The DCIT, Circle-2(1), Guntur V. M/s Ploisetty Somasundaram Tobacco Threshers (P) Ltd., Guntur

ITA 120/VIZ/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 2714 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 11-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S SUNDER SINGH
• Assessee Lawyers: U L N SUDHAKAR

Judgement Text

ITA 120/VIZAG/2010 POLISETTY SOMASUNDARAM TOBACCO THRESHERS (P) LTD , GUNTUR B H; IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 120 /VIZAG/ 20 10 ASSESSMENT YEAR : 2006 - 07 DCIT, CIRCLE - 2(1) GUNTUR POLISETTY SOMASUNDARAM TOBACCO THRESHERS (P) LTD GUNTUR (APPELLANT) VS. (RESPONDENT) PAN NO.AABCP 3549D APPELLANT BY: SHRI D.S. SUNDER SINGH, DR RESPONDENT BY: SHRI U.L.N. SUDHAKAR, ADVOCATE ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER : - THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER OF THE CIT(A) ON FOLLOWING GROUNDS: - 1. THE ORDER OF THE LD. CIT(A) ERRED IN BOTH IN LAW AND ON FACTS OF THE CASE. 2. THE LD. CIT(A) FAILED TO APPRECIATE THE FACT THAT THE DEBTOR M/S. SILVERLINE TECHNOLOGIES LTD HAS PAID RS.1 CRORE ON 13.11.2006. THOUGH THE SAID DEBTOR HAS NOT PAID INTEREST OF RS.9,33,333/ - , THE ASSESSEE HAS NOT MADE ANY EFFORT TO RECOVER THE INTEREST AND SIMPLY WRITTEN OFF THE INTEREST AS A DEBT WRITTEN OFF. MOREOVER, THE DEBT HAS BEEN WRIT TEN OFF ONLY AFTER PREPARATION OF THE ADJUSTED P&L A/C AND THE SAME WAS NOT CHARGED AT ANY TIME DURING THE PREVIOUS YEAR. 3. THE LD. CIT(A) ALSO FAILED TO APPRECIATE THE FACT THAT THE SECTION 36(1)(VII) STIPULATES THAT THE AMOUNT OF BAD DEBT ACTUALLY WRITTEN OFF A IRRECOVERABLE IN THE ACCOUNTS IS TO BE ALLOWED AS A BAD DEBT. THE CLAIM OF THE ASSESSEE AS BAD DEBT IN THE CASE OF M/S. SOCIAL COMPUTERS IS NOT CORRECT SINCE THE CREDITOR M/S. SOCIAL COMPUTERS IS REGULARLY FILING ITS RETURNS OF INCOME SHOWING CONSI DERABLE INCOME. 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. ITA 120/VIZAG/2010 POLISETTY SOMASUNDARAM TOBACCO THRESHERS (P) LTD, GUNTUR 2 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD. WITH REGARD TO GROUND NO.1, IT IS NOTICED THAT T HE A.O. HAS FOUND DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT A SUM OF RS.9,33,333/ - TOWARDS INTEREST FROM M/S. SILVERLINE TECHNOLOGIES LIMITED HAS BEEN CLAIMED BY THE ASSESSEE AS INTEREST ON DEB TS WRITTEN BACK. THE A.O. FURTHER NOTICED THAT IT WAS C LAIMED AS A DEBT WRITTEN OF F AFTER PREPARATION OF THE ADJUSTED P&L ACCOUNT AND THIS WAS NOT CHARGED TO THE ACCOUNTS AT ANY TIME DURING THE PREVIOUS YEAR. THE ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE HAD NOT FURNISHED ANY INFORMATION REGARDING M/S. SILVERLINE TECHNOLOGIES LIMITED OR REGARDING THE DEPOSITS MADE WITH THAT COMPANY. THE ASSESSEE HAD RECEIVED A DEPOSIT RECEIPT OF RS.1 CRORE ON 13.11.2006 THROUGH M/S. UTI BANK BUT NO INTEREST WAS RECEIVED ON THAT. THE ASSESSEE CLAIMED THAT SINCE THE AMO UNT OF RS.9,33,333/ - HAD BEEN INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE AS INTEREST ACCRUED ON THE DEPOSIT IN THE ASSESSMENT YEAR 2003 - 04, THE SAME HAD TO BE DELETED IN THE ASSESSMENT YEAR 2006 - 07. THE A.O. HELD THAT ASSESSEES CLAIM IS NOT TENABLE SIN CE THE COMPANY CONTINUED ITS EXISTENCE AND THE ASSESSEE HAD RECEIVED THE TOTAL PRINCIPAL DEPOSITS AND POSSIBILITY OF COLLECTING INTEREST ON THIS COULD NOT BE TOTALLY RULED OUT. HE ACCORDINGLY DISALLOWED THE CLAIM OF BAD DEBT. 3. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND FURNISHED A COPY OF E - MAIL RECEIVED FROM M/S. SILVERLINE TECHNOLOGIES LIMITED TO SHOW PAYMENT OF RS.1 CRORE AS WELL AS RECEIPT ISSUED BY THE ASSESSEE FOR SUCH ITA 120/VIZAG/2010 POLISETTY SOMASUNDARAM TOBACCO THRESHERS (P) LTD, GUNTUR 3 PAYMENT. IT WAS SUBMITTED THAT SINCE THE COMPANY WAS IN FINANCIA LLY BAD CONDITION, THERE WAS NO POSSIBILITY OF RECOVERY OF THE INTEREST AMOUNT. THE CIT(A) HAS EXAMINED THE ISSUE AND HAS OBSERVED THAT THE ASSESSEE HAS NOT RECEIVED THE INTEREST ON DEPOSITS. SINCE THIS INTEREST HAS BEEN ADDED AS INCOME IN THE ASSESSMENT YEAR 2003 - 04, IT IS NOW TO BE REDUCED FROM THE INCOME SINCE THERE IS NO POSSIBILITY OF RECOVERY OF THE INTEREST. THE CIT(A) ACCORDINGLY DIRECTED THE A.O. TO ALLOW THE CLAIM OF THE ASSESSEES FOR WRITING OFF THE INTEREST AS A BAD DEBT. 4 . NOW THE REVENU E HAS PREFERRED AN APPEAL BEFORE US BUT DURING THE COURSE OF HEARING, THEY COULD NOT MAKE OUT A CASE THAT THIS INTEREST WAS NOT TAKEN AS AN INCOME IN THE P&L ACCOUNT OF THE ASSESSEES IN EARLIER YEARS. ONCE THIS INTEREST INCOME WAS TAKEN INTO ACCOUNT IN EA RLIER YEARS, MERE WRITING OFF THE SAME ON ITS NON - RECOVERY, AS A BAD DEBT IS SUFFICIENT AS PER JUDGEMENT OF THE SUPREME COURT IN THE CASE OF T.R.S. LIMITED VS. CIT 323 ITR 397. SINCE THE CIT(A) HAS ADJUDICATED THE ISSUE IN PROPER PERSPECTIVE AND ALSO IN A CCORDANCE WITH LAW, WE FIND NO INFIRMITY THEREIN. WE ACCORDINGLY CONFIRM THE SAME. 5 . SO FAR AS GROUND NO.2 WHICH RELATE TO THE WRITE OFF OF A BAD DEBT OF AN AMOUNT OF RS.1, 90,018/ - , IT IS ALSO CLEAR THAT THIS AMOUNT WAS ALSO TAKEN INTO ACCOUNT AS AN INC OME IN EARLIER YEARS AND THE SAME WAS WRITTEN OFF DURING THE IMPUGNED ASSESSMENT YEAR ON ITS NON - RECOVERY. THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEES AFTER PLACING THE RELIANCE UPON THE VARIOUS ITA 120/VIZAG/2010 POLISETTY SOMASUNDARAM TOBACCO THRESHERS (P) LTD, GUNTUR 4 JUDGEMENTS OF DIFFERENT HIGH COURTS. SINCE THE FINDIN G OF THE CIT(A) IS IN CONSONANCE WITH THIS JUDGEMENT OF THE APEX COURT IN THE CASE OF T.R.S. LIMITED VS. CIT (SUPRA), WE FIND NO INFIRMITY IN HIS ORDER. ACCORDINGLY, WE CONFIRM THE SAME. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. PRONOUNC ED IN THE OPEN COURT ON 16.11 .20 10 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 16 TH NOVEMBER , 20 10 COPY TO 1 THE DCIT, CIRCLE - 2( 1), GUNTUR 2 SRI U.L.N. SUDHARKAR, ADVOCATE, 883/1, TILAK ROAD, HYDERABAD - 500 001 3 THE CI T, GUNTUR 4 THE CIT (A) , GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY IN COME TAX APPELLATE TRIBUNAL VISAKHAPATNAM