M/s. Shriram Chits(Karnataka) Pvt. Limited, Bangalore V. ACIT, Bangalore

ITA 1386/BANG/2010

• Counselvise Citation: 138621114 RSA 2010
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 06-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CITI
• Assessee Lawyers: V D GOPAL
• Keywords: Opportunity of being heard; Bad and doubtful debts
• Section: 260A

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL BANGALORE BENCH A, BANGALORE BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. P MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO.1386(BANG.)/2010 (ASSESSMENT YEAR : 2005-06) M/S SHRIRAM CHITS (KAR.) PVT.LTD., NO.259/31, I FLOOR, 10 TH CROSS, WILSON GARDEN, BANGALORE PAN NO. APPELLANT VS THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-12(3), BANGALORE. RESPONDENT AND ITA NO.1547(B)/2010 (ASSESSMENT YEAR : 2005-06) THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-12(3), BANGALORE. APPELLANT VS M/S SHRIRAM CHITS (KAR.) PVT.LTD., NO.259/31, I FLOOR, 10 TH CROSS, WILSON GARDEN, BANGALORE RES PONDENT ASSESSEE BY : SHRI V.D.GOPAL, ADVOCATE REVENUE BY : SHRI G.V.GOPALA RAO, CIT-I DATE OF HEARING : 20-10-2011 DATE OF PRONOUNCEMENT : 31-10-20 11 O R D E R PER SMT P. MADHAVI DEVI, JM ; BOTH ARE CROSS APPEALS FOR THE ASSESSMENT YEARS 20 05-06. ITA.NO.1386 & 1547(B)/10 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N ITS APPEAL: 1. THE ORDER OF THE LD. CIT(A)-III DATED 6/9/2010 TO THE EXTENT IS AGAINST THE ASSESSEE IS CONTRARY T O LAW, FACTS OF THE CASE AND THE MATERIALS AVAILABLE ON RECORD. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A)-II SHOULD HAVE BEEN PLEASED TO ALLOW THE APPEAL IN TOTO GRANTING ALL RELIEF PRAYED FOR IN T HE GROUNDS OF APPEAL. 3. (A) THE LD. CIT(A)-III ERRED IN STATING THAT TH E CHITS DIVIDEND RECEIVED BY THE ASSESSEE IS TAXABLE AND THE ASSESSEE CANNOT CLAIM EXEMPTION ON GROUNDS OF MUTUALITY. B) THE LD. CIT(A)-III SHOULD HAVE BEEN PLEASED APPRECIATE THAT THERE IS ABSOLUTELY NO DIFFERENCE BETWEEN THE ASSESSEE QUA SUBSCRIBER AND THE OTHER SUBSCRIBERS FORMING PART OF THE GENERAL PUBLIC EITH ER IN THE MATTER OF RIGHTS OR ON THE MATTER OF OBLIGATIONS. C) THE LD. CIT(A)-III SHOULD HAVE BEEN PLEASED TO APPRECIATE THAT THE PRINCIPLES OF MUTUALITY SQUAREL Y APPLIES TO THE ASSESSEES CASE IN VIEW OF THE ADMIT TED POSITION THAT THERE IS COMPLETE IDENTITY BETWEEN TH E CONTRIBUTORS AND ALL THE PARTICIPANTS IN THE SURPLU S ARISING FROM THE CHIT DISCOUNT AFTER MEETING FORMANS COMMISSION AS REMUNERATION FOR MEETING THE EXPENSES OF RUNNING THE CHIT. ITA.NO.1386 & 1547(B)/10 3 D) THE LD. CIT(A)-III SHOULD HAVE BEEN PLEASED TO APPRECIATE THAT THE ASSESSEE AND ALL OTHER SUBSCRIBERS CONTRIBUTE TO THE DISCOUNT RECEIPT WHEN THEY BID IN THE CHIT AUCTION AND AFTER DISCOUNT FOLLOWED BY PARTICIPATION IN THE SURPLUS BY HAVING A SHARE IN THE SURPLUS WHICH IS CALLED DIVIDEND. E) THE LD. CIT(A)-III ERRED IN NOT APPRECIATING TH AT WHAT IS IMPORTANT IS THE QUALITY OF THE RECEIPT BY WAY OF DIVIDEND AND NOT THE HAND THAT RECEIVED THE DIVIDEND. 4. THE LD. CIT(A)-III ERRED IN CONFIRMING THE FOLLOWING AMOUNTS ADDED BY AO EXERCISING HIS POWERS U/S 40(A)(IA) OF THE IT ACT. A) COMMISSION RS.37,07,125 (OUT OF RS.54,76,183/- ADDED BY AO) B) REPAIRS & MAINTENANCE RS.47,97,898/- C) ADVERTISEMENT RS.85,786/- THE GROUNDS ARE MADE ITEM WISE. A) COMMISSION: IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED IN NOT APPRECIATING TH AT BRANCH WISE DETAILS WERE BROUGHT TO HIS NOTICE BY T HE ASSESSEE THROUGH PAPER BOOK FILED AGAINST THAT THE COMMISSION PAID TO THE INDIVIDUAL AGENTS WERE LESS THAN RS.2,500/- AND TDS DEDUCTION ARE NOT NECESSARY FOR SUCH PAYMENTS. B) LEGAL & PROFESSIONAL CHARGES THE LD. CIT(A)-III ERRED IN CONFIRMING THE DISALLOWANCE OF RS.47,97,898/- UNDER TE LEGAL AND PROFESSIONAL ITA.NO.1386 & 1547(B)/10 4 CHARGES. THE LD. CIT(A)-III FAILED TO APPRECIATE THAT THE AMOUNT INCLUDES BOTH THE ABOVE EXPENSES FOR WHICH TDS IS NOT NECESSARY AND OUGHT TO HAVE BEEN ALLOWED BY HIM. C) REPAIRS AND MAINTENANCE & ADVERTISEMENT: THE LD. CITA)-III SHOULD HAVE BEEN PLEASED TO AND DELETE THE4 ADDITION OF RS.17,92,884/- & RS.85,786/- UNDER THE HEAD REPAIR AND MAINTENANCE AND ADVERTISEMENT RESPECTIVELY APPRECIATING THAT THE ASSESSEE HAD FURNISHED THE DETAILS OF BRANCHES AND ADMINISTRATIVE OFFICE AND T HE AMOUNT FOR WHICH TAX WAS NOT DEDUCTED WERE BELOW THE LIMITS PRESCRIBED U/S 194C. THE LD. CIT(A)-III HAD FAILED TO APPRECIATE THAT TH E DETAILS WERE FURNISHED BEFORE HIM IN THE PAPER BOOK FILED AND THEY CONTAIN THE COMPLETE DETAILS OF DATA WHICH ARE MOSTLY BELOW THE DEDUCTION LIMIT SINCE TH E ASSESSEE HAD FURNISHED ALL THE ABOVE DETAILS IN THE PAPER BOOK FILED BEFORE THE LD. CIT(A) AS DIRECTED BY HIM AND THE EXPENSES OUGHT TO HAVE BEEN ALLOWED. 5. MISC. EXPENSES OF RS.15,02,351/- THE LD. CIT(A)-III FAILED TO APPRECIATE THAT THESE ARE PETT Y EXPENSES ON PAYMENT TO SWEEPERS, CLEANERS AND PURCHASE OF SUNDRY MATERIAL IN ADMINISTRATIVE OFFIC E AND IN 47 BRANCHES LOCATED IN KARNATAKA. THE LD. CIT(A) OUGHT TO HAVE ALLOWED THESE EXPENSES WHICH ITA.NO.1386 & 1547(B)/10 5 ARE NOT SUBSTANTIAL IN NATURE COMPARED TO THE NUMBER OF BRANCHES. 3. GROUND NOS.1 & 2 ARE GENERAL IN NATURE AND NEED S NO ADJUDICATION. 3.1 AS REGARDS GROUND NO.3 LEARNED COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED THAT THIS ISSUE HAD BEEN ARISING IN THE ASSESSEES OWN CASE FOR A NUMBER OF YEARS PRIOR TO RELEVANT AS SESSMENT YEAR AND IN THOSE YEARS THE TRIBUNAL HAS CONFIRMED THE A DDITIONS MADE BY THE AO. HE SUBMITTED THAT THE ISSUE HAS BEEN TA KEN IN APPEAL BEFORE THE HONBLE HIGH COURT OF KARNATAKA AND THE SAME IS PENDING ADJUDICATION. HE SUBMITTED THAT IN ORDER T O KEEP THE ISSUE ALIVE, THE ISSUE MAY BE DECIDED ON MERITS. THE LD. DR SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. HAVING GONE THROUGH THE MATERIAL ON RECORD AND A LSO ORDER OF THE CIT(A), WE FIND THAT THE ISSUE IS DECIDED BY THE TRIBUNAL AGAINST THE ASSESSEE FOR THE ASSESSMENT YEARS 1992- 93 TO 1995-96 AND FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR S, THIS ISSUE IS