Deputy Commissioner of Income-tax, Circle - 10, Pune V. M/s. Thermax Ltd, Pune

ITA 1052/PUN/2018

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle-10, Pune as the appellant and M/s. Thermax Ltd. as the respondent. The dispute centered on the non-inclusion of lease rental income amounting to Rs. 1,53,21,302 from five contracts in the assessee's income for the Assessment Year 2002-03. The assessee contended that the lease rentals were not received due to the lessees' financial difficulties. The Assessing Officer added this amount to the assessee's income, which was later contested and led to an appeal before the CIT(A). The CIT(A) ruled in favor of the assessee, a decision which was challenged by the Revenue before the Tribunal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134299 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-10-2022
• Assessment Year: 2002-2003
• Appeal Filed On: 07-06-2018
• Other Referred Cases: ITA No.1055/PUN/2009
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R.D.ONKAR; VIKSIT
• Keywords: Recovery proceedings; Bad and doubtful debts
• Section: 145; 143(3)

Judgement Text

आयकर अपीलीय अिधकरण “बी” Ɋायपीठ पुणेमŐ। IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES “B” :: PUNE BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER आयकर अपील सं. / ITA No.1052/PUN/2018 िनधाᭅरण वषᭅ / Assessment Year : 2002-03 The Dy.Commissioner of Income Tax, Circle-10, Pune. V s M/s.Thermax Ltd., 14, Mumbai Pune Road, Wakedwadi, Shivajinagar, Pune. PAN: AAACT 3910 D Appellant/ Assessee Respondent / Revenue Assessee by Shri R.D.Onkar & Shri Viksit Bhargava – AR’s Revenue by Shri M.G.Jasnani – DR Date of hearing 11/10/2022 Date of pronouncement 09/01/2023 आदेश/ ORDER PER DR. DIPAK P. RIPOTE, AM: This appeal filed by the Revenue is directed against the order of ld.Commissioner of Income Tax(Appeals)-6, Pune dated 12.03.2018 emanating from assessment order of Assessing officer dated 31.03.2005 under section 143(3) of the I.T.Act, 1961 for the A.Y.2002-03. The Revenue has raised the following grounds of appeal: “1. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in not considering the fact that the assessee company had rented out its plant and machinery and hence entitled to receive rental income during the year, which the assessee had not accounted for and hence the A.O. had rightly added the lease rental income of Rs. 1,53,21,302/- ITA No.1052/PUN/2018 M/s.Thermax Ltd [R] 2 2. Whether on the facts and circumstances of the case and in law the Ld. CIT(A) was justified in deleting the addition on account of lease rental income when the assessee has the right and the means to receive lease rental and has several remedies at its disposal in case of non-receipt of lease rental ? 3. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) is justified in not appreciating the fact that the assessee cannot claim the lease rentals as not recoverable in the first stage itself by not crediting the same to Profit & Loss account when the assessee can initiate recovery proceedings through court notices and only in the final eventuality can claim the same as bad debt ? 4. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) was justified in not appreciating that the assessee is following mercantile system of accounting and therefore the amount of lease rentals should be first offered to tax and can be claimed as bad debts later, if the recovery of the same is not possible through court? 5. Whether on the facts and circumstances of the case and in law the Ld.CIT(A) was justified in deleting the addition on account of lease rental income without considering that the agreement between these parties and the assessee company was set according to the convenience of the related parties? 6. The appellant craves leave to add, amend or alter any of the above grounds of appeal.?” 2. Brief facts of the case as emanating from the order of the ld.Commissioner of Income Tax are that assessee had not included lease rentals amounting to Rs.1,53,21,302/- from the Five Contracts on the ground that the lease rentals were not received by the assessee company from the lessee on account of their bad financial conditions and huge losses. The appellant claimed that the accounting standard prescribed by the CBDT under section 145 provides for prudents as one of the accounting policies to be mandatorily followed. The Assessing Officer(AO) rejected contention on the ground that the ITA No.1052/PUN/2018 M/s.Thermax Ltd [R] 3 appellant is following mercantile system of accounting and therefore, held that the amount should be first offered to tax and can be claimed as bad debts later. Aggrieved by the order of the AO, the assessee filed appeal before the ld.CIT(A). 3. The ld.CIT(A) allowed the appeal of the assessee following ITAT’s order in assessee’s own case on the same issue. Aggrieved by the order of the ld.CIT(A), the Department filed appeal before this Tribunal. 4. The ld.DR relied on the orders of the Assessing Officer, however, accepted the fact that identical issue had been decided by ITAT in assessee’s own case for A.Y. 2003-04 in favour of assessee. 5. The ld.AR submitted that ITAT has allowed assessee’s appeal in A.Y.2003-04. The ld.AR read the relevant part of the ITAT’s order. 6. We have heard both the parties and perused the records. It is observed that ITAT in assessee’s own case in appal no.1055/PUN/2009 for A.Y. 2003-04 in para 68 has dismissed the Revenue’s ground regarding lease rental following earlier years. The relevant para is reproduced here as under: “68. We have heard the rival submissions and perused the material on record. The issue in the present ground is with respect to addition made on account of lease rentals. Before us it is submitted that in earlier year the addition has been deleted by the tribunal. Before us, no fallacy has been pointed out by the revenue ITA No.1052/PUN/2018 M/s.Thermax Ltd [R] 4 in the order of CIT(A). We therefore find no reason to interfere with the order of CIT(A) and thus the ground of Revenue is dismissed.” 7. The facts in the present case are identical to the facts in A.Y. 2003-04. Therefore, respectfully following ITAT’s order(supra), the Revenue’s appeal is dismissed. All the grounds of the Revenue are related to only one issue i.e. lease rental income. Therefore, all the grounds of the Revenue are dismissed. 8. In the result, appeal of the Revenue is Dismissed. Order pronounced in the open Court on 9 th January, 2023. Sd/- Sd/- (S.S.GODARA) (DR. DIPAK P. RIPOTE) JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / Pune; ᳰदनांक / Dated : 9 th Jan, 2023/ SGR* आदेशकᳱᮧितिलिपअᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The CIT(A), concerned. 4. The Pr. CIT, concerned. 5. िवभागीयᮧितिनिध, आयकर अपीलीय अिधकरण, “बी” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 6. गाडᭅफ़ाइल / Guard File. आदेशानुसार / BY ORDER, // TRUE COPY // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे/ITAT, Pune.