Sandhya Organics Chemicals Pvt.Ltd., Vapi V. The ACIT.,Vapi Circle, Vapi

ITA 1158/AHD/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9707 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 13-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C MISHRA
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Bad and doubtful debts; Unabsorbed depreciation
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI RAJPAL YADAV, J.M. & SHRI ANIL CHATURV EDI, A.M.) I.T. A. NO.1158/AHD/2012 (ASSESSME NT YEAR: 2008-09) SANDHYA ORGANICS CHEMICALS PVT. LTD. PLOT NO. 808/A/2,3 RD PHASE GIDC, VAPI-396195 V/S THE ACIT, VAPI CIRCLE, VAPI (APPELLANT) (RESPONDENT) PAN: AAKCS3881N APPELLANT BY : SHRI M.K. PATEL, A.R. RESPONDENT BY : SHRI D.C. MISHRA, SR. D.R. ( )/ ORDER DATE OF HEARING : 13-07-2015 DATE OF PRONOUNCEMENT : 15 -07-2015 PER ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER OF CIT(A)-VALSAD, GUJARAT DATED 17.02.2012 FOR A.Y. 2008-09. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY WHICH ELECTRONICALLY FILED IT S RETURN OF INCOME FOR A.Y. 2008-09 ON 18.02.2009 DECLARING TOTAL INCOME A T RS. NIL. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 14.12.2010 AND THE TOTAL I NCOME BEFORE SET OFF OF ITA NO 1158/ AHD/2012 . A.Y. 2008-09 2 UNABSORBED DEPRECIATION WAS DETERMINED AT RS. 4,34, 265/-. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFO RE LD. CIT(A) WHO VIDE ORDER DATED 17.02.2012 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ORDER OF ASSESSMENT IS CONTRARY TO THE FACTS AND PREJUDICIAL TO THE APPELLANT. 2. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF T HE CASE AND LAW, THE DISALLOWANCES MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ARE CONTRARY T O LAW AND BASED ON ERRONEOUS UNDERSTANDING OF THE FACTS. 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF T HE CASE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN C ONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER IN DISALLOWING RS. 4,00,7 50/- OUT OF ADVANCES WRITTEN OFF. THE ACTION OF THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) IS CONTRARY TO THE FACTS AND CIRCUMSTANCES OF THE CASE AND LAW AND DES ERVES TO BE DELETED. 4. BEFORE US, LD. A.R. SUBMITTED THAT IT DID NOT WISH TO PRESS GROUND NO. 1 & 2 AS THE SAME ARE GENERAL IN NATURE. WE THEREFORE DIS MISS THE GROUNDS. GROUND NO. 3 IS WITH RESPECT TO DISALLOWANCE O F RS. 4,00,750/-. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NO TICED THAT ASSESSEE HAD WRITTEN OFF RS. 4,00,750/- IN RESPECT OF ADVANCE GI VEN BY THE ASSESSEE TO KAWA INDUSTRIES FOR THE PURCHASE OF MACHINERY. A.O WAS OF THE VIEW THAT SINCE THE ADVANCE WAS FOR PURCHASE OF MACHINERY IT WAS NOT OF REVENUE IN NATURE AND THEREFORE CANNOT BE ALLOWED AS BAD DEBTS AND THEREFORE HE DISALLOWED THE CLAIM OF WRITE OF AS BAD DEBTS. AGG RIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO UPHELD THE ORDER OF A.O BY HOLDING AS UNDER:- 4.3 I HAVE CONSIDERED THE OBSERVATION OF THE AO IN THE ASSESSMENT ORDER AS WELL AS THE CONTENTIOUS RAISED BY THE AR OF THE APPELLANT IN TH E WRITTEN