ITO, CHENNAI V. M/s. Makers Pharma (P) Ltd., CHENNAI

ITA 1006/CHNY/2011

• Counselvise Citation: 100621714 RSA 2011
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 06-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR I V IJAYAKUMAR IRS
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER ITA NO.1006(MDS)/2011 ASSESSMENT YEAR: 2006-07 THE INCOME-TAX OFFICER, COMPANY WARD IV(1), CHENNAI. VS. M/S.MAKERS PHARMA(P) LTD., 56B, PANTHEON RD., EGMORE CHENNAI-600 008. PAN AAECM3833A. (APPELLANT) (RESPONDENT) APPELLANT BY : DR.I.VIJAYA KUMAR, IRS, CIT-DR. RESPONDENT BY : SHRI T.N.SEETH ARAMAN, ADVOCATE. DATE OF HEARING : 15 TH SEPTEMBER, 2011 DATE OF PRONOUNCEMENT : 15 TH SEPTEMBER, 2011 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE. THE RELEVAN T ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-V AT CHENNAI DATED 21-3-2011. THE APPEAL ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. - - ITA NO.1006 OF 2011 2 2. THE FIRST GROUND RAISED BY THE REVENUE IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(APPEA LS) HAS ERRED IN DELETING THE DISALLOWANCE OF BAD DEBTS ON A SUM OF ` 10.26 LAKHS. IT IS THE CASE OF THE REVENUE THAT A S PER SECTION 36(2) OF THE ACT, THE DEDUCTION ON ACCOUNT OF BAD D EBTS CAN BE ALLOWED ONLY IF THE DEBT OR PART THEREOF HAS BEEN T AKEN INTO ACCOUNT WHILE COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR OR IN ANY EARLIER YEAR. THE REVENUE ARGUES THAT THIS FACT HAS NOT BEEN ESTABLISHED BY THE ASSESSEE. 3. WE CONSIDERED THE ISSUE. IT IS NOW SETTLED LAW THAT THE SUCCESSOR IN BUSINESS IS ENTITLED TO CLAIM THE BAD DEBTS OF THE PREDECESSOR. THIS IS BECAUSE THE SUCCESSOR IS TAKI NG OVER THE BUSINESS OF THE PREDECESSOR ON LOCK, STOCK AND BARR EL BASIS ASSUMING ALL ASSETS AND LIABILITIES. THIS PRINCIPL E HAS BEEN UPHELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VEERABHADRA RAO & CO., 155 ITR 152 AND ALSO BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF UNIVERSAL RADIATOR S VS. CIT, 153 ITR 556. 4. THEREFORE, IN LAW WE HAVE TO CONSIDER THAT THE CONTINUANCE OF THE BUSINESS IS DEEMED IN THE CASE O F THE TAKE- - - ITA NO.1006 OF 2011 3 OVER OF THE PROPRIETARY CONCERN OF ONE OF THE DIREC TORS OF THE ASSESSEE COMPANY. WHEN THAT CONTINUITY IN CARRYING ON OF THE BUSINESS IS DEEMED IN LAW, THE ASSESSEE IS ENTITLED TO CLAIM THE DEDUCTION BY WAY OF BAD DEBTS WRITTEN OFF EVEN IF T HOSE BAD DEBTS RELATED TO THE PREDECESSOR UNIT. IN THE PRESENT CA SE, THE BAD DEBTS BELONGED TO THE ERSTWHILE PROPRIETARY CONCERN , WHEREIN THE AMOUNTS WERE REFLECTED IN THE COMPUTATION OF ITS IN COME. THE ASSESSEE HAS ALSO WRITTEN OFF THE BAD DEBTS IN ITS BOOKS OF ACCOUNTS. IN SUCH CIRCUMSTANCES, ONCE IT IS WRITTE N OFF IN THE BOOKS OF ACCOUNTS, DEDUCTION IS PERMISSIBLE, AS HEL D BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF DIRECTOR O F INCOME-TAX VS. OMAN INTERNATIONAL BANK, 313 ITR 128 AND AS CON FIRMED BY THE HONBLE SUPREME COURT IN 313 ITR (ST.) 03. THE REFORE WE UPHOLD THE DECISION OF THE COMMISSIONER OF INCOME-T AX(APPEALS) ON THIS POINT. THIS GROUND FAILS. 5. THE SECOND ISSUE IS AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DELETING THE DISALLOWANCES LIKE DELIVERY CHARGES, VEHICLE MAINTE NANCE AND POOJA EXPENSES OF ` 1,12,135/-; ` 54,487/- AND ` 10,635/- RESPECTIVELY. THE COMMISSIONER OF INCOME-TAX(APPEA LS) IS - - ITA NO.1006 OF 2011 4 JUSTIFIED IN DELETING THE ABOVE DISALLOWANCES, AS N O SPECIFIC DEFECT HAS BEEN POINTED OUT BY THE ASSESSING AUTHOR ITY. THIS GROUND IS ALSO DISMISSED. 6. IN RESULT THIS APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON THURSDAY, THE 15 TH OF SEPTEMBER, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 15 TH SEPTEMBER, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.