UB Engineering Ltd., Pune V. Deputy Commissioner of Income-tax,

ITA 129/PUN/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0385 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 29-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITENDRA NINAWE
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 129/PN/2015 %' ( ')( / ASSESSMENT YEAR : 2008-09 UB ENGINEERING LIMITED, SAHYADRI SADAN, TILAK ROAD, PUNE 411030 PAN : AAACU1363K ....... / APPELLANT ' /VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7, PUNE / RESPONDENT ASSESSEE BY : SHRI SANJAY R. PARIKH REVENUE BY : SHRI HITENDRA NINAWE / DATE OF HEARING : 22-11-2016 / DATE OF PRONOUNCEMENT : 25-11-2016 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-III, PUNE DATED 07-1 1-2014 FOR THE ASSESSMENT YEAR 2008-09. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF ENGINEERIN G, PROCUREMENT AND COMMISSIONING OF INFRASTRUCTURE PROJECTS. DURING THE 2 ITA NO. 129/PN/2015, A.Y. 2008-09 YEAR UNDER CONSIDERATION THE ASSESSEE HAD WRITTEN OFF BA D DEBTS TO THE TUNE OF ` 42,17,340/- WHICH INCLUDE TISCO ( ` 16.17 LACS) AND M/S. GOYAL MG GASES PVT. LTD. ( ` 25.36 LACS). THE ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD DEBTS WRITTEN OFF ON THE GROUND THAT THE ASSESSEE HAS NOT PROVED THAT THE DEBTS HAD IN FACT BE COME BAD AND MADE ADDITION OF ` 42,17,340/-. AGGRIEVED BY THE ADDITIONS/DISALLOWANCES MADE IN THE ASSESSMENT ORDER DATED 31-12-2010, THE ASSESSEE CARR IED THE MATTER IN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE CLAIM OF A SSESSEE IN RESPECT OF TISCO BUT REJECTED THE CONTENTIONS OF THE ASSESSEE IN RESPECT OF M/S. GOYAL MG GASES PVT. LTD. NOW, THE ASSES SEE IS IN SECOND APPEAL AGAINST THE DISALLOWANCE OF BAD DEBTS ` 25,36,931/- IN RESPECT OF M/S. GOYAL MG GASES PVT. LTD. 3. SHRI SANJAY R. PARIKH APPEARING ON BEHALF OF THE ASSESS EE SUBMITTED THAT DURING ASSESSMENT PROCEEDINGS THE ASSES SING OFFICER SOUGHT DETAILS OF BAD DEBTS WRITTEN OFF WHICH WERE DULY FU RNISHED BY THE ASSESSEE. AS PER AMENDED PROVISIONS OF SECTION 36(1)(VII) OF THE ACT THE ASSESSEE IS NO LONGER REQUIRED TO ESTABLISH THAT THE DEB T UNDER CONSIDERATION IS BAD. THE ONLY REQUIREMENT IS THAT THE A SSESSEE HAS TO WRITE OFF THE SAME AS BAD DEBT IN BOOKS. IN SUPPORT OF HIS SUBMISSIONS THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : I. T.R.F. LTD. VS. COMMISSIONER OF INCOME TAX, 323 ITR 397 (SC); II. COMMISSIONER OF INCOME TAX VS. SHARDA WORLDWIDE EXPORTS (P.) LTD., 61 TAXMANN.COM 100 (BOMBAY); III. COMMISSIONER OF INCOME TAX VS. ESSAR TELEHOLDINGS LTD., 51 TAXMANN.COM 499 (BOMBAY). 3 ITA NO. 129/PN/2015, A.Y. 2008-09 3.1 THE LD. AR SUBMITTED THAT THE PROJECTS UNDERTAKEN B Y THE ASSESSEE USUALLY TAKE 1 TO 4 YEARS FOR COMPLETION. THE BILLS ARE SENT TO CUSTOMERS AT REGULAR INTERVALS DEPENDING ON COMPLETION OF WORK. SOMETIME ON THE REQUEST OF CUSTOMERS EXTRA WORK IS CAR RIED OUT FOR WHICH SEPARATE BILLS ARE GENERATED. CUSTOMERS PAY AD HO C AMOUNTS AFTER VERIFICATION AND EVALUATION OF WORK CARRIED OUT BY THE ASSESSEE. FINAL PAYMENTS ARE SETTLED ON COMPLETION OF CONTRACT. ON COMPLETION OF CONTRACT, CUSTOMERS REVIEW WORK AND MAKES FINAL PAYMENT AFTER ADJUSTMENT. THE AMOUNTS NOT PAID BY THE ASSESSEE FOR WHICH THE BILLS HAVE ALREADY BEEN RAISED HAS TO BE WRITTEN OFF. IN THE CASE OF M/S. GOYAL MG GASES PVT. LTD. THERE WAS DISPUTE WITH REGARD T O THE EXECUTION OF WORK. M/S. GOYAL MG GASES PVT. LTD. MADE CLAIM FOR PENALTY LEVIED BY PRINCIPAL, LIQUIDATED DAMAGES AND LOSS OF GOO DWILL. THE ASSESSEE HAD MADE COUNTER CLAIMS ON ACCOUNT OF EXT RA PAYMENTS MADE ON ACCOUNT OF IDLE MAN POWER, TOOLS AND EQUIPMENTS AS THE COMPANY COULD NOT SUPPLY MATERIAL FOR EXECUTION OF