DCIT, CHENNAI V. M/s. Mando India Ltd., CHENNAI

ITA 1293/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0983 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 17-03-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 06-08-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RANGARAJANJR STA NDING
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Capital asset; Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL:D- BENCH: CHENNAI (BEFORE SHRI HARI OM MARATHA, JM & SHRI AB RAHAM P GEORGE, AM) ITA NO.1293/MDS/10 ASST. YEAR 2005-06 THE DCIT, M/S MANDO INDIA LTD, CO.CIR.IV(1), CHENNAI (FORMERLY MANDO BRAKE SYSTEM S I. LTD), FAGUN MANSION, 4 TH FLOOR, 26, C-IN-C RD, CHENNAI 600105 (PAN AACM7698H) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.E.B.RANGARAJAN,JR.STA NDING COUNSEL RESPONDENT BY: SHRI B. RAMAKRIS HNAN ORDER PER ABRAHAM P.GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANC E IS THAT THE CIT(A) DELETED THE DISALLOWANCE OF BAD DEBTS ` 2156179/- RELATING TO ONE M/S AM INDUSTRIES AND ` 20 LAKHS RELATING TO ONE M/S AL PUMP, WITHOUT APPRECIATING T HAT THE AMOUNT PERTAINED TO SALE OF OLD CAPITAL ASSET AND ADVANCE FOR PURCHASE OF CAPIT AL ASSET. 2. SHORT FACTS APROPOS ARE THAT AO HAD MADE DISALLO WANCE OF ` 4556179/- AGAINST A CLAIM OF SUNDRY BALANCE WRITE-OFF, MADE BY THE ASSE SSEE. OUT OF THIS ` 2156179/- RELATED TO ONE M/S AM INDUSTRIES AND ` 20 LAKHS RELATED TO ONE M/S AL PUMP. CLAIM OF THE ASSESSEE WAS THAT INSOFAR AS M/S AM INDUSTRIES WAS CONCERNED, AMOUNTS WERE DUE ON SALE OF OLD MACHINERY WHICH WAS DONE FOR CREATING A DEDICATED SUPPLIER NET WORK AND THE SUPPLIER HAVING BECOME SICK THE AMOUNTS WERE WR ITTEN OFF. VIS--VIS M/S AL PUMP, ITA NO.1293/MDS/10 2 SUBMISSION OF THE ASSESSEE WAS THAT THE AMOUNT WAS ADVANCED FOR MANUFACTURING OF TOOLINGS, REQUIRED FOR THE BUSINESS OF THE ASSESSEE AND IT WAS NORMAL TRADE PRACTICE TO MAKE SUCH ADVANCES TO SUCH ANCILLARIES. THE AMOUNT HAD BECOME IRRECOVERABLE M/S.AL PUMP HAVING BECOME SICK, AND WRITE OFF WAS EFFECTE D. LD. CIT(A) WAS APPRECIATIVE OF THESE CONTENTIONS. ACCORDING TO HIM, THE ADVANCES G IVEN WERE A PART OF NORMAL TRADE PRACTICE AND WAS NECESSARILY TO BE ALLOWED AS REVEN UE EXPENSES, WHEN FOUND IRRECOVERABLE. 3. NOW BEFORE US LD. DR STRONGLY ASSAILING THE ORDE R OF THE CIT(A) SUBMITTED THAT THE DEBT WAS NEVER TAKEN INTO ACCOUNT FOR COMPUTAT ION OF THE TOTAL INCOME IN ANY OF THE EARLIER YEARS OR FOR THE IMPUGNED A.Y AND THERE FORE, ASSESSEE COULD NOT CLAIM IT AS A BAD DEBT. PER CONTRA, LD. AR SUBMITTED THAT A SIMIL AR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN DEPARTMENTAL APPEAL IN ASSESSEES OWN C ASE FOR THE AY 2006-07. FILING A COPY OF THE DECISION DATED 21-01-2011 IN ITA NO.155 0/MDS/2010, LD.AR SUBMITTED THAT THIS TRIBUNAL HAD REMITTED THE ISSUE BACK TO THE AO FOR READJUDICATION AFTER ASCERTAINING THE CORRECT FACTS. 4. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL S UBMISSIONS. WE FIND THAT A SIMILAR ADVANCE WRITE OFF PERTAINING TO M/S AM INDU STRIES WAS THERE FOR AY 2006-07 ALSO. AT PARA-7 OF ITS ORDER DATED 21-01-2011, IT WAS HELD BY THIS TRIBUNAL AS UNDER: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ASSESSMENT ORDER CLEARLY SHOWS LTHAT IN REGARD TO THE BAD DEBTS/ADVA NCES WRITTEN OFF TO THE TUNE OF ` 2156179/-. THE AO HAS RAISED THE ISSUE THAT THIS IS IN REGARD TO NON-RECOVERY OF THE COST OF MACHINERY SOLD TO M/S INDUSTRIES. IN RE GARD TO THE ISSUE OF TOOLING ADVANCES WRITTEN OFF TO THE EXTENT OF ` 5311331/- IT IS NOTICED THAT THE AO HAS RAISED THE CLAIM THAT THIS IS TOWARDS SUPPLY OF TOO LING/MACHINERY BY M/S AM ITA NO.1293/MDS/10 3 INDUSTRIES. THE ASSESSEE FOR BOTH THE ISSUES HAS CA TEGORICALLY STATED THT THIS IS ADVANCE GIVEN TO M/S AM INDUSTRIES FOR THE SUPPLY O F THE BRAKE CALIPERS IN REGARD TO THE CORSA MODEL CARS WHICH HAD BEEN DISCONTINUED BY M/S GENERAL MOTORS. THUS IT IS NOTICED THAT THE AO HIMSELF HAS RAISED T O DIFFERENT STANDS IN REGARD TO THE TWO ISSUES AND THE ASSESSEE HAS BEEN CLAIMING A TOTALLY DIFFERENT STAND. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FACTS IN THE PRESENT APPEAL ARE NOT CLEAR INSOFAR AS THREE DIFFERENT CLAIMS HAVE BEEN P LACED BEFORE US TWO BY THE AO AND ONE BY THE ASSESSEE. IN THE CIRCUMSTANCE, WE ARE OF THE VIEW THAT THE ISSUES IN THIS APPEAL ARE LIABLE TO BE SENT BACK TO THE AO FOR ASCERTAINING THE CORRECT FACTS AND THEN FOR ADJUDICATING THE ISSUES AFRESH AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS C ASE AND WE DO SO. IN THE CIRCUMSTANCES, THE ORDERS OF THE LD. CIT(A) AND THE AO ON THIS I SUE ARE SET ASIDE AND THE ISSUES IN THIS APPEAL ARE RESTORED TO THE F ILE OF THE AO FOR RE - ADJUDICATION AFTER ASCERTAINING THE CORRECT FACTS A ND AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBSTANTIATE ITS CASE. IN T HE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. 5. WE FIND THAT THE ADVANCES GIVEN TO M/S AL PUMP, FOR WHICH ALSO WRITE OFF WAS DONE IN THE IMPUGNED AY, WAS ALSO ON A SIMILAR FOO TING AS FOR M/S AM INDUSTRIES. HENCE FOR THE IMPUGNED A.Y ALSO WE REMIT THE ISSUE BACK TO THE AO FOR CONSIDERATION AFRESH FOR READJUDICATION, AFTER ASCERTAINING THE C ORRECT FACTS. NECESSARILY, ASSESSEE HAS TO BE GIVEN AN OPPORTUNITY TO REPRESENT ITS CASE. 6. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 25 - 03-2011. SD/- SD/- (HARI OM MARATHA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI: 25TH MARCH, 2011 .CC: THE ASSESSEE 2)THE ASSESSING OFFICER 3)THE C IT(A) 4) THE CIT, 5)THE D.R 6)GUARD FILE. ITA NO.1293/MDS/10 4 NBR