DECIDED AGAINST THE ASSESSEE. ITA.NO.1386 & 1547(B)/10 6 5. COMING TO GROUND NO.4, LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE ASSESSEE HAS CLAIMED VARIOUS EXP ENSES BUT THE SAME HAS BEEN DISALLOWED U/S 40(A)(IA) ON THE GROUN D THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE WHILE MAKIN G THE PAYMENTS. HE SUBMITTED THAT THE ASSESSEE HAS FURNI SHED ALL THE `REQUIRED DETAILS BEFORE THE ASSESSING AUTHORITY AN D ALSO BEFORE THE CIT(A), BUT THE SAME HAS NOT BEEN CONSIDERED IN THE PROPER PERSPECTIVE. HE ALSO SUBMITTED THAT TDS HAS NOT B EEN DEDUCTED FROM THE PAYMENT OF COMMISSION, AS THE COMMISSION H AS BEEN PAID TO INDIVIDUAL AGENTS AND THE AMOUNT WAS NEVER MORE THAN RS.2,500/-. AS REGARDS NOT MAKING TDS FROM LEGAL AN D PROFESSIONAL CHARGES, HE SUBMITTED THAT THESE PAYMENTS INCLUDED THE EXPENSES OF FILING THE SUITS BEFORE THE COURTS AND THE ENTIR E AMOUNT DID NOT REPRESENT THE FEES PAID TO ADVOCATE ONLY. HE SUBMI TTED THAT THE EXPENDITURE INCLUDED THE COURT FEE AND OTHER EXPENS ES ALSO AND THEREFORE, SINCE THERE IS NO ELEMENT OF INCOME THER EIN, THERE IS NO REQUIREMENT OF DEDUCTION OF TAX AT SOURCE, WHILE MA KING THE PAYMENT. IN SUPPORT OF HIS CONTENTIONS, HE PLACED RELIANCE UPON THE DECISION OF ITAT, MUMBAI IN THE CASE OF UTILITY POWERTECH LTD., VS ACIT REPORTED IN 2010-TIOL-545-ITAT(MUM.), WHERE IN IT WAS HELD THAT WHERE THE PAYMENT IS ONLY A REIMBURSEMENT OF EXPENSES INCURRED BY THE PAYEE, THEN NO DISALLOWANCE CAN BE MADE U/S ITA.NO.1386 & 1547(B)/10 7 40(A)(IA) OF THE IT ACT. IN COMING TO THIS CONCLU SION, THE TRIBUNAL AD FOLLOWED THE DECISION OF THE HONBLE BOMBAY HIGH COURT N THE CASE OF CIT VS SIEMENS AKTIONGESELLSCHAFT (2008 T IOL-569 HC- MUM.). SIMILARLY, WITH REGARD TO THE OTHER EXPENSES I.E. REPAIRS AND MAINTENANCE, ADVERTISEMENT AND ALSO MISC. EXPEN SES, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SE WERE ALL PETTY EXPENSES AND DID NOT REQUIRE DEDUCTION OF TAX AT SOURCE. 6. THE LEARNED DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE F AILED TO FURNISH THE DETAILS BEFORE THE AUTHORITIES BELOW FOR VERIFI CATION OF THE SAME. 7. HAVING HEARD BOTH THE PARTIES AND HAVING GONE TH ROUGH THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE H AS RAISED ALL THE ABOVE CONTENTION AND ALSO FILED ALL THE DETAILS BEF ORE THE ASSESSING AUTHORITY AND ALSO BEFORE THE CIT(A). WE FIND THAT THOUGH THIS EVIDENCE GOES TO THE ROOT OF THE MATTER AND THE SAI D EVIDENCE HAS NOT BEEN CONSIDERED OR APPRECIATED OR VERIFIED BY A NY OF THE AUTHORITIES BELOW. IN VIEW OF THE SAME, WE REMAND THE ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY THE DETAI LS AND DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW. NEEDLESS TO MENT ION THAT THE ASSESSEE SHALL BE GIVEN A FAIR OPPORTUNITY OF HEARI NG. ACCORDINGLY, ITA.NO.1386 & 1547(B)/10 8 WE REMAND THE ISSUE TO THE FILE OF THE AO AND THIS GROUND OF THE ASSESSEE IS ALLOWED. 8. THIS IS REVENUES APPEAL FOR THE ASSESSMENT YEA R 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL; 2. THE LD. CIT(A) ERRED IN ALLOWING BID LOSS OF RS.1,61,77,897/- WHICH WAS NOT DEBITED TO P&L ACCOUNT CLAIMED IN THE COMPUTATION OF INCOME BY RELYING ON ITATS ORDER IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 IN ITA NO.601/BANG/2007 WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS NOT ACCEPTED THE SAID ORDER OF THE ITAT AND AN APPEAL U/S 260A HAS BEEN FILED BY THE REVENUE BEFORE THE HONBLE HIGH COURT OF KARNATAKA AND THE SAME IS PENDING AS ON DATE. 3. THE LD. CIT(A) ERRED IN ALLOWING BAD DEBTS WRITTEN OFF OF RS.4,94,87,520/- WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO PROVIDE ANY DETAILS OF CASE-WISE DEBTS WRITTEN OFF DESPITE BEING GIVEN SUFFICIENT OPPORTUNITIES DURING ASSESSMENT PROCEEDINGS. 9. AS REGARD GROUND NO.2, WE FIND THAT THE ISSUE I S COVERED BY THE DECISION OF THE ITAT IN THE ASSESSEES OWN C ASE FOR THE ASSESSMENT YEAR 2003-04 AND THE DEPARTMENT HAS FOLL OWED ITS OWN CASE FOR THE EARLIER YEAR ONLY TO KEEP THE ISSUE AL IVE ON THE GROUND ITA.NO.1386 & 1547(B)/10 9 THAT AN APPEAL HAS BEEN FILED BEFORE THE HONBLE HI GH COURT OF KARNATAKA. SINCE THE ISSUE IS COVERED BY THE DECI SION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE AND BECAUSE AN APPEAL IS PENDING IN THE HIGHER FORUM, IT WILL NOT LOSE ITS P RECEDENTIAL VALUE. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE CIT(A). THIS GROUND IS ACCORDINGLY, REJECTED. 10. AS REGARDS GROUND NO.3 TH3E LEARNED DR SUPPORT ED THE ORDERS OF THE AUTHORITIES BELOW, WHILE THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL THE DETAILS WERE SUBMIT TED BEFORE THE AUTHORITIES BELOW TO PROVE THAT THE BAD DEBTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEEE AND THE CIT(A) H AS CORRECTLY DELETED THE SAME. 10.1 HAVING HEARD BOTH THE PARTIES AND HAVING GONE THROUGH THE MATERIAL ON RECORD, WE FIND THAT THE CIT(A) HAD FOLLOWED THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA AND ALSO DECISION OF THE TRIBUNAL, WHEREIN IT HAS BEEN HELD THAT AS P ER AMENDED LAW, IT IS NO LONGER REQUIRED THAT THE ASSESSEE HAS TO P ROVE THAT THE DEBTS HAS BECOME BAD AND IT IS SUFFICIENT THAT THE SAME HAVE BEEN WRITTEN OFF IN HIS BOOKS OF ACCOUNTS. HOWEVER, FR OM THE ORDERS OF THE AO AS WELL AS THE CIT(A), WE FIND THAT THE DETA ILS FILED BY THE ASSESSEE HAVE NOT BEEN CONSIDERED AND VERIFIED BY T HE AUTHORITIES ITA.NO.1386 & 1547(B)/10 10 BELOW. IN VIEW OF THE SAME, WE DEEM IT FIT AND PRO PER TO REMAND THE ISSUE ALSO TO THE FILE OF THE AO WITH A DIRECTI ON TO VERIFY IF THE BAD DEBTS WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF T HE ASSESSEE AND IF IT IS FOUND THAT THE SAME ARE WRITTEN OFF THEN I T HAS TO BE ALLOWED. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVE N A FAIR OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THE 31 ST OCTOBER, 2011. SD/- SD/- ( N.K.SAINI) (SMT . P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDIC IAL MEMBER PLACE: BANGALORE DATED: 31-10-2011 AM* COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3. CIT(A) 4. CIT 5. DR 6. GF(BLORE) BY ORDER AR, ITAT, BANGALORE