ACIT CIR 6(3), MUMBAI V. GEETA ENGINEERING WORKS. P. LTD, MUMBAI

ITA 1565/MUM/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2591 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2009
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 06-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED USMAN
• Keywords: Bad and doubtful debts; TDS
• Section: 201

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.V.P. AND SHRI J.SUDH AKAR REDDY, AM I.T.A. NO.1565/MUM/2009 (ASSESSMENT YEAR :2005-06) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6(3), AAYAKAR BHAVAN, R.NO.522, M.K.ROAD, MUMBAI-400 020. VS. M/S.GEETA ENGINEERING WORKS P.LTD., 602-B, B.POONAM CHAMBERS, DR. A.B.ROAD, WORLI, MUMBAI-400 018. PAN:AAACG5138Q (APPELLANT) (RESPONDENT) APPELLANT BY : MR. MOHAMMED USMAN, DR RESPONDENT BY : NONE O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THIS APPEAL BY THE DEPARTMENT RELATES TO THE ASSESSMENT YEAR 2005-06 A ND ARISES OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 14 3(3) OF THE INCOME TAX ACT ON 28.12.2007. THE ASSESSEE IS A COM PANY ENGAGED IN THE MANUFACTURE OF HEAVY MARINE EQUIPMEN TS. IT FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. 2. IN THE RETURN OF INCOME, THE ASSESSEE HAD CLAIME D DEDUCTION OF RS.5,11,235/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF. THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO D EMONSTRATE THAT THE CONDITIONS OF SECTION 36(1)(VII) WERE SATI SFIED. THE ASSESSEE GAVE THE DETAILS OF THE DEBT DUE FROM WEST ERN SHIP YARD AMOUNTING TO RS.3,05,646/-. THE COPY OF THE DE BIT NOTE WAS ALSO FILED. IT WAS SUBMITTED BY THE ASSESSEE, O N THE BASIS OF THE ORDER OF THE SPECIAL BENCH OF THE ITAT., MUMBAI IN THE CASE OF OMAN INTERNATIONAL LTD. 102 TTJ 201 (MUM), THAT THE MERE WRITE OFF OF THE DEBTS IN THE BOOKS OF THE ASSESSEE WAS SUFFICIENT TO JUSTIFY THE CLAIM. THE ASSESSING OFFICER HOWEVER RELIED ON THE JUDGEMENT OF THE MADRAS HIGH COURT IN SOUTH INDIA S URGICAL ITA NO.1565/MUM/09 2 CORPORATION LTD., 287 ITR 62 AND THAT OF THE KERALA HIGH COURT IN KERALA STATE FINANCE CORPORATION, 289 ITR 238 AN D HELD THAT EVEN AFTER THE AMENDMENT MADE TO SECTION 36(1)(VII) WITH EFFECT FROM 1.4.1989, IT WAS NECESSARY FOR THE ASSESSEE TO PROVE THAT THE DEBT HAD BECOME BAD IN THE RELEVANT PREVIOUS YE AR. ACCORDINGLY HE HELD THAT THE UNILATERAL WRITE OFF I N THE ASSESSEES ACCOUNTS CANNOT JUSTIFY THE CLAIM FOR ALLOWANCE. HE ACCORDINGLY DISALLOWED THE CLAIM. HE ALSO OBSERVED THAT IN ANY CASE THE ASSESSEE CANNOT WRITE OFF THE BALANCE IN THE TDS AC COUNT, EXCISE DEPOSIT AND SUNDRY DEPOSITS WHICH WERE NEVER OFFER ED AS INCOME FOR TAXATION. 3. ON APPEAL, THE CIT(A), ON THE BASIS OF THE DETAI LS AND THE CORRESPONDENCE FILED BEFORE HIM IN THE COURSE OF T HE APPEAL, AND APPLYING THE AMENDED PROVISIONS OF SECTION 36(1 )(VII), UPHELD THE ASSESSEES CLAIM. AS REGARDS THE EXCISE DEPOSIT, SUNDRY DEPOSITS AND TDS HE ACCEPTED THE ASSESSEES CLAIM THAT THESE WERE REQUIRED TO BE REFUNDED TO THE ASSESSEE BY THE EXCISE AND I.T. DEPARTMENTS BUT NOT REFUNDED AND THEREFORE THEY AMOUNTED TO BAD DEBTS. IN THIS VIEW OF THE MATTER, HE ALLOWED THE DEDUCTION OF RS.5,11,235/-. 4. THE DEPARTMENT IS IN APPEAL TO CONTEND THAT THE CIT(A) ERRED IN ALLOWING THE BAD DEBTS EVEN THOUGH THE ASS ESSEE COULD NOT PROVE THAT THEY WERE BAD. HOWEVER, THE MUMBAI B ENCHES OF THE TRIBUNAL ARE HOLDING, CONSISTENT WITH THE ORDER OF THE SPECIAL BENCH CITED SUPRA, THAT AFTER THE AMENDMENT MADE TO SECTION 36(1)(VII) WITH EFFECT FROM 1.4.1989 THE AS SESSEE IS NO LONGER REQUIRED TO ADDUCE PROOF TO SHOW THAT THE DE BTS BECAME BAD IN THE RELEVANT ACCOUNTING YEAR AND THAT IT WAS ONLY REQUIRED OF HIM TO WRITE OFF THE DEBTS AS BAD IN HI S ACCOUNTS. THIS CONDITION HAS BEEN SATISFIED BY THE ASSESSEE I N THE PRESENT CASE. THEREFORE, RESPECTFULLY FOLLOWING THE VIEW TA KEN BY THE ITA NO.1565/MUM/09 3 SPECIAL BENCH(SUPRA) WE UPHOLD THE DECISION OF THE CIT(A) IN PRINCIPLE. 5. AS REGARDS THE AMOUNT OF THE BAD DEBTS CLAIMED, THE DEPARTMENT HAS TAKEN GROUND NO.2 THAT IN ANY CASE T HE TDS OF RS.16,814/- ON SERVICE CHARGES AND RS.2,244/- ON BA NK INTEREST AND THE SUNDRY DEPOSITS OF RS.65,515/- WHICH WERE A LL NOT OFFERED AS INCOME BY THE ASSESSEE CANNOT IN ANY EVE NT BE ALLOWED AS BAD DEBT SINCE THIS CONDITION LAID DOWN IN SECTION 36(2)(I) HAS NOT BEEN SATISFIED. WE ARE INCLINED TO AGREE WITH THE DEPARTMENTS CONTENTION. THE SECTION REQUIRES THAT THE DEBT MUST HAVE BEEN OFFERED AS INCOME BY THE ASSESSEE IN ANY OF THE EARLIER YEARS BEFORE IT CAN BE CLAIMED AS A BAD DEB T. THERE IS NO FINDING OR EVIDENCE TO SHOW THAT THE AFORESAID AMOU NTS WERE ASSESSED AS INCOME IN ANY OF THE EARLIER YEARS. ACC ORDINGLY WE REVERSE THE DECISION OF THE CIT(A) INSOFAR AS THE A FORESAID AMOUNTS ARE CONCERNED AND RESTORE THAT OF THE ASSES SING OFFICER. IN THE RESULT, THE APPEAL OF THE DEPARTMEN T IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 17 TH DAY OF DECEMBER, 2009. SD/- (J.SUDHAKAR REDDY) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 17 TH DECEMBER, 2009. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT, CITY-6, MUMBAI. 4. THE CIT(A)-VI, MUMBAI 5. THE DR G BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI