Jt. CIT, R-10, Pune, V. Indian Card Clothing Co.Ltd.,

ITA 14/PUN/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7700 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 02-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANGRAM GAIKWAD D I T
• Assessee Lawyers: S U PATHAK
• Keywords: Bad and doubtful debts
• Section: 56

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUNAKARA RAO ITA NO. 14/PN/09 (ASSTT. YEAR 2001-02) JT. CIT, RANGE-10, PUNE .... APPELLANT VS. THE INDIAN CARD CLOTHING CO. LTD. MUMBAI PUNE ROAD, PIMPRI, PUNE- 411 018 PAN NO. AAACT6211F . RESPONDENT APPELLANT BY : SHRI SANGRAM GAIKWAD, ADDL. DIT RESPONDENT BY : SHRI S.U. PATHAK & NIKHIL PATHAK ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-III, PUNE DATED 15-09-2008 FOR THE ASSESSMENT YEAR 2001-02 AND THE GROUNDS RAISED ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, AND IN LAW THE LD. CIT(A)-III ERRED IN ALLOWING THE ASSESSEES CLA IM OF WRITING OFF OF ICD IN ACCORDANCE WITH SECTION 36(1)(VII) OF THE IT ACT, 1961 AS THE SAME IS APPLICABLE ONLY TO DEBTS AND NOT TO DEP OSITS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, AND IN LAW THE LD. CIT(A)-III ERRED IN EQUATING ICD WITH LOANS AND IN NOT APPLYING THE RATIO OF HONBLE MADRAS HIGH COURT IN A.M. SHAM SUDAN VS. UNION OF INDIA (244 ITR 266) AND OF HONBLE DELHI H IGH COURT IN BAIDYA NATH PLASTIC INDUSTRIES (P) LTD. VS. K.L. AN AND (230 ITR 522) WHEREIN THE HONBLE HIGH COURTS HAVE DISTINGUI SHED DEPOSITS FROM LOANS. 3. THE ORDER OF THE CIT(A) MAY PLEASE BE VACATED AN D THAT OF THE ASSESSING OFFICERS ORDER BE RESTORED. 2. DURING THE PROCEEDINGS LD. DR TOOK US THROUGH PARA 6 OF THE IMPUGNED ORDER AND STATED THAT THE ISSUE IN QUESTION RAISED IN THE GROUND RELATES TO DISALLOWANCE OF ICD (INTER CORPORATE DEPOSITS) WRITTEN OFF AMOUNTING TO RS. ITA NO. 14/PN/09 A.Y 2001-02 PAGE 2 OF 3 25,00,699/-. IN THIS REGARD, HE MENTIONED THAT THE SA ID AMOUNT WAS WRITTEN OFF AS BAD DEBTS GIVEN IN EARLIER YEARS TO SUSHANT CAPITAL LTD IN THE NORMAL COURSE OF CARRYING OF FINANCE BUSINESS. A.O DID NOT ACCEPT THE CLAIM BAD DEBTS OF THE ASSESSEE STATING THAT THE INTEREST RECEIVABLE AT SUCH DEPOSITS IS NORMALLY CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCE , THEREFORE, THE BAD DEBTS OF THIS KIND ARE NOT ALLOWABLE U/S. 28 OF THE INCOME TAX ACT. IN THIS REGARD, THE ASSESSEE DEMONSTRATED THAT THE SAID AMOUNT WAS A BUS INESS DEPOSITS AND THE INTEREST RECEIVABLES WERE REGULARLY CHARGED TO TAX AS BU SINESS RECEIPTS AND NOT AS INCOME FROM OTHER SOURCES AS WRONGLY HELD BY THE AO. LD . COUNSEL DEMONSTRATED THE SPECIAL RESOLUTION PASSED BY THE MEMBERS AT THE 3 7 TH ANNUAL GENERAL MEETING FOR ADOPTING FINANCING BUSINESS AS ONE OF THE BUSINE SS ASPECTS OF THE ASSESSEE. ASSESSEE RELIED ON VARIOUS DECISIONS FOR THE PROPOSITIO N THAT BAD DEBTS OF ICDS, GIVEN AS BUSINESS DEPOSITS WITH OTHER COMPANYS IS A ALLOWABLE EXPENDITURE. FINALLY, AS HELD IN PARA 6.8 OF THE IMPUGNED ORDER, C IT(A) GAVE RELIEF TO THE ASSESSEE. AGGRIEVED WITH THE SAME REVENUE FILED THE IMPUGNED APPEAL AND PLEADED FOR SETTING ASIDE THE ORDER OF THE CIT(A). 