HAMLET CONSTRUCTION (INDIA) PVT LTD., MUMBAI V. DY CIT CIRCLE- 1(1)(2), MUMBAI

ITA 1315/MUM/2020

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 5393 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 26-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: JEETENDER LALA
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH “D”, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA No.1315/M/2020 Assessment Year: 2013-14 M/s. Shree Deepak Tours & Travels, 2 nd Floor, Diamond Mansion, 366-68, Kalbadevi Road, Mumbai – 400002 PAN: AACFD6454H Vs. ACIT – 18(3), 6 th Floor, Earnest House, Nariman Point, Mumbai - 400021 (Appellant) (Respondent) Present for: Assessee by : Shri Jeetender Lala, A.R. Revenue by : Shri Bharat Andhale, D.R. Date of Hearing : 01.09.2021 Date of Pronouncement : 26.10.2021 O R D E R Per Rajesh Kumar, Accountant Member: The present appeal has been preferred by the assessee against the order dated 20.12.2018 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2014-15. 2. The only issue raised by the assessee is against the confirmation of addition of Rs.47,20,816/- by Ld. CIT(A) as made by the AO by rejecting/disallowing the claim of bad debts/advances by the assessee. 3. The facts in brief are that the assessee is a firm dealing in airline tickets and doing other travel related business activities. During the year the assessee filed the return of income on ITA No.1354/M/2020 M/s. Shree Deepak Tours & Travels 2 04.11.2014 declaring an income of Rs.76,10,820/- which was processed under section 143(1) of the Act. Thereafter, the case of the assessee was selected under scrutiny and statutory notices were duly issued and served upon the assessee. During the course of assessment proceedings the AO observed that assessee has claimed bad debts of Rs.47,20,816/- in the profit & loss account and accordingly called upon the assessee to explain the justification for the said claim of deduction. The assessee submitted before the AO that the claim of bad debts comprised of Rs.43,60,230/- which represented e-tickets and coupons, booklet tickets of Kingfisher Airlines in 2013 from various parties. The assessee submitted that since the airline has defaulted in all its activities, the tickets remained unsold and were written off during the year as they became invalid. The assessee submitted that the balance of Rs.3,60,586/- represented the expenses incurred due to faulty booking which became bad and were not received by the assesse from its customers. However, the reply of the assessee did not find favour with the AO and he rejected the claim of the assessee on the ground that the claim of the assessee is not sustainable in law as assessee as it has never booked sales or income of the equivalent amount and therefore, not allowable in terms of section 36(2)(i) of the Act and finally added the same to the income of the assessee. 4. In the appellate proceedings, the Ld. CIT(A) dismissed the appeal of the assessee by observing and holding as under: “I have carefully considered submissions and arguments of the A.R. of the appellant. I have also carefully gone through basis of disallowance made by the A.O. in assessment order. The case laws relied by the appellant as well as other relevant case laws have been perused and considered. ITA No.1354/M/2020 M/s. Shree Deepak Tours & Travels 3 4.1. There is a solitary ground of appeal which relates to disallowance of claim of bad debts of Rs.47,20,816/-. The A.O. has noted that the nature of receipt by the appellant is commission income on booking of airlines tickets. As per facts the appellant had purchased e tickets and coupon tickets of King Fisher airlines. Since the airline defaulted, the tickets of Rs.43,60,230/- remained unsold. A small part of Rs.3,60,586/-was also written off on account of faulty booking by the employees of the appellant. 4.2. The issue has been examined by the A.O. and A.O. has rightly invoked provisions of section 36(2)(i) of the act that before writing off any amount as a Bad debts, it is important that such amount should be a debt. The provisions of section 36(2)(i) is very clear that before becoming an amount as a debt the same should be routed to P & L A/c. of the appellant in the earlier assessment years, which is not a case here. 4.3. Moreover the advance booking is not a part of trading activity and no amount given for ticket booking can be treated as trading debt. Thus this amount cannot be allowed u/s.37(1) of the Act also. It is out of ambit of trading receipts in the background of nature of receipt in the hands of appellant. In view of the above, I have no reason to deviate from the findings of A.O.. Thus disallowance of Rs.47,20,816/- is confirmed and ground of appeal filed in this issue is dismissed.” 5. After hearing both the parties and perusing the material on record, we find that assessee was genuinely engaged in the business of booking of air tickets and other travel activities and in the normal course of business purchased air ticket from Kingfisher Airlines and also coupon booklet tickets from Kingfisher Airlines in 2013 from various parties. We note that the airline has defaulted in its activities and was finally closed down and consequently the tickets and coupons purchased by the assessee in the ordinary course of business became invalid and were written off in the profit & loss account to the extent of Rs.43,60,230/-. Similarly, Rs.3,60,586/- was incurred on account of faulty booking was also debited to the bad debt account. The AO disallowed the claim of the assessee on the ground that the assessee has never recognized these tickets/coupons as sales for income in the earlier years. ITA No.1354/M/2020 M/s. Shree Deepak Tours & Travels 4 Therefore, claim under section 36(2)(i) of the Act could not be allowed as bad debts. We find from the records before us that this is the loss which is incurred in the ordinary course of business by the assessee and both the authorities below have failed to appreciate the same in true perspective. Though the assessee has not booked any sales or income qua these tickets/coupons but undoubtedly the assessee is entitled to claim this as a genuine business loss as the same has arisen/incurred in the ordinary course of business. Therefore, without going into the technicality of the issue whether the claim under the head bad debt is wrong or not, we are of the considered view that this is a genuine business loss and has to be allowed to the assessee. Accordingly, we set aside the order of Ld. CIT(A) and direct the AO to allow the deduction of Rs.47,20,816/-. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26.10.2021. Sd/- Sd/- (Saktijit Dey) (Rajesh Kumar) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 26.10.2021. * Kishore, Sr. P.S. Copy to: The Appellant The Respondent The CIT, Concerned, Mumbai The CIT (A) Concerned, Mumbai The DR Concerned Bench //True Copy// [ By Order Dy/Asstt. Registrar, ITAT, Mumbai.