SUBMISSION. THE A.O HAD TREATED THE EXPENDITURE AS CAPITAL IN NATURE. THE M ACHINERY WAS PURCHASED BY THE ITA NO 1158/ AHD/2012 . A.Y. 2008-09 3 APPELLANT COMPANY FOR BUSINESS PURPOSE ONLY AND ON ACCOUNT OF REFUSAL OF THE PARTY TO SUPPLY THE MACHINERY OR TO REPAY BACK, THE AMOUNT R ECEIVABLE HAS BECOME A BAD DEBT. THE ASSESSEE COMPANY HAD WRITTEN OFF THE SAME AS BA D DEBT IN ITS BOOKS OF ACCOUNT. AS HELD BY THE HON'BLE APEX COURT IN THE CASE OF TRF L IMITED THAT ONCE THE DEBT WHICH HAS BECOME BAD IS WRITTEN OFF IN THE BOOKS OF ACCOUNT T HE SAME SHALL BE ALLOWED AS EXPENDITURE. BUT THE DEBT DO NOT REPRESENT AMOUNT R ECEIVABLE FOR SUPPLY OF GOODS AND HENCE RS.4,00,750/- WRITTEN OFF DURING THE YEAR PER TAINING TO M/S., KAWA INDUSTRIES IS NOT COVERED BY THE AFORESAID DECISION OF THE HON'BLE AP EX COURT. THEREFORE, THIS -GROUND OF APPEAL IS DISMISSED. 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), AS SESSEE IS NOW IN APPEAL BEFORE US. 7. BEFORE US, LD. A.R. FAIRLY SUBMITTED THAT THE AMOUN T WHICH HAS BEEN WRITTEN OFF CANNOT BE TREATED AS BAD DEBTS BUT BEFORE US RA ISED AN ALTERNATE CONTENTION THAT THE AMOUNT BE TREATED AS BUSINESS LOSS U/S. 28 OF THE ACT AS THE AMOUNT HAS BEEN PAID DURING THE COURSE OF BUSINESS AND WAS IN THE NATURE OF BUSINESS ADVANCE. HE FURTHER SUBMITTED THAT THE PAYMENT OF A DVANCE HAS NOT BEEN DOUBTED BY THE A.O AND ON THE CONTRARY THE MACHINER Y SUPPLIER HAD INITIATED LEGAL PROCEEDINGS AGAINST THE ASSESSEE TO RECOVER F URTHER SUM OF RS. 2,89,372/- AND THE COPY OF THE NOTICE RECEIVED FROM THE ADVOCATE OF THE MACHINERY SUPPLIER WAS ALSO PLACED BEFORE LD. CIT(A ). HE FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF CIT VS. ABD UL RAZZAQ & COMPANY (1982) 136 ITR 825 (GUJ). THE LD D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF A.O AND LD. CIT(A). 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE HAD ADVANCED THE A MOUNT OF RS. 4,00,750/- TO KAWA INDUSTRIES FOR PURCHASE OF MACHINERY AND TH E SAID ADVANCE WAS WRITTEN OFF BY THE ASSESSEE. BEFORE US, LD. A.R. H AS ADMITTED THAT THOUGH THE AMOUNT CANNOT BE TREATED AS BAD DEBTS BUT IT WAS IN CURRED DURING THE COURSE ITA NO 1158/ AHD/2012 . A.Y. 2008-09 4 OF BUSINESS AND THEREFORE SHOULD BE TREATED AS BUSI NESS LOSS. THE SUBMISSION OF THE ASSESSEE THAT THE AMOUNT WAS ADVANCED DURING THE COURSE OF BUSINESS FOR THE PURPOSE OF PURCHASE OF MACHINERY AND THE SU BMISSION OF THE LD. A.R. OF INITIATION OF LEGAL PROCEEDINGS BY THE SUPPLIER FOR FURTHER RECOVERY HAS NOT CONTROVERTED BY REVENUE AND THESE SUBMISSIONS WERE ALSO MADE BY THE ASSESSEE BEFORE LD. CIT(A). CONSIDERING THE AFORESA ID FACTS, WE ARE OF THE VIEW THAT THE ALTERNATE CONTENTION OF THE LD. A.R. THAT THE LOSS BEING TRADING LOSS U/S. 28 HAS FORCE MORE SO WHEN THE AMOUNT HAS BEEN ADVANCED BY THE ASSESSEE DURING THE COURSE OF BUSINESS IS NOT IN DO UBT. WE THEREFORE DIRECT THAT THE SAME BE ALLOWED AS BUSINESS LOSS. IN THE R ESULT, THE GROUND OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 17 - 07 - 20 15. SD/- SD/- (RAJPAL YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHM EDABAD