GEO FOUNDATION AND STRUCTURES PRIVATE LTD,ERNAKULAM V. ACIT, CIRCLE-1(2), KOCHI

ITA 108/COCH/2024

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Geo Foundation and Structures Pvt. Ltd., engaged in civil contracts, appealed against the order of the National Faceless Appeal Centre, which confirmed the disallowances made by the Assessing Officer (AO) for the Assessment Year 2012-13. The AO had disallowed a loss on the sale of fixed assets and a claim of bad debts totaling Rs. 1,39,02,125. The Tribunal found no illegality in the lower authorities' decisions, stating that the loss on the sale of fixed assets was capital in nature and thus not deductible, and the bad debts did not qualify for deduction as they were not incurred in the ordinary course of business.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669159 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUNDARASAN S.
• Assessee Lawyers: RISHAL K.
• Keywords: Bad and doubtful debts; Depreciation
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SHRI PRAKASH CHAND YADAV, JM ITA No. 108/Coch/2024 Assessment Year: 2012-13 Geo Foundation and Structures Pvt. Ltd. .......... Appellant 6th Floor, Alpha Plaza, K.P. Vallon Road Kadavanthara, Ernakulam 682020 [PAN: AABCG1899F] vs. ACIT, Corporate Circle-1(2), Kochi .......... Respondent Appellant by: Shri Rishal K., Advocate Respondent by: Shri Sundarasan S., CIT-DR Date of Hearing: 29.05.2025 Date of Pronouncement: 24.06.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 20.11.2023 for Assessment Year (AY) 2012-13. 2. Brief facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of execution of civil contracts. The return of income for AY 2012-13 was filed on 29.09.2012 declaring total income of Rs. 4,60,66,461/-. Against the said return of income, the 2 ITA No. 108/Coch/2024 Geo Foundation and Structures Pvt. Ltd. assessment was completed by the ACIT, Corporate Circle-1(2), Kochi (hereinafter called \"the AO\") vide order dated 23.03.2015 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 24,11,26,360/- after making several disallowances aggregating to a sum of Rs. 19,50,59,894/-. The disallowances, inter alia, includes disallowance on account of bad debts of Rs. 1,39,02,125/- and loss on sale of assets of Rs. 25,38,250/-, with which, we are concerned. The AO disallowed the loss on sale of fixed assets debited to the Profit & Loss A/c. by holding that the same is not eligible as it is capital in nature. In respect of bad debts of Rs. 1,39,02,125/-, the factual background leading to the above addition is that during the previous relevant to the assessment year under consideration, the appellant had written off the following amounts due from several parties as extracted in para 7 of the amt order: - WAPCOS Ltd. Rs. 3,73,527/- Albis Engineering Co. Rs. 60,479/- A.R. Estaes & Investments Rs. 47,286/- Maansarover Porperties Rs. 1,29,552/- Real Value Promoters (P) Ltd. Rs. 1,68,475/- Sadhana Varma Rs. 3,00,000/- Vijaya Productions (P) Ltd. Rs. 1,08,301/- 5D – Albis Engg Cpcl Rs. 1,86,265/- SD-IT Expressway Rs. 1,96,312/- SD-L&T RMC Sirusery Rs. 18,756/- 3 ITA No. 108/Coch/2024 Geo Foundation and Structures Pvt. Ltd. SD-NBCC Perambur Rs. 22,649/- SD- Rayala Corporation Pvt. Ltd. Rs. 2,17,636/- SD-Saveetha Engg. Rs. 148,830/- SD-Wapcos Rs. 12,500/- SD-Voora Shreera Construction Rs. 30,642/- SD-IVRCL Infrastructure Projects Rs. 83,848/- B. Venkjataraman Reddy Rs.75,03,000/- SD-HPCL Rs.21,66,763/- SD-Kirlosker Rs. 3,01,184/- SD-Nippon Infra Rs.15,81,815/- SD-Paharpur Cooling Towers Rs. 3,44,305/- Total Rs.1,39,02,125/- 3. Regarding the major amount due from one Mr. B. Venkataram Reddy of Rs. 75,03,000/- it was stated that this money was given as advance for purchase of land. Since the deal had not materialised the same was written off and claimed as bad debt. However, the AO disallowed the same by holding to be capital in nature. 4. Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO. 5. Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal. 6. Ground No. 3 challenges the disallowance of loss on sale of fixed assets of Rs. 25,38,250/-. Admittedly, these assets form part of fixed assets on which claim for depreciation was allowed. Since it is 4 ITA No. 108/Coch/2024 Geo Foundation and Structures Pvt. Ltd. not capital nature it cannot be allowed as deduction. We did not find any illegality in the orders of the learned lower authorities. Accordingly. This ground of appeal stands dismissed. 7. Ground of appeal No. 4 challenges the disallowance of claim of bad debts of Rs. 1,39,02,125/-. It is claimed that since the advanced was made during the course of business of the appellant and the same was written off in the books of account, the same should be allowed. On a perusal of the assessment order, it would reveal that the AO had disallowed the claim solely on the ground that the loss incurred on account of write off of the advance paid to Mr. B. Venkataram Reddy towards acquisition of land, is capital in nature. Before the AO no plea was taken that this advance was made towards acquisition of land which constitutes stock-in-trade in the hands of the assessee. Nowhere this plea was taken before the AO. However, before the CIT(A), the appellant took a plea that the advance was made towards acquisition of land which constitute part of business of the appellant. However, no material was placed before us to show that this advance was made for acquisition of stock-in-trade. Therefore, without entering into the debate whether the debt had been written off or not, it is suffice to hold that the condition precedent for allowance of bad debts, i.e. debt in the ordinary course does not stand satisfied. Therefore, the claim cannot be allowed. 5 ITA No. 108/Coch/2024 Geo Foundation and Structures Pvt. Ltd. 8. In the result, the appeal filed by the assessee stands dismissed. Order pronounced in the open court on 24th June, 2025. Sd/- Sd/- (PRAKASH CHAND YADAV) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 24th June, 2025 n.p. Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File Assistant Registrar ITAT, Cochin "