DCIT, CHENNAI V. Deccan Estates, CHENNAI

ITA 1060/CHNY/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4492 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-09-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 20-05-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN IRS
• Assessee Lawyers: D ANAND
• Keywords: Bad and doubtful debts
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1060(MDS)/2013 ASSESSMENT YEAR : 2008-09 THE DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE III(4), CHENNAI. VS. M/S. DECCAN ESTATES, 24, DR. B.N.ROAD, T.NAGAR, CHENNAI-600 017. PAN AAACD2068D. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.MADHAVA N, IRS, JCIT RESPONDENT BY : SHRI D.ANAND, ADVOC ATE DATE OF HEARING : 23 RD SEPTEMBER, 2013 DATE OF PRONOUNCEMENT : 23 RD SEPTEMBER, 2013 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THIS IS AN APPEAL FILED BY THE REVENUE. THE RELE VANT ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS)-I AT CHENNAI, - - ITA 1060 OF 2013 2 DATED 23-1-2012. THE APPEAL ARISES OUT OF THE ASSE SSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX AC T, 1961. 2. THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN TH E BUSINESS OF CONSTRUCTION AND LAND DEVELOPMENT. IN COMPUTING ITS INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL, THE AS SESSEE HAS CLAIMED A DEDUCTION BY WAY OF BAD DEBT WRITTEN OFF AT ` 50 LAKHS. THE ASSESSEE EXPLAINED BEFORE THE ASSESSING OFFICER THAT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAD GIVEN A REFUNDABLE AMOUNT OF ` 50 LAKHS TO MR. K.PONNUSAMY, THE LAND OWNER OF THE PROJECT DECCAN ENCLAVE UNDERTAKEN BY THE ASSESSEE AS JOINT VENTURE. THERE WAS A DELAY IN COMPLETING THE PROJECT. THEREFORE, SHRI K.PONNU SAMY, THE LANDLORD, ADJUSTED THE REFUNDABLE AMOUNT GIVEN BY T HE ASSESSEE AGAINST THE DELAY AND FURTHER THREATENED TO CANCEL THE REGISTERED POWER OF ATTORNEY. AT THAT TIME THE ASSESSEE WENT BEFORE THE HONBLE HIGH COURT AND THE HIGH COURT DIRECTED TO D EPOSIT 50% OF THE CONSIDERATION RECEIVED BY THE ASSESSEE IN TH E COURT SO AS TO PROTECT THE INTEREST OF THE LANDLORD. FINALLY, THE MATTER WAS SETTLED OUT OF COURT. - - ITA 1060 OF 2013 3 3. IT IS IN THIS CONTEXT THAT THE ASSESSEE HAS CLA IMED THE DEDUCTION OF ` 50 LAKHS AS BAD DEBT. THE ASSESSING OFFICER HELD THAT THE AMOUNT WRITTEN OFF AS BAD DEBT WAS NE VER CREDITED IN THE PROFIT AND LOSS ACCOUNT FOR ANY OF THE EARLI ER ASSESSMENT YEARS AND THUS THE SAID AMOUNT WAS NEVER CONSIDERED IN COMPUTING THE INCOME OF THE ASSESSEE FOR THOSE EARL IER ASSESSMENT YEARS. THEREFORE, THE AMOUNT WRITTEN OF F BY THE ASSESSEE CANNOT BE CONSIDERED AS A BAD DEBT. THE A SSESSING OFFICER FURTHER HELD THAT THE SAID AMOUNT CANNOT AL SO BE DEDUCTED UNDER SECTION 37(1) OF THE ACT, AS THE EXPENDITURE HAS NOT BEEN PROVED TO BE INCURRED FOR THE PURPOSE OF THE BUSINE SS IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. 4. THE ASSESSEE TOOK UP THE DISALLOWANCE IN FIRST APPEAL. THE COMMISSIONER OF INCOME-TAX(APPEALS) HE LD THAT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF INDUSTRIES VS. CIT, 323 ITR 397, IS APPLICABLE AND, THEREFORE, THE WRITTEN OFF AMOUNT SHOULD BE DEDUCTED AS BAD DEBT W RITTEN OFF. HE ALLOWED THE APPEAL OF THE ASSESSEE. - - ITA 1060 OF 2013 4 5. THE REVENUE IS AGGRIEVED AND, THEREFORE, THIS SECOND APPEAL BEFORE THE TRIBUNAL. 6. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER :- 1.A ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION TOWARDS BAD DEBTS WRITTEN OFF AMOUNTING TO ` 50,00,000. 1.B THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE TO THE EFFECT THAT THE DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF. 1.C THE LEARNED CIT(A) HAS FAILED TO NOTE THAT THE RELIED UPON DECISION IN THE CASE OF TRF INDUSTRIES V CIT 323 ITR 397 IS NOT APPLICABLE TO THE FACTS OF THE CASE SINCE SECTION 36(2) IS NOT APPLICABLE IN THIS CASE AS CLEARLY HELD BY THE A.O. IN THE ASSESSMENT ORDER. 1.D THE LEARNED CIT(A) HAS FAILED TO CONSIDER THE DECISION IN THE CASE OF INDIAN EXPRESS - - ITA 1060 OF 2013 5 (MADURAI)(P) LTD VS DCIT 68 ITD 374(MAD) (1999). 7. WE HEARD BOTH SIDES IN DETAIL. 8. THIS AMOUNT CANNOT BE TREATED AS BAD DEBT, BECAUSE THIS AMOUNT HAS NEVER BEEN PART OF COMPUTAT ION OF THE PROFIT OR LOSS OF THE BUSINESS OF THE ASSESSEE IN A NY OF THE EARLIER ASSESSMENT YEARS. ONLY THOSE AMOUNTS WHICH HAVE CO NTRIBUTED TO THE COMPUTATION OF INCOME OR LOSS FOR ANY OF THE EARLIER ASSESSMENT YEARS COULD BE WRITTEN OFF AS BAD DEBT U NDER SECTION 36(1). OBVIOUSLY, THE DECISION OF THE HONBLE SUPR EME COURT RENDERED IN THE CASE OF TRF INDUSTRIES VS. CIT, 323 ITR 397, DOES NOT APPLY TO THIS CASE. 9. THEREFORE, THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IS NOT SUSTAINABLE IN LAW. IT IS SET ASIDE. THE DISALLOWANCE OF ` 50 LAKHS MADE BY THE ASSESSING OFFICER IS RESTORED. - - ITA 1060 OF 2013 6 10. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 23 RD OF SEPTEMBER, 2013 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 23 RD SEPTEMBER, 2013. V.A.P. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GF.