ACIT, Mysore V. M/s. Mysore Paints & Varnishes Ltd., Mysore

ITA 1387/BANG/2010

• Counselvise Citation: 138721114 RSA 2010
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 06-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE JT
• Assessee Lawyers: S LOKANATH
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1387/BANG/2010 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(2), MYSORE. PAN : AAACT 7295H VS. M/S. MYSORE PAINTS & VARNISHES LTD., NEW BANNIMANTAP EXTN., MYSORE 570 038. APPELLANT RESPONDENT APPELLANT BY : SMT. SUSAN THOMAS JOSE, JT.CIT(DR) RESPONDENT BY : SHRI S. LOKANATH, C.A. DATE OF HEARING : 01.11.2011 DATE OF PRONOUNCEMENT : 01.11.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 30.8.2010 OF CIT(APPEALS), MYSORE. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL READS AS UNDER: THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO IN RESPECT OF THE BAD DEBTS WRITTEN OFF BY T HE ASSESSEE AMOUNTING TO RS.9,79,027/- AND FAILED TO APPRECIATE THE FACTS AND ITA NO. 1387/BANG/10 PAGE 2 OF 4 CIRCUMSTANCES OF THE CASE IN WHICH THE ASSESSING OF FICER HAS MADE THE DISALLOWANCE AND THAT THE NATURE OF BUSINE SS OF THE ASSESSEE IN THE PRESENT CASE AND THE APPELLANT IN T HE CASE LAW RELIED UPON BY THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) ARE DIFFERENT. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE FILED THE RETURN OF INCOME ON 28.11.2003 DECLARING TOTAL INCOME OF RS.1 ,65,01,038. THE ASSESSMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT] WAS COMPLETED, DISALLOWING VARIOUS CLAIMS OF THE ASSESSEE AND THE TOTAL INCOME WAS DETERMINED AT RS. 1,82,67,087. THE ASSESSEE HAD WRITTEN BACK A SUM OF RS.9,79,027 AS B AD DEBTS AND FURNISHED A COPY OF LIST OF BAD DEBTS WHICH RUNS IN TO 176 ITEMS. THE ASSESSEE SUBMITTED TO THE ASSESSING OFFICER THAT AS PER THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, THERE WAS NO OBLIGAT ION ON THE PART OF THE ASSESSEE TO DEMONSTRATE PROOF FOR ESTABLISHING A DE BT AS BAD DEBT AND THAT THE ONLY CONDITION REQUIRED FOR CLAIMING DEDUCTION OF BAD DEBTS WAS THAT THE ASSESSEE SHOULD WRITE OFF THE BAD DEBTS IN THE PROFIT &LOSS ACCOUNT AS IRRECOVERABLE. HOWEVER, THE AO DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND MADE DISALLOWANCE OF RS.9,79,027. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A PPEALS), WHO DELETED THE DISALLOWANCE MADE BY THE AO. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F VIJAYA BANK V. CIT & ANR. (323 ITR 166) . NOW THE DEPARTMENT IS IN APPEAL. 5. THE LD. DR SUPPORTED THE ORDER OF THE AO. WHILE THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED ON THE JUDGMENT OF THE HONBLE JURISDICT IONAL HIGH COURT IN THE CASE OF CIT & ANR. V. KRONE COMMUNICATION LTD. [2011] 333 I TR 497. ITA NO. 1387/BANG/10 PAGE 3 OF 4 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PR ESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD WRITTEN OFF THE BAD D EBTS IN THE BOOKS OF ACCOUNTS AND MADE THE CLAIM OF DEDUCTION U/S. 36(1) (VII) OF THE ACT. THIS ISSUE HAS NOW BEEN SETTLED BY THE HONBLE SUPREME C OURT IN THE CASE OF T.R.F. LTD. V. CIT [2010] 323 ITR 397 (SC) WHEREIN IT HAS BEEN HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE INCOME- TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN O RDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECES SARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 7. RECENTLY, THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. KRONE COMMUNICATION LTD. (SUPRA) BY FOLLOWING THE AFORESAID JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD . V. CIT [2010] 323 ITR 397 HAS HELD AS UNDER: THAT AFTER APRIL 1, 1989 IT IS NOT NECESSARY FOR T HE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECO VERABLE, IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERA BLE IN THE ACCOUNTS OF THE ASSESSEE. 8. IN THE PRESENT CASE ALSO, AS THE ASSESSEE HAD WR ITTEN OFF THE AMOUNT IN QUESTION AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS, THE CLAIM OF THE ASSESSEE WAS ALLOWABLE AS PER THE RATIO LAID DOWN IN THE AFO RESAID REFERRED TO CASES. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. ITA NO. 1387/BANG/10 PAGE 4 OF 4 9. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF NOVEMBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 1 ST NOVEMBER, 2011. DS/- COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.