DCIT, CHENNAI V. M/s. Mando India Ltd., CHENNAI

ITA 1550/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1190 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 13-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 17-09-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SRINIVAS
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Bad and doubtful debts; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 1550/MDS/2010 ASSESSMENT YEAR : 2006-07 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-IV(1), CHENNAI. V. M/S. MANDO INDIA LTD. (FORMERLY M/S. MANDO BRAKE SYSTEM INDIA LTD.), FAGUN MANSION, 4 TH FLOOR, NO. 26, C-IN-C ROAD, CHENNAI-600 105. (PAN : AAACM7698H) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B. SRINIVAS RESPONDENT BY : SHRI B. RAMAKRISHNAN O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(AP PEALS)-V, CHENNAI IN ITA NO. 277/09-10 DATED 22-06-2010 FOR THE ASSESSMENT YEAR 2006-07. 2. SHRI B. SRINIVAS, SR. DR REPRESENTED ON BEHALF O F THE REVENUE AND SHRI B. RAMAKRISHNAN, CA REPRESENTED ON BEHALF OF THE ASSES SEE. 3. IT WAS THE SUBMISSION BY THE LEARNED DR THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF HYDRAULIC BRAKE SYSTEMS, SHOCK ABSORBERS AND RELATED COMPONENTS. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD IN ITS RETURN OF INCOME CLAIMED BAD DEBTS/ADVANCES WRITTEN OFF FROM M/S. AM I.T.A. NO.1550/MDS/2010 2 INDUSTRIES TO THE EXTENT OF A SUM OF ` 21,56,179/- AND A SUM OF ` 53,11,331/- DEBITED AS TOOLING ADVANCES WRITTEN OFF FROM M/S. A M INDUSTRIES. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD DISALLOWE D THE BAD DEBTS/ADVANCES WRITTEN OFF ON THE GROUND THAT THE ASSESSEE HAD SOL D SOME OLD MACHINERIES TO AM INDUSTRIES IN THE EARLIER PERIOD AND COULD NOT RECO VER FROM M/S. AM INDUSTRIES THE AMOUNT AS THEY WERE IN FINANCIAL PROBLEMS. IT WAS THE SUBMISSION THAT THE AMOUNT BEING PERTAINING TO OLD MACHINERIES SOLD TO AM INDUSTRIES THE SAME WERE CAPITAL IN NATURE AND CONSEQUENTLY THE ASSESSING OF FICER HAD DISALLOWED THE CLAIM OF WRITE OFF. 4. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE AMOUNTS WRITTEN OFF IN THE CASE OF AM INDUSTRIES WE RE IN THE NATURE OF ADVANCES GIVEN TOWARDS THE SUPPLY OF CERTAIN BRAKE PARTS IN REGARD TO OPEN CORSA MODEL CAR. IT WAS THE SUBMISSION THAT THE ASSESSEE GOT P URCHASE ORDER FROM M/S. DELPHI AUTOMOTIVE SYSTEM TO DEVELOP BRAKE COMPONENT CALIPERS FOR CORSA MODEL CARS AND THE ADVANCES GIVEN BY THE ASSESSEE TO M/S. AM INDUSTRIES TOWARDS THE SUPPLY OF THE SPECIALIZED SPECIFIC ITEMS. IT WAS T HE SUBMISSION THAT SUBSEQUENTLY M/S. GENERAL MOTORS HAD DISCONTINUED THE PRODUCTION OF THE CORSA MODEL CARS AND CONSEQUENTLY THE ASSESSEE HAD TO WRITE OFF THE AMOUNT GIVEN TO M/S. AM INDUSTRIES AS THE PRODUCTS DEMANDED TO BE MANUFACTU RED BY M/S. AM INDUSTRIES WERE NO MORE REQUIRED BY THE ASSESSEE DUE TO THE ST OPPAGE OF THE PRODUCTION OF THE CORSA MODEL CARS. IT WAS THE SUBMISSION THAT T HE WRITE OFF WAS LIABLE TO BE I.T.A. NO.1550/MDS/2010 3 ALLOWED AS A REVENUE EXPENDITURE. IT WAS THE SUBMI SSION THAT THERE WAS NO MACHINERY SPECIFICALLY SOLD TO M/S. AM INDUSTRIES. 5. IN REGARD TO THE TOOLING ADVANCES IT WAS SUBMITT ED BY THE LEARNED DR THAT THE SAID AMOUNT WAS IN RESPECT OF ADVANCES GIVEN FO R THE SUPPLY OF TOOLING/MACHINERY BY M/S. AM INDUSTRIES AND AS THE MACHINERY AND TOOLS WERE IN THE CAPITAL FIELD THE ASSESSING OFFICER HAD DISALLO WED THE WRITE OFF. 6. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ADVANCE WRITTEN OFF UNDER THE HEAD TOOLING ADVANCE S WERE SIMILAR TO THE EARLIER ADVANCES BEING FOR THE SUPPLY OF THE BRAKE CALIPERS . IT WAS THE SUBMISSION THAT THERE WAS NO MACHINERY PURCHASED OR GIVEN TO M/S. A M INDUSTRIES. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT IN REGARD TO THE BAD DEBTS /ADVANCES WRITTEN OFF TO THE TUNE OF ` 21,56,179/- THE ASSESSING OFFICER HAS RAISED THE I SSUE THAT THIS IS IN REGARD TO NON-RECOVERY OF THE COST OF MACHINERY SOL D TO M/S. AM INDUSTRIES. IN REGARD TO THE ISSUE OF TOOLING ADVANCES WRITTEN OFF TO THE EXTENT OF ` 53,11,331/- IT IS NOTICED THAT THE ASSESSING OFFICER HAS RAISED THE CLAIM THAT THIS IS TOWARDS SUPPLY OF TOOLING/MACHINERY BY M/S. AM INDUSTRIES. THE ASSESSEE FOR BOTH THE ISSUES HAS CATEGORICALLY STATED THAT THIS IS ADVANC E GIVEN TO M/S. AM INDUSTRIES FOR THE SUPPLY OF THE BRAKE CALIPERS IN REGARD TO T HE CORSA MODEL CARS WHICH HAD BEEN DISCONTINUED BY M/S. GENERAL MOTORS. THUS IT IS NOTICED THAT THE ASSESSING OFFICER HIMSELF HAS RAISED TWO DIFFERENT STANDS IN REGARD TO THE TWO ISSUES AND I.T.A. NO.1550/MDS/2010 4 THE ASSESSEE HAS BEEN CLAIMING A TOTALLY DIFFERENT STAND. IN THE CIRCUMSTANCES WE ARE OF THE VIEW THAT THE FACTS IN THE PRESENT AP PEAL ARE NOT CLEAR INSOFAR AS THREE DIFFERENT CLAIMS HAVE BEEN PLACED BEFORE US TWO BY THE ASSESSING OFFICER AND ONE BY THE ASSESSEE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ISSUES IN THIS APPEAL ARE LIABLE TO BE SENT BACK TO THE ASSESSING OFFICER FOR ASCERTAINING THE CORRECT FACTS AND THEN FOR ADJUDIC ATING THE ISSUES AFRESH AFTER GRANTING THE ASSESSEE ADEQUATE OPPORTUNITY TO SUBST ANTIATE ITS CASE AND WE DO SO. IN THE CIRCUMSTANCES, THE ORDERS OF THE LEARNE D CIT(A) AND THE ASSESSING OFFICER ON THIS ISSUE ARE SET ASIDE AND THE ISSUES IN THIS APPEAL ARE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATI ON AFTER ASCERTAINING THE CORRECT FACTS AND AFTER GRANTING THE ASSESSEE ADEQUATE OPPO RTUNITY TO SUBSTANTIATE ITS CASE. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVE NUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 8. THE ORDER WAS PRONOUNCED IN THE COURT ON 21/01/2 011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 21 ST JANUARY, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE