Gujarat Gas Financial Services Ltd., Ahmedabad V. The ACIT.,Circle-4, Ahmedabad

ITA 149/AHD/2008

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0473 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-01-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 08-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR SRDR
• Assessee Lawyers: S N SOPARKAR SRAR
• Keywords: Bad and doubtful debts
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A AHMEDABAD BEFORE SHRI, A.K.GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ITA NO.149/AHD/2008 ASSESSMENT YEAR :2004-05 GUJARAT GAS FINANCIAL SERVICES LIMITED., 2, SHANTISADAN SOCIETY, NR. PARIMAL GARDEN, ELLISBRIDGE, AHMEDABAD [ PAN NO. AAACG 5558 E ] V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-4, AHMEDABAD . / APPELLANT .. / RESPONDENT) /BY APPELLANT SHRI S.N.SOPARKAR, SR-AR /BY RESPONDENT SHRI RAHUL KUMAR, SR-DR /DATE OF HEARING 17-01-2013 /DATE OF PRONOUNCEMENT 08-03-2013 / // / O R D E R PER KUL BHARAT, JUDICIAL MEMBER:- THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORD ER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VIII, AHMEDABAD (CIT(A) FOR SHORT) DATED 30-11-2007 PERTAINING TO ASSESSMENT YE AR (AY) 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE ORDER PASSED BY CIT(APPEALS) IS BAD IN LAW A ND ON FACTS AND HENCE, IT IS SUBMITTED THAT THE SAME BE CANCELLED AND BE SUIT ABLY MODIFIED. 2. THE LEARNED CIT(APPEALS) HAS GROSS ERRED IN LAW AND ON FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF THE CLAIM FOR DEDUCTI ON OF BAD DEBTS AMOUNTING TO RS.6,34,073/-. THE LEARNED CIT(A) HAS CONFIRMED THE DISALLOWANCE HOLDING THAT THE APPELLANT ASSESSEE IS NOT IN THE BUSINESS OF MONEY LENDING OR BANKING BUSINESS. WHILE CONFIRMING THE APPELLANTS CLAIM FOR BAD DEBTS AMOUNTING TO RS.6,34,073/-, THE LEARNED CIT(APPEALS ) HAS GROSSLY ERRED IN LAW AND ON FACTS OF THE CASE IN NOT APPRECIATING THE FA CT THAT THE DEBT IN QUESTION AROSE IN THE NORMAL COURSE OF THE APPELLANTS BUSIN ESS OF HIRE PURCHASE AND ITA NO.149/AHD/2008 A..Y.2004-05 G.G.F.S. LTD. V. ACIT, CIR-4, ABD PAGE 2 LEASING AND THAT THE INCOME WHICH ACCRUED ON ACCOUN T OF SUCH HIRE PURCHASE/LEASING HAD ALREADY BEEN ACCOUNTED FROM IN THE EARLIER YEARS. 3. THE LEARNED CIT(APPEALS) HAS GROSSLY ERRED IN LA W AND ON FACTS OF THE CASE IN NOT CONSIDERING THE APPELLANTS ALTERNATE PLEA T HAT IN CASE THE CLAIM FOR DEDUCTION OF RS.6,34,073/- IS NOT DEDUCTIBLE AS BAD DEBT U/S. 36(1)(VII) R.W.S. 36(2) THE SAME IS ELIGIBLE FOR DEDUCTION U/S. 28 OF THE INCOME TAX ACT. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD. CI T(A) BE MODIFIED AND THE CLAIM FOR BAD DEBT OF RS.6,34,073/- BE MAY BE ALLOW ED EITHER U/S. 36(1)(VII) OR SECTION 28 OF THE INCOME TAX ACT. 2. ALL THE ISSUES ARE INTER-CONNECTED, HENCE, THEY ARE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. BRIEFLY STATED FACTS ARE THAT ASSESSEE -COMPANY IS A LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS OF LEASING A ND HIRE PURCHASE OF EQUIPMENTS, INVESTMENT, STOCK TRADING OF SHARES AND SECURITIES ETC., DURING THE YEAR UNDER CONSIDERATION, THE CASE OF AS SESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND WHILE FRAMING THE ASSES SMENT U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT) THE ASSESSING OFFICER DISALLOWED RS.6,43,073/- BEING TH E PRINCIPAL PORTION OF THE LEASE TRANSACTION OUT OF THE TOTAL BAD DEBT OF RS.7,45,968/-. AGAINST THIS ADDITION, ASSESSEE FIELD APPEAL BEFORE LD. CIT (A) WHO AFTER CONSIDERING THE SUBMISSIONS OF ASSESSEE CONFIRMED T HE ACTION OF ASSESSING OFFICER. 3. NOW, ASSESSEE FEELING AGGRIEVED BY THIS ORDER OF LD. CIT(A) PREFERRED APPEAL BEFORE THE TRIBUNAL. 4. LD. SR-AR SHRI S.N.SOPARKAR, FOR THE ASSESSEE SU BMITTED THAT ISSUE INVOLVED IN THIS CASE IS SQUARELY COVERED BY THE JUDGMENT OF HONBLE BOMBAY HIGH COURT RENDERED IN THE CASE OF CIT, CENTRAL II V. SHREYAS S. MORAKHIA (2012) 19 TAXMANN. COMMISSIONER 64 (BOM.) HE ALSO PLACED RELIANCE ON THE DECISION OF THE HONBLE CO-ORDINATE BENCH ITA NO.149/AHD/2008 A..Y.2004-05 G.G.F.S. LTD. V. ACIT, CIR-4, ABD PAGE 3 RENDERED IN THE CASE OF DCIT V. WALL STREET FINANCE LTD. IN ITA NO. 7022/MUM/2008 DATED 30-04-2010, WHEREAS LD. SR-DR, SHRI RAHUL KUMAR FOR THE REVENUE SUPPORTED THE ORDERS OF AUTHO RITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIALS AVAILABLE ON RECORD, GONE THROUGH THE ORDERS OF AUT HORITIES BELOW AND JUDGMENTS CITED BY LD. AR OF THE ASSESSEE. WE FIND THAT BASIS OF DISALLOWANCE OF BAD DEBT MADE BY ASSESSING OFFICER IS THIS THAT DEDUCTION IS ALLOWABLE TO THE ASSESSEE U/S. 36(2) R .W.S. 36(1)(VII) OF THE ACT IN RESPECT OF INTEREST PORTION ONLY AND NOT FOR THE PRINCIPAL PORTION. ACCORDINGLY, OUT OF THE TOTAL AMOUNT OF RS.7,45,968 /-, HE HAS ALLOWED THE DEDUCTION OF RS.1,11,895/- BEING INTEREST PORTION O F HIRE CHARGES AND LEASE CHARGES AND DISALLOWED THE PRINCIPAL PORTION OF RS.6,34,073/-. IN PARA-3.2 OF THE ORDER OF LD. CIT(A) ALSO, IT IS NOT ED BY HIM THAT THE AO HAS DISALLOWED RS.6,34,073/- PERTAINING TO PRINCIPA L PORTION OF LEASE TRANSACTION BECAUSE THE SAID AMOUNT HAS NEVER BEEN OFFERED AS INCOME BY THE ASSESSEE. NOW, IN THE LIGHT OF THIS FACT, WE EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HONBLE BOMBAY HIG H COURT RENDERED IN THE CASE OF SHREYAS S MORAKHIA (SUPRA) AND WE FIND THAT IN THIS JUDGMENT, HONBLE BOMBAY HIGH COURT HAS FOLLOWED TH E DECISION OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT V. BONANZA PORTFOLIO LTD. (2010) 320 ITR 178 (DEL) AND THE RELEVANT PORTION OF THE JUDGMENT OF HONBLE DELHI HIGH COURT IS AS UNDER:- THE MONEY RECEIVABLE FROM THE CLIENT HAS TO BE T REATED AS DEB T AND SINCE IT BECAME BAD, IT WAS RIGHTLY CONSIDERED AS BAD DEBT AND CLAIMED AS SUCH BY THE ASSESSEE IN THE BOOKS OF AC COUNT. SINCE THIS BAD DEBT OCCURRED IN THE YEAR IN QUESTION, IT WAS S HOWN BY THE ASSESSEE IN THAT MANNER. SINCE THE BROKERAGE PAYABLE BY THE CLIENT IS A PART OF THE DEBT AND THAT DEBT HAD BEEN TAKEN INTO ACCOUNT IN T HE COMPUTATION OF THE INCOME, THE CONDITIONS STIPULATED IN SUB-SECTIO N (2) OF SECTION 36 READ WITH SECTION 36(1)(VII) STAND SATISFIED IN THI S CASE. ITA NO.149/AHD/2008 A..Y.2004-05 G.G.F.S. LTD. V. ACIT, CIR-4, ABD PAGE 4 6. WE ARE OF THE CONSIDERED OPINION THAT IN THE FAC TS OF THE PRESENT CASE AS NOTED ABOVE, SOME PORTION THAT IS INTEREST PORTION OF LEASE RENTAL INCOME WERE DULY OFFERED TO TAX BY THE ASSESSEE AND THEREFORE, AS PER THESE TWO JUDGMENTS OF HONBLE BOMBAY HIGH COURT AND HONBLE DELHI HIGH COURT CITED BY LD. AR OF THE ASSESSEE, THE ASSESSEE IS ELIGIBLE FOR DEDUC TION ON ACCOUNT OF BAD DEBTS, AS CLAIMED BY THE ASSESSEE BECAUSE THE INTER EST INCOME OFFERED TO TAX BY THE ASSESSEE OUT OF LEASE RENTAL INCOME IS A PAR T OF THE DEBT AND THEREFORE, A PART OF THE DEBT HAS BEEN TAKEN INTO ACCOUNT IN T HE COMPUTATION OF INCOME AND AS A RESULT, THE CONDITIONS STIPULATED IN SUB-S ECTION-2 OF SECTION 36 OF THE ACT STAND SATISFIED IN THE PRESENT CASE. RESPECTFUL LY FOLLOWING THESE TWO JUDGMENTS OF HONBLE BOMBAY HIGH COURT AND HONBLE DELHI HIGH COURT, WE DELETE THE DISALLOWANCE OF PART OF BAD DEBT MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). THIS GROUND OF ASSESSE ES APPEAL IS ALLOWED. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K.GARODIA) (KUL BHARAT) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, *DKP !' #-08/03/2013 *+, - ../ ../ ../ ../ 0/ 0/ 0/ 0/ / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ','.2 3 / CONCERNED CIT 4. 3- / CIT (A) 5. /67 ...2, .2 , *+, / DR, ITAT, AHMEDABAD 6. 7:; <= / GUARD FILE. BY ORDER/ , /TRUE COPY/ >/* '? .2 , ITA NO.149/AHD/2008 A..Y.2004-05 G.G.F.S. LTD. V. ACIT, CIR-4, ABD PAGE 5 *+, - STRENGTHEN PREPARATION & DELIVERY O F ORDERS IN THE ITAT 1) DATE OF TAKING DICTATION 05/03 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE NO 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 05/03 4) DATE OF CORRECTION 06/03 5) DATE OF FURTHER CORRECTION - - 6) DATE OF INITIAL SIGN BY MEMBERS 07/03 7) ORDER UPLOADED ON - - 8) ORIGINAL DICTATION PAD-PART HAS BEEN ENCLOSED IN THE FILE YES 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 11/03