DCIT,Circle-2, Kolkata, Kolkata V. M/s. Indian Explosives Ltd, Kolkata

ITA 1546/KOL/2009

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7916 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 02-09-2009
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA
• Assessee Lawyers: SUSHMITA BASU; KESHAV BINANI
• Keywords: Business expenditure
• Section: 28

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B , KOLKATA [ () , ,, , , ! ''# $% ''# $% ''# $% ''# $% ] ]] ] [BEFORE HONBLE SRI PRAMOD KUMAR, AM & HONBLE SR I GEORGE MATHAN, JM] !' !' !' !' /ITA NO.1546/KOL/2009 (%) *+/ ASSESSMENT YEAR : 2005-06 ($- / APPELLANT ) - % - ( /$- /RESPONDENT) D.C.I.T., CIRCLE-11, M/S.INDIAN EXPLOSIVES LTD . KOLKATA -VERSUS- KOLKATA (PAN: AAACI 6548 N) 0 12 0 12 0 12 0 12 /C.O.NO.35/KOL/2010 !' !' !' !' /A/O.ITA NO.1546/KOL/2009 (%) *+/ ASSESSMENT YEAR : 2005-06 ($- / CROSS OBJECTOR ) - % - ( /$- /RESPONDENT) M/S.INDIAN EXPLOSIVES LTD. D.C.I.T., CIRCLE-11, KOLKATA -VERSUS- KOLKATA (PAN: AAACI 6548 N) $- 3 4 / FOR THE DEPARTMENT: SHRI A.K.MAHAPATRA /$- 3 4 / FOR THE ASSESSEE: SMT. SUSHMITA BASU & SHRI KESHAV BINANI % 5 3 6 /DATE OF HEARING : 09.08.2012. 7* 3 6 /DATE OF PRONOUNCEMENT : 09.08.2012. 8 / ORDER ( (( (''# $% ''# $% ''# $% ''# $%) )) ), , , , PER SHRI GEORGE MATHAN, JM ITA NO.1546/KOL/2009 (BY THE REVENUE) :THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-XI, KOLKATA IN APPEAL NO.120/CIT(A)-XI/CIR- 11/08-09 DATED 26.06.2009 FOR THE ASSESSMENT YEAR 2 005-06. 2. SHRI A.K.MAHAPATRA, CIT (DR) REPRESENTED ON BEH ALF OF THE REVENUE AND SMT.SUSHMITA BASU AND SHRI KESHAV BINANI, ARS REPRE SENTED ON BEHALF OF THE ASSESSEE. 3. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLO WING GROUNDS :- 2 I. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,84,28,000/- BEING THE ADVANCES WRITTEN OFF BY HOLDING THAT THE AMOUNT INVOLVED WAS A TRADE DEBT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,84,28,000/- PERTAINING TO ADVA NCES WRITTEN OFF WHERE THE A.O. HAD CLEARLY POINTED OUT IN HIS ASSESSMENT ORDER THAT TH E ADVANCE WAS WRITTEN OFF BY WAY OF ADJUSTMENTS TO THE PROVISION AND NOT BY DEBITING TH E P & L ACCOUNT. 3. THE CIT(A) OUGHT TO HAVE HELD THAT WHEN AMOUNTS DUE FROM BHARAT COOKING COAL LTD. WERE TRANSFERRED TO FERTILIZER CORPORATION OF INDIA AS ADVANCE FOR PURCHASE OF RAW MATERIALS, THE AMOUNTS HAVE CHANGED THEIR CHARACTER AND THEY WERE NO LONGER DEBTS DUE TO THE ASSESSEE. 4. IT WAS SUBMITTED BY THE LD. DR THAT THE ONLY ISS UE IN THIS APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(A) IN DELETING THE ADDITION R EPRESENTING THE ADVANCE WRITTEN OFF BY ASSESSEE TO FCI (FERTILIZER CORPORATION OF INDIA ). IT WAS SUBMITTED BY THE LD. DR THAT THE ASSESSEE IS A MANUFACTURER OF INDUSTRIAL E XPLOSIVES. IT WAS THE SUBMISSION THAT THERE WAS A TRIPARTITE AGREEMENT UNDER WHICH THE AS SESSEE SUPPLIED EXPLOSIVES TO M/S. BHARAT COKING COAL LTD. (BCCL). M/S. BCCL SUPPLIED COAL TO FCI AND FCI SUPPLIED AMMONIUM NITRATE TO THE ASSESSEE COMPANY. IT WAS TH E SUBMISSION THAT ON ACCOUNT OF THE SAID AGREEMENT THE ASSESSEES RECEIVABLES FROM BCCL WERE ADJUSTED AGAINST RECEIVABLES OF BCCL FROM FCI WHICH IN TURN WAS ADJU STED AND SET OFF AGAINST THE RECEIVABLE OF FCI FROM THE ASSESSEE. IT WAS THE SUB MISSION THAT IT WAS A TRILATERAL BARTER ARRANGEMENT WITHOUT ACTUAL CASH FLOW. IT WAS THE SU BMISSION THAT IN COURSE OF TIME AS THE FINANCIAL CONDITION OF FCI HAD BECOME BAD THE P RODUCTION BY FCI HAD BEEN HALTED. IN ORDER TO RESTART THE PRODUCTION BY FCI OF THE AM MONIUM NITRATE WHICH WAS A CRITICAL RAW MATERIAL COMPONENT FOR THE MANUFACTURI NG OPERATION OF THE ASSESSEE, THE ASSESSEE HAD BECOME A PARTY OF THE SAID TRILATERAL BARTER AGREEMENT. IT WAS THE SUBMISSION THAT HOWEVER, THE FINANCIAL CONDITION OF THE FCI DID NOT IMPROVE AND IT WAS DECLARED A SICK COMPANY AND REFERRED TO BIFR W HICH ORDERED ITS WINDING UP. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT THE AO HELD THAT THE ASSESSEE DID NOT PRODUCE A COPY OF THE ORDER OF BIFR DECLARING F CI AS A SICK COMPANY AND ON ACCOUNT OF THE FACT THE SAID AMOUNT WAS NOT A BAD D EBT IN SO FAR AS THE SAID DEBT HAD NOT BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN ANY OF THE PREVIOUS YEARS AS ALSO ON ACCOUNT OF THE FACT THAT VARIOUS SUITS HAD BEEN FILED BY THE ASSESSEE COMPANY FOR THE RECOVERY OF THE AMOUNT WAS STILL PENDING ADJUDICATION, THE 3 WRITE OFF OF THE ADVANCE OF RS.2,84,28,000/- WAS DI SALLOWED. IT WAS THE SUBMISSION THAT THE LD. CIT(A) HAD ALLOWED THE CLAIM OF THE AS SESSEE OF THE WRITE OFF OF THE ADVANCE WHICH WAS TOTALLY ERRONEOUS. IT WAS THE SUB MISSION THAT THE ORDER OF THE LD. CIT(A) BE REVERSED. 5. IN REPLY THE LD. AR SUBMITTED THAT THE AMOUNT WR ITTEN OFF WAS NOT AN AMOUNT GIVEN IN CASH BY THE ASSESSEE TO FCI. IT REPRESENTE D TRADE DUES RECEIVABLE BY IT FROM M/S. BCCL WHICH UNDER THE TRILATERAL BARTER ARRANGE MENT WAS SHIFTED TO FCI. IT WAS THE SUBMISSION THAT THIS WAS A BAD LOSS WHICH HAD B EEN RIGHTLY ALLOWED BY THE LD. CIT(A). IT WAS THE FURTHER SUBMISSION THAT THE LD. CIT(A) HAD ALSO TAKEN INTO CONSIDERATION THE FACT THAT THE AMOUNTS REPRESENTIN G THE ASSESSEES SALES AND THAT THE SAME HAD BEEN TAKEN INTO ACCOUNT WHILE COMPUTING IT S INCOME IN THE PAST. IT WAS THE SUBMISSION THAT THE BUSINESS LOSS WAS LIABLE TO BE ALLOWED AS A BUSINESS EXPENDITURE THE LD. AR VEHEMENTLY SUPPORTED THE ORDER OF THE LD . CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE ASSESSMENT ORDER SHOWS THAT THE AO HAS DISALLOWED THE EXPENDITURE RE PRESENTING THE ADVANCE WRITTEN OFF FOR THE REASONS THAT THE COPY OF BIFR DECLARING FCI AS A SICK COMPANY WAS NOT PRODUCED BEFORE HIM, THE ADVANCE WAS WRITTEN OFF BY WAY OF ADJUSTMENT TO THE PROVISION AND NOT BY DEBITING TO THE P&L ACCOUNT, T HE ADVANCE HAD NOT BEEN TAKEN INTO CONSIDERATION IN COMPUTING THE INCOME IN THE PAST N OR REPRESENTING A LOAN GIVEN IN THE ORDINARY COURSE OF MONEY LENDING BUSINESS, IT WAS N OT ESTABLISHED THAT THE ADVANCE HAD BECOME BAD. A PERUSAL OF THE ORDER OF THE LD. CIT(A ) SHOWS THAT THE LD. CIT(A) HAS TAKEN INTO CONSIDERATION THE TRILATERAL BARTER ARRA NGEMENT. THE LD. CIT(A) HAS ALSO TAKEN INTO CONSIDERATION THAT THE ADVANCE WAS IN FA CT A TRADE ADVANCE AND THE SALES HAD ALSO BEEN TAKEN INTO CONSIDERATION WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE EARLIER YEARS. HERE IT IS TO BE MENTIONED THAT THE REVENUE HAS NOT BEEN ABLE TO SHOW THAT THE TRILATERAL AGREEMENT IS A BOGUS AGREEMENT OR A SHAM. THE REVENUE HAS NOT BEEN ABLE TO SHOW THAT THE TRANSACTION WAS IN ANY MANNER BOGU S. THE REVENUE HAS NOT BEEN ABLE TO DISLODGE THE FINDINGS OF THE LD. CIT(A) IN PARA 2.1 TO 2.4 OF THE ORDER. IN THIS CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE IS ON THE RIGHT FOOTING AND DOES NOT CALL FOR INTERFER ENCE. 7. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. 4 C.O.NO.35/KOL/2010 A/O ITA NO.1546/KOL/2009 (BY THE ASSESSEE): 8. THIS IS A CROSS OBJECTION FILED BY THE ASSESSEE AGAINST THE REVENUES APPEAL IN ITA NO.1546/KOL2009. 9. IN THE CROSS OBJECTION THE ASSESSEE HAS RAISED T HE FOLLOWING GROUNDS :- 1.THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(APPEALS) HAVING ALLOWED THE CLAIM OF THE ASSESSEE AMOUNTING TO RS.2 ,84,28,000/- U/S 36(1) SHOULD HAVE ALSO CONSIDERED THE ALTERNATIVE CLAIM OF THE ASSESS EE THAT THE SUM WRITTEN OFF IS ALLOWABLE AS DEDUCTION U/S 28 READ WITH SECTION 37( 1) OF THE INCOME TAX ACT, 1961. 2. THAT THE RESPONDENT CRAVES LEAVE TO ADD TO AND T O ALTER, AMEND, RESCIND OR MODIFY THE GROUNDS RAISED HEREINABOVE BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 10. THE GROUNDS FILED BY THE ASSESSEE IS DELAYED BY 185 DAYS. THE ASSESSEE HAS NOT FILED ANY AFFIDAVIT FOR CONDONATION OF THE DELAY. T HE ASSESSEE HAS FILED A LETTER DATED 12 TH APRIL, 2010 WHICH ALSO DOES NOT EXPLAIN THE REASON FOR THE DELAY IN ITS ENTIRETY. CONSEQUENTLY THE CROSS OBJECTION FILED BY THE ASSES SEE IS DISMISSED. 11. IN THE RESULT THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.08.2012. SD/- SD/- [ , ,, , ] [ .''# $% , ] [PRAMOD KUMAR] [ GEORGE MATHAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER ( (( (6 6 6 6) )) ) DATE: 09.08.2012. R.G.(.P.S.) 8 3 ((1 :1*;- COPY OF THE ORDER FORWARDED TO: 1. M/S.INDIAN EXPLOSIVES LTD., 10A, LEE ROAD, KOLKATA- 700020. 2 THE D.C.I.T., CIRCLE-11, KOLKATA 3. THE CIT- 4. THE CIT(A)-XI, KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA /1 (/ TRUE COPY, 8%/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 5