DCIT, New Delhi V. M/s. UBS Publishers Distributors (P) Ltd., New Delhi

ITA 189/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58927 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 12-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C B SINGH
• Assessee Lawyers: SACHIN VASUDEVA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI U.B.S. BEDI AND SHRI K.G. BANSAL ITA NO. 189(DEL)/2012 ASSESSMENT YEAR: 2008-09 DEPUTY COMMISSIONER OF INCOME M/S UB S PUBLISHERS TAX, CIRCLE 18(1), NEW DELHI. VS. DIS TRIBUTORS (P) LTD., 5, ANSARI ROAD, NEW DELHI. PAN: AAACU0042R (APPELLANT) (RESPOND ENT) APPELLANT BY : SHRI C.B. SINGH, SR. D.R. RESPO NDENT BY: SHRI SACHIN VASUDEVA, C.A DATE OF HEARIN G : 14.03.2012 DATE OF PRONOUN CEMENT: 23.03.2012 ORDER PER K.G. BANSAL : AM GROUND NO. 1 IS TO THE EFFECT THAT THE LD. CIT( APPEALS) ERRED IN DELETING A SUM OF RS. 11,36,252/- FROM THE TOTA L INCOME ON ACCOUNT OF BAD DEBTS WRITTEN OFF, DISALLOWED BY THE AO IN THE ASSESSMENT ORDER. IN THE ASSESSMENT ORDER, THE AO HAS FURNISHED THE DETAI LS OF THE BAD DEBTS IN RESPECT OF 11 PARTIES, AGGREGATING TO RS. 10,5 3,288/-. IT IS MENTIONED THAT THE ASSESSEE-COMPANY HAS NOT MADE ANY SERI OUS EFFORTS FOR RECOVERY OF THE DEBTS. IN SOME CASES, THE ASSESSEE HAS BEEN DEALING WITH THESE PARTIES EVEN NOW. THEY HAVE CAPACITY TO MAKE P AYMENT. THESE AMOUNTS ITA NO. 189(DEL)/2012 2 ALSO BECAME DUE IN THIS FINANCIAL YEAR. IN SU CH A SITUATION, THERE IS NO REASON TO WRITE OFF THE AMOUNTS. THE LD. CIT( APPEALS) DELETED THE ADDITION AFTER MENTIONING THAT THE DOMESTIC SA LES IN THIS YEAR AMOUNTED TO RS. 71,36,845/- AND EXPORT SALES AMOUNTED TO R S. 33,50,611/-. THE DETAILS OF BAD DEBTS OF RS. 82,964/- IN RESPECT OF DOMESTIC SALES COULD NOT BE FURNISHED BEFORE THE AO. FURTHER, IN PURSUANC E OF THE ORDER OF THE ITAT IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2007-08, THE AO WAS REQUIRED TO EXAMINE WHETHER THE WRITING OF F OF THE FOREIGN DEBT WAS IN ACCORDANCE WITH RESERVE BANK OF INDIA GUI DELINES ISSUED IN CIRCULAR NO. 40 DATED 05.12.2003. BOTH THESE MATTERS WE RE REMANDED TO THE AO. ON RECEIPT OF THE REMAND REPORT AS WELL AS REJ OINDER OF THE ASSESSEE THEREON, IT WAS FOUND THAT THE AMOUNT WRITTEN IN RESPECT OF FOREIGN DEBTS WAS LESS THAN 10%. THEREFORE, FOLLOWING DIRECTI ONS OF THE TRIBUNAL IN THE IMMEDIATELY PRECEDING YEAR, IT HAS BEEN HELD THAT THE WRITE OFF IN RESPECT OF BOTH KINDS OF DEBTS SATISFIED THE STATUTORY CO NDITION THAT THESE HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. 1.1 BEFORE US, THE LD. DR REFERRED TO THE FIND INGS OF THE AO AND THE LD. CIT(APPEALS). ON THE OTHER HAND, THE LD. COUNSEL F OR THE ASSESSEE REFERRED TO THE DETAILS OF THE DEBTS AND THE CIRCULAR IS SUED BY THE RBI IN RESPECT OF ITA NO. 189(DEL)/2012 3 WRITING OFF OF THE FOREIGN DEBTS. IT IS ARGUED THAT THE WRITE OFF OF FOREIGN DEBTS IS IN ACCORDANCE WITH THE CIRCULAR OF THE RBI. THE DEBTS ALONG WITH OTHER INDIAN DEBTS HAVE BEEN WRITTEN OFF FROM T HE BOOKS OF ACCOUNT. THEREFORE, THE STATUTORY CONDITION OF ACTUAL W RITING OFF OF THE DEBTS STANDS SATISFIED IN THIS CASE. THUS, IT IS ARG UED THAT THE ORDER OF THE LD. CIT(APPEALS) SHOULD BE UPHELD. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE FIND THAT THE DEBTS HAVE BEEN ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. TH E FOREIGN DEBT HAS BEEN WRITTEN OFF IN ACCORDANCE WITH THE CIRCULAR ISSUED BY THE RBI. SINCE THE BASIC STATUTORY CONDITION HAS BEEN SATISFIED, WE ARE OF THE VIEW THAT THE LD. CIT(APPEALS) WAS RIGHT IN GRANTING THE DEDUC TION. 1.2 THUS, GROUND NO. 1 IS DISMISSED. 2. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERRE D IN DELETING A SUM OF RS. 4,62,125/- OUT OF TRAVELING AND CONVEYANCE EXPENSES. IN THIS CONNECTION, IT IS MENTIONED IN THE ASSESSMENT ORDE R THAT EXPENDITURE OF RS. 98,54,218/- WAS INCURRED UNDER THIS HEAD. OUT O F THIS EXPENDITURE, A SUM OF RS. 60,04,496/- IS ON ACCOUNT OF FOREIGN TRAVEL OF THE DIRECTORS AND EXPORT MARKETING MANAGERS. PERSON-WISE DETAILS HAVE BEEN FURNISHED. HOWEVER, ITA NO. 189(DEL)/2012 4 THE PERSONAL EXPENDITURE IS INHERENT IN THIS KIN D OF EXPENDITURE. THEREFORE, 10% OF THE EXPENDITURE ON FOREIGN TRAVEL DAILY A LLOWANCE, COMPUTED AT RS. 4,62,125/- HAS BEEN DISALLOWED. THE LD. CIT(APPE ALS) DELETED THIS DISALLOWANCE BY MENTIONING THAT FULL DETAILS HA VE BEEN FILED AND THE ASSESSMENT ORDER DOES NOT DISCLOSE IN ANY MANNER WHATSOEVER THAT ANY OF THE PART OF THE EXPENDITURE WAS NOT FOR THE PUR POSE OF BUSINESS. THE CASE OF THE LD. DR BEFORE US IS THAT PERSONAL BENEFI T TO THE DIRECTOR CANNOT BE RULED OUT. ON THE OTHER HAND, THE LD. COUNSEL REL IED ON THE FINDINGS OF THE LD. CIT(APPEALS) THAT THERE IS NO FINDING OF FAC T THAT ANY EXPENDITURE HAS BEEN INCURRED FOR PERSONAL BENEFIT OF DIRECTOR. ANY INCIDENTAL BENEFIT TO THE DIRECTOR IS NOT OF ANY CONSEQUENCE AS THE EXPEND ITURE HAS BEEN INCURRED IN THE COURSE OF BUSINESS. HAVING CONSIDERED TH E RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT IN ABSENCE OF ANY FINDING BY THE AO THAT THE EXPENDITURE WAS INCURRED FOR THE PERSONAL BENEFI T OF DIRECTOR OF THE EMPLOYEES, THE DISALLOWANCE COULD NOT HAVE BEEN MA DE. THEREFORE, THE FINDINGS OF THE LD. CIT(APPEALS) ARE UPHELD. 2.1 THUS, GROUND NO. 2 IS ALSO DISMISSED. ITA NO. 189(DEL)/2012 5 3. GROUND NO. 3 IS THAT THE LD. CIT(APPEALS) ERR ED IN DELETING THE ADDITION OF RS. 4,57,920/- MADE BY THE AO U/S 41 (1) OF THE ACT. THE FACTS IN THIS REGARD MENTIONED IN THE ASSESSMENT ORDER ARE THAT THE ASSESSEE HAD SHOWN SUNDRY CREDITORS OF RS. 57,29,11,676/- AT THE CLOSE OF THE YEAR AGAINST RS. 48,83,14,180/- AT THE BEGINNING OF THE YEAR. THE DETAILS HAVE BEEN FURNISHED. THE ASSESSEE WAS ALSO REQUIRED TO FURNISH THE DETAILS AS ON 31.03.2010 IN RESPECT OF THE CREDITS AT THE B EGINNING AND AT THE END OF THE YEAR. IT WAS FOUND THAT IN RESPECT OF CREDI TORS WITH TOTAL CREDIT BALANCE OF RS. 4,57,920/-, THERE WAS NO TRANSACTION BETWE EN 01.04.2007 TO 31.03.2010. HE ADDED THIS AMOUNT BY INVOKING THE PROVISION CONTAINED IN SECTION 41(1) BY MENTIONING THAT THE EXPENSES HAVE BEEN CLAIMED IN THE PAST AND THE LIABILITY HAS CEASED TO EXIST. THE LD. CIT(APPEALS) DELETED THE ADDITION BY MENTIONING THAT THE BALANCES HAVE NOT BEEN WRITTEN OFF TO THE CREDIT OF PROFIT AND LOSS ACCOUNT AND THE LIA BILITY DOES NOT CEASE TO EXIST MERELY BECAUSE THE ACCOUNTS HAVE BECOME N ON-OPERATIONAL FOR A PERIOD OF THREE YEARS. THE LD. DR REFERRED TO TH E FACTS OF THE CASE AND FINDINGS OF THE AO AND ARGUED THAT IN ABSENCE OF ANY TRANSACTION IN THESE ACCOUNTS FOR THREE YEARS, THE LIABILITY HAS CEASED TO EXIST AND THE ASSESSEE HAS GOT BENEFIT TO THAT EXTENT IN THE COURSE OF BUSINESS. ON THE OTHER HAND, THE LD. COUNSEL REFERRED TO THE PROVISION MA DE IN SECTION 41(1) ITA NO. 189(DEL)/2012 6 WHEREIN IT IS SPECIFICALLY POINTED OUT THAT SUCH AMOUNTS CAN BE TREATED AS INCOME PROVIDED THEY HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. HAVING CONSIDERED THE SUBMISSIONS FROM BOTH THE SIDES, WE ARE OF THE VIEW THAT THE PROVISION CONTAINED IN EXPLANATION -1 TO SECTION 41(1) DOES NOT STAND SATISFIED IN THIS CASE. FURTHER, THE LIABILITY DOES NOT CEASE TO EXIST MERELY BECAUSE THE ACCOUNTS HAVE BECOME NON-O PERATIONAL. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) IN THIS REGARD ALSO. 3.1 IN THE RESULT, THIS GROUND IS ALSO DISMISSED. 4. IN THE RESULT, THE APPEAL IS DISMISSED. SD/- SD/- (U.B.S. BEDI) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER 23.12.2012. SP SATIA - COPY OF THE ORDER FORWARDED TO:- M/S UBS PUBLISHERS DISTRIBUTORS (P) LTD., NEW DELHI . DCIT, CIRCLE 18(1), NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.