WORK. THE DISPUTE WAS REFERRED TO ARBITRATOR IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE CONTRACT AGREEMENT. AFTER SEVERAL ROUNDS OF MEET ING BEFORE THE SOLE ARBITRATOR, BOTH THE SIDES AGREED TO WITHDRAW THEIR RESPECTIVE CLAIMS. THE ARBITRATOR VIDE AWARD DATED 24-08-2007 ACCE PTED THE SETTLEMENT ENTERED INTO BY BOTH THE SIDES. THE ASSESSE E HAD TO WRITE OFF OF ` 25,36,931/- FOR WHICH THE BILLS WERE ALREADY RAISED ON M/S. G OYAL MG GASES PVT. LTD. 4. ON THE OTHER HAND SHRI HITENDRA NINAWE REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE OF BAD DE BTS WRITTEN OFF. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS N OT BEEN ABLE TO SHOW THAT THE DEBTS WRITTEN OFF WERE NOT RECOVERABLE. 4 ITA NO. 129/PN/2015, A.Y. 2008-09 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE ONLY ISSUE IN PRESENT APPEAL IS WITH RESPECT TO DISALLOWANC E OF BAD DEBTS WRITTEN OFF. THE ASSESSEE HAS WRITTEN OFF ` 25,36,931/- RECEIVABLE FROM M/S. GOYAL MG GASES PVT. LTD. THE ASSESSEE HAS PLACED ON RECORD A COPY OF THE AWARD DATED 24-08-2007 PASSED BY SOLE ARBITRATOR TO SHOW THAT THERE WAS DISPUTE BETWEEN THE ASSESSEE AND M/S. GOYAL MG GASES PVT. LTD. THE AMOUNT HAS BEEN WRITTEN OFF AFTER BOTH THE SIDES HAD AGREED TO WITHDRAW THEIR RESPECTIVE CLAIMS. THE HONBLE S UPREME COURT OF INDIA IN THE CASE OF T.R.F. LTD. VS. CIT (SUPRA) HAD HELD TH AT AFTER AMENDMENT TO SECTION 36(1)(VII) OF THE ACT IT IS NOT NECESSA RY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT HAS BECOM E IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 6. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ESSAR TELEHOLDINGS LTD. (SUPRA) HAS REITERATED THE LAW LAID DOWN B Y THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF T.R.F. LTD. V S. CIT (SUPRA). THE HONBLE HIGH COURT HELD : 5. THE TRIBUNAL FOUND ON FACTS THAT THE ASSESSING OFFICER AND THE CIT (APPEALS) BOTH WERE IN ERROR IN IGNORING THE AMENDM ENT AND WHICH HAS BEEN BROUGHT ON THE STATUTE-BOOK WITH EFFECT FROM 1 ST APRIL 1989. SECTION 36(1)(VII) WHICH HAS BEEN AMENDED DOES NOT REQUIRE THE ASSESSEE TO ESTABLISH THAT THE DEBT WRITTEN OFF WAS BAD AND ALL THAT IS REQUIRED IS IT BEING WRITTEN OFF AS SUCH. THE CIT AS ALSO THE ASSE SSING OFFICER HAVE TRIED TO OVERCOME THIS LEGAL POSITION BY SEEKING EX PLANATION FROM THE ASSESSEE. IN RELATION TO THAT, THEY HAVE OBSERVED T HAT THE APPELLANT/ASSESSEE HAS NOT GIVEN ANY DETAILS OR JUS TIFICATION ON THIS ASPECT IN THE EARLIER YEARS. THAT CERTAINLY WAS NOT A REQUIREMENT IN THE GIVEN FACTS AND CIRCUMSTANCES AND THEREFORE THE DIS ALLOWANCE COULD NOT BE UPHELD. THAT WOULD ALSO HAVE GONE CONTRARY TO TH E JUDGMENT OF THE SUPREME COURT DELIVERED IN THE CASE OF T.R.F LTD. V . CIT [2010] 323 ITR 397/190 TAXMAN 391 (SC) . 5 ITA NO. 129/PN/2015, A.Y. 2008-09 7. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. SHARDA WORLDWIDE EXPORTS (P .) LTD. (SUPRA). THUS, IN VIEW OF THE FACTS OF THE CASE AND THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF T.R.F. LTD. VS. CIT (SU PRA), WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES BELOW HAV E ERRED IN REJECTING THE CLAIM OF THE ASSESSEE WITH RESPECT TO BAD DEBTS WRITTEN OFF. THE ASSESSING OFFICER SHOULD HAVE RESTRICTED TO VERIFY WHE THER THE AMOUNT HAS ACTUALLY BEEN WRITTEN OFF IN THE BOOKS OF ACCO UNT. IN VIEW OF THE ABOVE, WE FIND MERIT IN THE SUBMISSIONS OF THE ASSESS EE AND ACCORDINGLY DELETE THE ADDITION. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 25 TH DAY OF NOVEMBER, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 25 TH NOVEMBER, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-III, PUNE 4. ' / THE CIT-IV, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE