Assistant Commissioner of Income-tax, V. Chatrapati Sambhaji Raje Sakhar Udyog Ltd., Aurangabad

ITA 163/PUN/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3207 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 31-05-2018
• Assessment Year: 2010-2011
• Appeal Filed On: 05-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Business expenditure; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUN E . , , , BEFORE SHRI D. KARUNAKARA RAO, AM AND SHRI VIKAS AW ASTHY, JM . / ITA NO.163/PUN/2016 / ASSESSMENT YEAR : 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, AURANGABAD ....... / APPELLANT / V/S. CHATRAPATI SAMBHAJI RAJE SAKHAR UDYOG LTD., DEENDAYAL NAGAR, CHITEPIMPALGAON, TQ. DIST. AURANGABAD PAN : AABCC5358B / RESPONDENT ASSESSEE BY : SHRI SUNIL GANOO REVENUE BY : SHRI A.K. MODI / DATE OF HEARING : 08-08-2018 / DATE OF PRONOUNCEMENT : 14-08-2018 / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-I, AURANGABAD DATED 27-11-2015 FOR THE ASSESSMENT YEAR 2010-11. 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL BY THE REVENU E IS AGAINST DELETING ADDITION OF RS.1,49,24,586/- ON ACCOUNT OF BAD DEBTS WRITTE N OFF. 2 ITA NO. 163/PUN/2016, A.Y. 2010-11 3. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORDS ARE : THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF SUGAR, ALCOHOL AND ITS BI-PRODUCTS. DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER MADE ADDITION OF RS.1,49,24,586/- AFTER D ISALLOWING THE ASSESSEES CLAIM OF EXPENDITURE UNDER THE HEAD LOAN WRITT EN OFF. AGGRIEVED BY THE ASSESSMENT ORDER DATED 17-09-2014 P ASSED U/S.143(3) R.W.S.147 OF THE INCOME TAX ACT, 1961 (HEREIN AFT ER REFERRED TO AS THE ACT), THE ASSESSEE FILED APPEAL BEFORE THE COMMIS SIONER OF INCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE FACTS OF THE CASE AND VARIOUS JUDGMENTS ALLOWED THE ASSESSEES CLAIM OF BAD DEBTS WRITTEN OFF. AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS), THE REVENUE IS IN APPE AL BEFORE THE TRIBUNAL. 4. SHRI A.K. MODI REPRESENTING THE DEPARTMENT SUBMITTED THAT THE CIT(A) HAS ERRED IN DELETING THE ADDITION. THE ASSESSEE HAS FAILED TO SHOW THAT THE DEBTS HAVE ACTUALLY BECOME BAD. FURTHER, THE ASSESSEE HAS ALSO FAILED TO SHOW THE EFFORTS MADE TO RECOVER THE LOANS DEC LARED AS BAD DEBTS BEFORE WRITING OFF. THE LD. DEPARTMENTAL REPRESENTATIVE VEH EMENTLY SUPPORTED THE FINDING OF ASSESSING OFFICER AND PRAYED FOR SE TTING ASIDE THE IMPUGNED ORDER. THE LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT OUT OF RS.1,49,24,586/- WRITTEN OFF AS BAD DEBT, THE ASSESSEE HA S PAID RS.1,01,03,075/- AS ADVANCE TO CONTRACTORS. HENCE, THE S AID AMOUNT CANNOT BE CONSIDERED UNDER THE HEAD SUNDRY DEBTORS, C ONSEQUENTLY NON RECOVERY OF THE SAME CANNOT BE CATEGORIZED AS BAD DEB T. IN SUPPORT OF HIS SUBMISSIONS, THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE 3 ITA NO. 163/PUN/2016, A.Y. 2010-11 JUDGMENT OF HONBLE MADRAS HIGH COURT IN THE CASE OF TUB E INVESTMENTS OF INDIA LTD. VS. JCIT REPORTED AS 67 TAXMANN.COM 59 (MAD.) 5. ON THE OTHER HAND, SHRI SUNIL GANOO APPEARING ON BEH ALF OF THE ASSESSEE VEHEMENTLY SUPPORTED THE ORDER OF COMMISSIONE R OF INCOME TAX (APPEALS) AND PRAYED FOR DISMISSING THE APPEAL OF REVENUE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY REPRESENTATIVE S OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BE LOW. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE ASSESSEE HAS WRITTE N OFF RS.1,49,24,591/- IN THE PROFIT AND LOSS ACCOUNT. OUT OF THE ABOVE SAID AMOUNT RS.48,21,516/- RELATES TO SUNDRY DEBTORS AND THE BALANCE RS.1,01,03,075/- IS ADVANCES GIVEN TO THE HARVESTING AND T RANSPORT CONTRACTORS AND SUPPLIERS. IN SO FAR AS WRITING OFF OF BAD DEBTS RS.48,21,516/- IS CONCERNED, THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GRANTED RELIEF TO THE ASSESS EE BY FOLLOWING THE JUDGMENT OF HONBLE SUPREME COURT OF INDIA IN THE CASE OF TRF LTD. VS. CIT REPORTED ON 323 ITR 397. THE HONBLE APEX COURT HAS HELD THAT AFTER THE AMENDMENT OF SECTION 36(1)(VII) W.E.F. 01-04- 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THUS, IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT OF INDIA, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF COMMISSIONER OF INCOME TAX (APPEALS) IN ALLOWING THE ASSESSEES CLAIM OF WRITING OFF OF RS.48,21,516/- AS BAD DEBT. 4 ITA NO. 163/PUN/2016, A.Y. 2010-11 AS REGARDS BALANCE AMOUNT OF RS.1,01,03,075/-, THE COMMISS IONER OF INCOME TAX (APPEALS) HAS HELD THAT IT IS AN ALLOWABLE BUS INESS EXPENDITURE. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A CATEGORIC FINDING THAT ADVANCES WERE GIVEN TO THE HARVES TING AND TRANSPORT CONTRACTORS DURING THE COURSE OF BUSINESS, THUS, SUCH AD VANCES HAVE CLOSE PROXIMITY WITH THE BUSINESS ACTIVITY CARRIED OUT BY THE AS SESSEE. THE COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING VARIOU S DECISIONS INCLUDING THE DECISIONS RENDERED IN THE CASES OF MOHAN ME AKIN LTD. VS. CIT REPORTED AS 348 ITR 109 (DELHI) AND HARSHAD J. CHOKS I VS. CIT REPORTED AS 25 TAXMANN.COM 567 (BOM.): 349 ITR 250 (BOM. ) HELD THAT THE ADVANCES GIVEN BY THE ASSESSEE ARE ALLOWABLE AS BUSINESS EXPENDITURE. WE DO NOT FIND ANY ERROR IN THE FINDINGS OF THE COMMISSIONER O F INCOME TAX (APPEALS) IN DELETING THE ADDITION MADE BY ASSESSING OFFICER. A CCORDINGLY, THE IMPUGNED ORDER IS UPHELD AND THE APPEAL OF REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. 7. WE HAVE ALSO CONSIDERED THE DECISION RENDERED IN THE CASE OF TUBE INVESTMENTS OF INDIA LTD. VS. JT. CIT (SUPRA). WE FIND THA T THE SAME IS DISTINGUISHABLE ON THE FACTS. HENCE, THE SAID JUDGMENT DOE S NOT SUPPORT THE CASE OF REVENUE. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 14 TH DAY OF AUGUST, 2018. SD/- SD/- ( . /D. KARUNAKARA RAO) ( / VIKAS AWASTHY) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 14 TH AUGUST, 2018 SATISH 5 ITA NO. 163/PUN/2016, A.Y. 2010-11 ! $ ! $ ! $ ! $ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ! ( ) / THE CIT(A)-I, AURANGABAD 4. THE PR. CIT-I, AURANGABAD 5. , , A $ , / DR, ITAT, A BENCH, PUNE. 6. ( / GUARD FILE. / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY, , / ITAT, PUNE