2008 HE : :3: I.T.A. NOS.2252, 2253 AND 2254/MDS/2012 &C.O.NOS.06, 07 & 08/MDS/201 3 DISALLOWED/ADDED THE AMOUNT, INTER-ALIA BY OBSERVING THAT THE ASSESSEE HAD FOLLOWED MERCANTILE SYSTEM OF ACCOUNTI NG AND TWO ITEMS OF INTERESTS APPEARED IN THE ASSET SIDE OF THE BALA NCE SHEET. HEALSO HELD THAT IT HAD RECEIVED A SUM OF G51,00,000/- IN THE RELEVANT PREVIOUS YEAR FROM ONE OF THE DEBTORS & INSTEAD OF CREDITING THIS AMOUNT IN LOAN ACCOUNT, IT WAS SHOWN IN THE SUNDR Y CREDITORS. ON THIS REASONING, THE ASSESSING OFFICER DISALLOWED/AD DED THE CLAIM OF BAD DEBTS. 4. IN THE LOWER APPELLATE PROCEEDINGS, THE CI T(A) HAS OBSERVED THAT IN VIEW OF THE CASE LAW 2010 (323) ITR 397(SC) TRF LTD VS. CIT, IT IS NOT NECESSARYFOR AN ASSESSEE AS PER AMENDED S ECTION 36(I)(VII) OF THE ACT, TO ESTABLISH THAT BAD DEBTS ARE IRRECOVER ABLE AND DELETED THE DISALLOWANCE/ADDITION. THEREFORE THE REVENUE IS IN APPEAL. 5. WE HAVE HEARD BOTH SIDES AND PERUSED THE C ASE FILE. WE MAKE IT CLEAR THAT NO COGENT EVIDENCE HAS BEEN FILE D BY THE REVENUE TO PROVE THAT THE ASSESSEE HAS NOT ACTUALLY WRITTEN OFF THE BAD DEBTS IN QUESTION. COMING TO REASONS ADOPTED IN ASSESSMENT ORDER, WE FIND SUPPORT FROM THE CASE LAW OF TRF LTD.(SUPRA) IN HOL DING THAT IN CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEB TORS AND ALSO THAT : :4: I.T.A. NOS.2252, 2253 AND 2254/MDS/2012 &C.O.NOS.06, 07 & 08/MDS/201 3 IT IS NOT NECESSARY TO ESTABLISH THAT THE DEBTS HAV E BECOME BAD. THE CIT(A) FINDINGS ARE UPHELD. SAME ORDER IS TO FOLLOW IN ITA NO.2253 AND 2254/MD S/2012. 6. NOW, WE COME TO CROSS OBJECTIONS. IN THE COURSE OF SCRUTINY, THE ASSESSEE FIRM CLAIMED TO BE PAID SALARY OF G84, 000/- EACH TO ITS THREE PARTNERS. THE ASSESSING OFFICER OBSERVED THAT THE PARTNERSHIP DEED NEITHER SPECIFIED AMOUNT NOR QUANTIFICATION OF REMUNERATION PAYABLE TO EACH OF INDIVIDUAL WORKING PARTNERS. HE DIDNT ACCEPT ASSESSEES PLEA THAT THESE EXPENSES ARE ALLOWABLE U NDER SECTION 37 OF THE ACT, AS THE PARTNERS COULDNT BE HELD AS ITS EM PLOYEES. . ACCORDINGLY, HE DISALLOWED/ADDED A SUM OF G2,52,000 /-. 7. IN ASSESSEES APPEAL THE CIT(A) HAS ALLOWED THE CLAIM ON MERITS BY OBSERVING THAT SALARY PAID TO THE PARTNER S FROM THE INCOME OF ASSESSEES FIRM IS ALLOWABLE. HE HAS DIRECTED THE ASSESSING OFFICER TO ALLOW THE SALARY PAID TO THE PARTNERS AS WHAT HAS B EEN REFLECTED IN THE INDIVIDUAL RETURNS OF THE IMPUGNED ASSESSMENT YEAR. 8. BEFORE US, THE COUNSEL FOR THE ASSESSEE HALF -HEARTEDLY ARGUES IN FAVOUR OF THE CLAIM. IN VIEW OF THE FACT THAT THE C IT(A) HAS AGREED : :5: I.T.A. NOS.2252, 2253 AND 2254/MDS/2012 &C.O.NOS.06, 07 & 08/MDS/201 3 WITH ITS CLAIM IN LEGALITY AND MERELY DIRECTED THE ASSESSING OFFICER TO VERIFY THE SALARY AMOUNTS DECLARED IN PARTNERS RE TURNS, WE DO NOT DEEM IT APPROPRIATE TO INTERFERE WITH THE ORDER UND ER CHALLENGE. THE ASSESSEES CROSS OBJECTIONS ARE ALSO REJECTED. THE SAME ORDER IS TO FOLLOW IN CO NOS.07&08/MDS/2013. 9. TO SUM UP, ALL APPEALS ITA NOS.2252 TO 225 4/MDS/2012 AND CO NOS.06 TO 08/MDS/2013 ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON TUESDAY, THE 18 TH OF FEBRUARY, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE PRESIDENT (S.S. GODARA) JUDICIAL MEMBER DATED: 18 TH FEB, 2014. K.V COPY TO:APPELLANT/RESPONDENT/CIT(A)/CIT/DR