ITO, Ward-16(1), Hyd, Hyderabad V. Labham Finance Pvt.Ltd., Secunderabad, Secunderabad

ITA 1140/HYD/2015

• Counselvise Citation: 114022514 RSA 2015
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2015
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 05-11-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 31-08-2015
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Keywords: Bad and doubtful debts; Cancellation of registration
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 1140/HYD/2015 ASSESSMENT YEAR: 2003-04 THE INCOME TAX OFFICER, WARD-16(1), HYDERABAD VS M/S. LABHAM FINANCE PVT. LTD., SECUNDERABAD [PAN: AAACL2447D] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI B. KURMI NAIDU , DR FOR ASSESSEE : NONE DATE OF HEARING : 3 0 - 1 0 - 201 5 DATE OF PRONOUNCEMENT : 18 - 1 1 - 2015 O R D E R THIS IS AN APPEAL BY REVENUE AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-4, HYDERABAD D ATED 12-05-2015. THE ISSUE INVOLVED IS WITH REFERENCE T O BAD DEBT OF RS. 5,78,500/-. WHEN THE CASE WAS TAKEN UP NONE APPEAR ED FOR THE ASSESSEE. CASE WAS DISPOSED OFF AFTER HEARING THE L D. DR, EXPARTE ASSESSEE. 2. ASSESSEE WAS REGISTERED AS NBFC AND HAD FIL ED LOSS FROM BUSINESS AT RS. 17,429/- AND CAPITAL GAINS AT RS. 5 ,19,452/-. PROCEEDINGS U/S. 147 OF THE INCOME TAX ACT [ACT] IN ITIATED IN THE ASSESSEES CASE AS ASSESSING OFFICER (AO) NOTICED T HAT ASSESSEE WAS NOT ELIGIBLE FOR PROVISIONS FOR NPAS AT RS. 5,78, 500/- CLAIMED IN THE P&L A/C WHICH SHOULD BE RESTRICTED TO 5% OF THE TOTAL INCOME AS PER SECTION 36(1)(VIIA)(C) OF THE ACT. WHILE AL LOWING DEDUCTION I.T.A. NO.1140/HYD/2015 M/S. LABHAM FINANCE PVT. LTD., :- 2 -: WHICH IS EQUIVALENT TO 5% OF TOTAL INCOME AT RS. 25 ,973/-, THE BALANCE OF RS. 5,52,530/- WAS DISALLOWED AND ADDED BACK. 3. ASSESSEE CONTENDED BEFORE THE LD. CIT(A) THAT TH E AMOUNT OF RS. 5,78,500/- WAS WRITTEN OFF AS IRRECOVERABLE AND THE AMOUNT IS NOT A PROVISION AS CONSIDERED BY THE AO. FURTHER, IT WAS SUBMITTED THAT THE CLAIM WAS U/S. 36(1)(VII) OF THE ACT AND R ELIED ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CITI FINANCIAL RETAIL SERVICES INDIA LTD., VS. ACIT [53 TAXMANN.COM 274], WHEREIN IT WAS HELD THAT BAD DEBTS WRITTEN OFF/BECO ME IRRECOVERABLE CAN BE CLAIMED AS A DEDUCTION AND TAX PAYER NEED NOT ESTABLISH THE FACT THAT THE SAME HAS BECOME IRRECOV ERABLE FOLLOWING THE DECISION OF THE APEX COURT IN THE CASE OF TRF L TD., VS. CIT [190 TAXMAN 391]. IT WAS ALSO MENTIONED THAT ASSESSEE I S ELIGIBLE TO CLAIM BAD DEBT AS WELL AS PROVISION FOLLOWING THE D ECISION OF THE APEX COURT IN THE CASE OF VIJAYA BANK VS. CIT [323 ITR 166]. IT WAS FURTHER SUBMITTED THAT THERE IS NO REQUIREMENT AS PER THE ACT TO SHOW THE INDIVIDUAL DEDUCTIONS OF THE IRRECOVERA BLE BAD DEBTS. 4. CONSIDERING THE SUBMISSIONS OF ASSESSEE, WHICH W ERE EXTRACTED IN PARA 4 OF THE LD. CIT(A)S ORDER, CIT( A) DELETED THE AMOUNT STATING AS UNDER: 5. THE ASSESSMENT ORDER, DOCUMENTS PLACED BEFORE ME AND THE SUBMISSIONS OF THE APPELLANT ARE CONSIDE RED. THE APPELLANT CLAIMS THAT THERE IS A MISTAKE IN MENTION ING THE DEBIT AS PROVISIONS FOR NPAS WHEREAS THE AMOUNT TO P&L AC COUNT HAS BEEN WRITTEN OFF. FOR DEMONSTRATING THE SAME T HE AUDITED ACCOUNTS OF THE APPELLANT COMPANY ARE FILED. IT IS SEEN THAT THE AMOUNT OF RS. 5,78,500/- HAS BEEN DEDUCTED FROM OUT STANDING LOANS AS SHOWN IN SCHEDULE F AND THE SAME IS NOT SHOWN AS ASSET IN THE BALANCE SHEET ANYWHERE ELSE. FURTHE R, THE APPELLANT SUBMITTED THAT THE APPELLANT WAS NO MORE NFBC DURING THE YEAR AND PROVISIONS OF SECTION 36(1)(VII A)(C) ARE NOT I.T.A. NO.1140/HYD/2015 M/S. LABHAM FINANCE PVT. LTD., :- 3 -: APPLICABLE TO APPELLANTS CASE. IN VIEW OF THE FAC TUAL POSITION AS ABOVE, THE ADDITION MADE OF RS. 5,78,500/- IS DE LETED. 5. REVENUE IS AGGRIEVED AND RAISED THE FOLLOWING TW O GROUNDS: 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN HOLDING THAT A SUM OF RS. 5,78,500/- IS TO BE ALLOWED AS BAD DEBT WITHOUT I DENTIFYING THE PARTICULARS OF DEBT(S) WHICH BECAME IRRECOVERAB LE AND ESTABLISHING WHETHER THE PROVISIONS OF SECTION 36(1 )(VIII) READ WITH SECTION 36(2) OF THE INCOME TAX ACT, 1961 (THE ACT) WERE SATISFIED OR NOT. 2.1 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN IGNORING THE AUDITED ACCOUNTS OF THE ASSESSEE WHERE A SUM OF RS. 5,78,500/- IS ST ATED AS PROVISION FOR NPAS IN SCHEDULE K TO THE BALANCE S HEET AND RELYING UPON A MERE STATEMENT GIVEN BY THE ASSESSEE . 2.2 WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) IS CORRECT IN DELETING THE ADDITION MADE BY THE AO BY RELYING ON THE STATEMENT GIVEN BY THE ASSESSEE THAT THE ASSESSEE IS NOT AN NBFI FOR THE Y EAR UNDER CONSIDERATION WITHOUT TAKING INTO COGNIZANCE THE FACT THAT THE CANCELLATION OF REGISTRATION LETTER COMMUN ICATED BY RBI IS DATED 29-06-2005 AND THEREFORE, BELONG TO FY . 2005- 06 BUT NOT THE FY. 2002-03 WHICH IS UNDER CONSIDERA TION? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) HAS ERRED IN DELETING A SUM OF RS. 5,78,500/- WHEREAS THE NET ADDITION MADE BY THE ASS ESSING OFFICER HAS BEEN ONLY RS. 5,52,530/- [RS. 5,78,500/ -] BEING PROVISION FOR NPA-RS.25,973 BEING 5% OF TOTAL INCOM E]. GROUND NO 1 IS GENERAL IN NATURE. 6. WITH REFERENCE TO GROUND NO. 2, WE DO NOT SEE AN Y REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) AS HE HA S GIVEN A FACTUAL FINDING THAT THE AMOUNT WAS WRITTEN OFF AS BAD DEBT AND CLAIM WAS U/S. 36(1)(VII) R.W.S. 36(2). THEREFORE, THE GROUN DS RAISED IN I.T.A. NO.1140/HYD/2015 M/S. LABHAM FINANCE PVT. LTD., :- 4 -: GROUND NO. 2 CANNOT BE CONSIDERED AS ASSESSEES CLA IM WAS AS PER THE PROVISIONS OF THE ACT, SUPPORTED BY JUDICIAL PR INCIPLES, GROUND NO.2 IS ACCORDINGLY REJECTED. 7. COMING TO THE ISSUE IN GROUND NO.3, AO ALLOWED T HE DEDUCTION OF RS. 25,973/- AND DISALLOWED ONLY BALAN CE AMOUNT OF RS. 5,52,530/- BEING EXCESS PROVISION MADE BY ASSES SEE. SINCE ADDITION IS ONLY OF AN AMOUNT OF RS. 5,52,530/-, AL LOWING THE AMOUNT OF RS. 5,78,500/- BY THE CIT(A) IS NOT CORRE CT. CONSEQUENTLY MODIFYING THE ORDER OF THE CIT(A), AO IS DIRECTED TO DELETE THE AMOUNT OF RS. 5,52,530/- ONLY. GROUND N O. 3 IS ACCORDINGLY ALLOWED. 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH NOVEMBER, 2015 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 18 TH NOVEMBER, 2015 TNMM I.T.A. NO.1140/HYD/2015 M/S. LABHAM FINANCE PVT. LTD., :- 5 -: COPY TO : 1. INCOME TAX OFFICER, WARD-16(1), ROOM NO. 7, 7 TH FLOOR, AAYAKAR BHAVAN, BASHEER BAGH, HYDERABAD. 2. M/S. LABHAM FINANCE PVT. LTD., D.NO. 7-2-709, PO ST MARKET, SECUNDERABAD. 3. CIT(APPEALS)-4, HYDERABAD 4 . CIT - 4 , HYDERABAD . 5 . D.R. ITAT, HYDERABAD. 6. GUARD FILE.