3. LD. AR FOR THE ASSESSEE ARGUED STATING THAT WHEN T HERE IS NO DISPUTE ON THE FACT THAT ASSESSEE IS A UNDISPUTEDLY A FINANCIN G COMPANY AND THE IMPUGNED ICDS WERE GIVEN FOR THE NORMAL COURSE OF BUSINESS OF F INANCING AND WHEN THESE AMOUNTS WERE DULY WRITTEN OFF IN THE BOOKS OF ACCOUNT S OF THE ASSESSEE AND WHEN THE RELATABLE INTEREST INCOME IS CONSISTENTLY BE ING OFFERED UNDER THE BUSINESS HEAD, THE CLAIM OF THE ASSESSEE IS PROPER AN D THE FINDING GIVEN BY THE CIT(A) DOES NOT REQUIRE ANY ALTERATION. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE ORDERS OF THE REVENUE, WE HAVE ALSO PERUSED PARA 6.8 OF THE IMPUGNED ORDER, FOR TH E SAKE OF COMPLETENESS THE SAME IS REPRODUCED AS UNDER:- 6.8 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE APPELLANT AND I FIND FORCE IN IT. IT IS SEEN FROM THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS MADE NO EFFORTS TO REFUTE THE CLAIM OF THE ASSESSEE THAT THE ICDS TO SUSHANT CAPITAL HAVE BEEN GIVEN IN THE NORMA L COURSE OF ASSESSEES BUSINESS OF LEASING AND FINANCING AND TH AT THE INTEREST ON THE SAME HAS BEEN OFFERED TO TAX UNDER THE HEAD PROFIT AND GAINS FROM BUSINESS FOR LAST TEN YEARS. FURTHER, NO JUSTIFICATION HAS BEEN GIVEN BY THE ASSESSING OFFICER IN RESPECT OF THE TREATMENT GIVEN BY HIM TO THE INTEREST EARNED ON ICDS AS INCOME FROM OTHER SOURCES. CONSIDERI NG THE FACT THAT ASSESSEE HAS BEEN IN FINANCING BUSINESS SINCE 1991- 92, I FIND IT DIFFICULT TO UPHOLD THE ACTION OF THE ASSESSING OFFICER. ON THE O THER HAND, I FIND MERIT IN APPELLANTS CONTENTION THAT SINCE ALL THE CONDIT IONS PRESCRIBED IN SECTION 36(1)(VII) R.W.S. 36(2) ARE SATISFIED, ITS CLAIM REGARD ING WRITING OFF OF AMOUNT OF RS. 25,00,699/- DESERVES TO BE DELETED. ITA NO. 14/PN/09 A.Y 2001-02 PAGE 3 OF 3 5. FROM THE ABOVE, IT IS EVIDENT THAT ASSESSEES BUS INESS INCLUDES THE GIVING ADVANCES IN THE NORMAL COURSE OF BUSINESS. IT IS ALSO A FACT THAT THE ASSESSEE HAS BEEN REGULARLY ACCOUNTING THE INTEREST INCOME AS BUSIN ESS RECEIPTS AND NOT AS INCOME FROM OTHER SOURCES TAXABLE U/S 56 OF THE ACT. F URTHER, THERE IS NO DISPUTE ON THE FACT OF PROPER WRITE OFF OF THE SAID ICDS IN T HE BOOKS OF THE ASSESSEE. CONSIDERING THESE UNDISPUTED FACTS OF THE CASE, WE A RE OF THE OPINION THAT THE ORDER OF THE CIT(A) IS PROPER AND IT DOES NOT CALL FOR ANY INTERFERENCE. THE JUDICIAL CITATIONS NARRATED IN GROUND NO. 2 IN THE AP PEAL OF THE REVENUE ARE FOUND DISTINGUISHABLE ON FACTS. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 12 TH JANUARY, 2011. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 12 TH JANUARY, 2011 R COPY OF THE ORDER IS FORWARDED TO : 1. JT. CIT, RANGE-10, PUNE 2. ASSESSEE 3. CIT(A)-III, PUNE 4. CIT-V, PUNE 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE