M/s HP Ex-servicemen Corporation, Hamirpur V. ACIT, Mandi

ITA 193/CHANDI/2006

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8224 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2003-2004
• Appeal Filed On: 21-03-2006
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAVI SARANGA L
• Assessee Lawyers: S K BHASIN
• Keywords: Question of law; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.193/CHD/2006 (ASSESSMENT YEAR : 2003-04) HP EX-SERVICEMEN CORPORATION, VS. THE A.C.I.T., SAINIK BHAVAN, HAMIRPUR (HP). MANDI (HP). PAN: AAACH-4040-C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. BHASIN RESPONDENT BY : SHRI RAVI SARANGAL, DR DATE OF HEARING : 04.01.2017 DATE OF PRONOUNCEMENT : 23.03.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), PALAMPUR (CAMP AT HAMIRPUR) DATED 15.2.2 006 RELATING TO ASSESSMENT YEAR 2003-04. 2. THE PRESENT APPEAL HAS BEEN FIXED BEFORE US FOR HEARING IN PURSUANCE TO THE DIRECTIONS OF THE HON'B LE HIGH COURT OF HIMACHAL PRADESH VIDE ITS ORDER IN ITA NO. 49 OF 2008 DATED 28.10.2013. THE HON'BLE HIGH COURT IN T HE SAID ORDER HAS DIRECTED THE I.T.A.T. TO RECONSIDER THE CASE IN THE LIGHT OF THE PRINCIPLES EXPOUNDED BY THE HON 'BLE HIGH COURT IN THE CASE OF SURESH GUGGAL VS. ITO, 2 2 CTR 96 WITH REGARD TO THE SCOPE OF SECTION 36(2) OF THE INCOME 2 TAX ACT, 1961 (IN SHORT THE ACT). THE RELEVANT O RDER OF THE HON'BLE HIGH COURT GIVING THE AFORESAID DIRECTI ONS IS REPRODUCED HEREUNDER: THIS APPEAL WAS ADMITTED ON THE SUBSTANTIAL QUESTION OF LAW REGARDING INTERPRETATION OF SECTION 36( 2) OF THE INCOME TAX ACT, 1961 AFTER THE AMENDMENT OF 1989 . 2. IT IS NOT IN DISPUTE THAT THE SAID QUESTION HAS BEEN ANSWERED BY THE DIVISION BENCH OF THIS COURT IN THE CASE OF SURESH GAGGAL VS. INCOME TAX OFFICER 1 . ACCORDINGLY, THIS APPEAL SHOULD SUCCEED KEEPING IN MI ND THE PRINCIPLE EXPOUNDED IN THE SAID DECISION WITH R EGARD TO SCOPE OF SECTION 36(2) OF THE ACT. 3. WE ACCORDINGLY ALLOW THIS APPEAL AND REMAND THE MATTER TO THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH (A) FOR RECONSIDERATION OF THE CAS E KEEPING IN MIND THE EXPOSITION IN THE CASE OF SURESH GAGGAL (SUPRA). ALL OTHER QUESTIONS RAISED IN THE APPEAL WILL HAVE TO B E DECIDED ON ITS OWN MERITS IN ACCORDANCE WITH LAW. APPE AL DISPOSED OF ACCORDINGLY. 3. BRIEF BACKGROUND OF THE CASE IS THAT THE ASSESSEE CORPORATION WAS ESTABLISHED IN THE YEAR 19 81 UNDER AN ENACTMENT NAMELY HP EX-SERVICEMEN CORPORATION ACT, 1979 WITH THE MAIN OBJECT BEING TO LOOK AFTER THE WELFARE OF THE EX-SERVICEMEN AND HELP THE M BY ADVANCING LOANS FOR THE PURCHASE OF VEHICLES ETC., TO EARN THEIR LIVING AFTER RETIREMENT. THE ASSESSEE HAD EN TERED INTO CONTRACTS WITH ACC LTD., BARMANA AND HP STATE CIVIL SUPPLIES CORPORATION LTD. FOR CARRIAGE OF THEIR GOO DS TO DIFFERENT DESTINATIONS. THE VEHICLES BELONGING TO EX- SERVICEMEN WERE ENGAGED BY THE CORPORATION FOR 3 TRANSPORTATION OF GOODS OF THE AFOREMENTIONED COMPA NIES. THE ASSESSEE ALSO PROVIDED SECURITY STAFF FROM EX- SERVICEMEN TO VARIOUS ORGANIZATIONS WHO REQUIRED TH E SAME. IN THE IMPUGNED ASSESSMENT YEAR I.E. 2003-04 , THE ASSESSEE FILED RETURN OF INCOME DECLARING AN INCOM E OF RS.26,24,210/-. THE ASSESSMENT WAS FRAMED BY THE ASSESSING OFFICER AT AN INCOME OF RS.1,65,06,669/- MAKING SEVERAL ADDITIONS WHICH INCLUDED ADDITION O F RS.21,60,188/- ON ACCOUNT OF DISALLOWANCE OF CLAIM OF THE ASSESSEE OF PROVISION FOR LOSS ON SALE OF CEMENT, IN THE ABSENCE OF REQUISITE EVIDENCE TO SUBSTANTIATE THE C LAIM , AND RS.43,55,078/- ON ACCOUNT OF DISALLOWANCE OF IN TEREST SUBSIDY, SINCE THE AO FOUND THAT THE EXPENSES HAD N OT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOS E OF BUSINESS OF THE ASSESSEE. THE CIT (APPEALS) CONFIRM ED THE ADDITION OF RS.21,60,188/- BEING PROVISION FOR LOSS ON SALE OF CEMENT WHILE IN RESPECT OF INTEREST SUBSIDY A RE LIEF OF RS.8,90,509/- WAS ALLOWED SINCE THE CIT(A) FOUND TH AT IT PERTAINED TO THE IMPUGNED YEAR WHILE THE BALANCE AD DITION OF RS.34,64,569/- WAS CONFIRMED SINCE IT WAS FOUND TO PERTAIN TO EARLIER YEARS. THE I.T.A.T. VIDE ITS OR DER IN ITA NO.193/CHD/2006 DATED 29.1.2008 CONFIRMED THE ADDIT ION OF RS.21,60,188/- ON ACCOUNT OF PROVISION FOR LOSS ON SALE OF CEMENT FOR THE REASON THAT THE ASSESSEE HAD NOT SUFFERED THE LOSS IN THE YEAR UNDER APPEAL AND ALSO THAT THE ASSESSEE HAD FAILED TO ESTABLISH THAT THE LOSS HAD BEEN INCURRED BY IT AND DID NOT PERTAIN TO THE TRUCK OWN ERS. THE I.T.A.T. ALSO HELD THAT THE ASSESSEE WAS ALSO N OT 4 ELIGIBLE TO DEDUCTION UNDER SECTION 36(VII) OF THE ACT IN VIEW OF THE CONDITION IMPOSED UNDER SECTION 36(2) O F THE ACT. FURTHER THE DISALLOWANCE ON ACCOUNT OF INTERE ST SUBSIDY AMOUNTING TO RS.34,64,569/- WAS ALSO UPHELD BY THE I.T.A.T. FOR THE REASON THAT THE SAME DID NOT R ELATE THE YEAR UNDER APPEAL. 4. AGGRIEVED BY THE SAME, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE HON'BLE HIGH COURT ON T HE SUBSTANTIAL QUESTION OF LAW REGARDING INTERPRETATIO N OF SECTION 36(2) OF THE ACT, WHO IN TURN VIDE THEIR OR DER DATED 28.10.2013 REMANDED THE MATTER TO THE I.T.A.T. TO RECONSIDER THE ISSUE IN THE LIGHT OF ITS DECISION I N THE CASE OF SURESH GUGGAL VS. ITO (SUPRA). IN COMPLIANCE WIT H THE DIRECTIONS OF THE HIGH COURT THE CASE WAS FIXED BEF ORE US. 5. WE FIND THAT SINCE ONLY THE CLAIM OF THE ASSES SEE VIS A VIS PROVISION FOR LOSS ON SALE OF CEMENT WAS DISALLOWED BY APPLYING SECTION 36(1)(VII) R.W.S 36( 2),THE SAID CLAIM HAS TO BE EXAMINED IN THE LIGHT OF THE PROPOSITION LAID DOWN BY THE HON'BLE HIMACHAL PRADE SH HIGH COURT IN THE CASE OF SURESH GUGGAL (SUPRA). A LL OTHER QUESTIONS RAISED HAVE TO BE DECIDED ON MERITS IN ACCORDANCE WITH LAW AS PER THE DIRECTION OF THE HON BLE HIGH COURT. 6. WE SHALL FIRST BE DEALING WITH THE GROUND RAISE D BY THE ASSESSEE VIS A VIS CLAIM OF PROVISION FOR LO SS ON SALE OF CEMENT. 5 7. IT IS NECESSARY AT THIS JUNCTURE TO REPRODUCE T HE PROPOSITION LAID DOWN IN SURESH GAGGAL(SUPRA).THE HONBLE HIGH COURT IN THE SAID CASE HELD THAT FOR T HE PURPOSE OF CLAIMING DEDUCTION ON ACCOUNT OF WRITE OFF OF BAD DEBTS AS PER SECTION 36(1)(VII) R.W.S 36(2) OF THE ACT, IT IS NOT NECESSARY TO PROVE THAT THE DEBTS HAVE BECOM E BAD AND SIMPLY WRITING THEM OFF IN THE BOOKS OF ACCOUNT S OF THE ASSESSEE WOULD BE SUFFICIENT TO CLAIM DEDUCTIO N. THE RELEVANT PORTION OF THE ORDER LAYING DOWN THIS PROP OSITION IS AS UNDER; THE LEGISLATURE IN ITS WISDOM CHOSE TO AMEND THE ACT AND THE AMENDED PROVISION IS ABSOLUTELY CLEAR THAT ONCE THE AS SESSEE WRITES OFF ANY BAD DEBT OR ANY PART THEREOF AS BEING IRRECOVERABLE, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTI ON FOR THE SAME. THE WORD 'ESTABLISHED' HAS BEEN DELETED FRO M THE AMENDED PROVISION. THE INTENTION OF THE LEGISLATURE IS ABSOLUTELY CLEAR THAT THE ASSESSEE IS NO LONGER REQUIR ED TO ESTABLISH THAT THE DEBT IS BAD. HE HAS ONLY TO PROVE THAT HE HAS WRITTEN OFF THE DEBT IN HIS BOOKS OF ACCOUNTS A S A BAD DEBT. ONCE HE WRITES OFF THE DEBT AS BEING IRRECOVERAB LE, HIS CLAIM FOR DEDUCTION CANNOT BE REJECTED ON THE GROUND THAT DEBT HAS NOT BEEN ESTABLISHED TO HAS BECOME IRRECOVERABLE DEBT. THE AFORESAID INTERPRETATION IS SUPPORTED BY THE AM ENDMENT MADE TO S. 36(2), WHICH ALSO CAME INTO EFFECT ON 1ST AP RIL, 1989. THIS CLAUSE MAKES IT CLEAR THAT EVEN IF IN THE P REVIOUS YEAR RELEVANT TO THE ASST. YR. 1988-89 OR ANY PREVIOUS ASSESSMENT YEAR THE AO HAD NOT ALLOWED ANY DEBT TO BE DEDUCTED ON THE GROUND THAT IT HAD NOT BEEN ESTABLIS HED THAT IT HAD BECOME A BAD DEBT, THEN ALSO AFTER THE AMENDME NT THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION OF THE SAME IN THE NEXT ASSESSMENT YEAR. IN VIEW OF THE CLEAR-CUT LANGUAGE OF THE SECTION AND THE DISTINCTION BETWEEN THE UNAMENDED AN D AMENDED PROVISIONS, THERE IS NO MANNER OF DOUBT THAT THE 6 INTENTION OF THE LEGISLATURE WAS THAT THE ASSESSEE W AS ENTITLED TO CLAIM DEDUCTION IN CASE HE, IN HIS BOOKS OF ACCOUNT , HAD WRITTEN OFF THE DEBT AS A BAD DEBT. THE LANGUAGE IS CRYSTAL CLEAR AND BROOKS OF NO OTHER INTERPRETATION. ANY DOUB T, IF REMAINING, HAS BEEN CLARIFIED BY THE CIRCULAR NO. 551 , DT. 23RD JAN., 1990. THIS CIRCULAR MAKES IT AMPLY CLEAR THAT ONCE THE ASSESSEE HAS WRITTEN OFF THE DEBT THEN IT IS NOT OPEN TO THE AO TO REJECT THE CLAIM OF THE ASSESSEE ON THE GROUND TH AT THE ASSESSEE HAS FAILED TO ESTABLISH THAT THE DEBT HAS B ECOME A BAD DEBT IN THE RELEVANT ASSESSMENT YEAR. AS PER THE AMENDED PROVISIONS OF THE IT ACT, 1961 ONCE THE DEBT HAS BEEN WRITTEN OFF AS A BAD DEBT, IT IS NOT THE REQUIREM ENT OF LAW THAT THE ASSESSEE SHOULD ESTABLISH THAT THE DEBT HAS IN FACT BECOME BAD. THE REASON BEHIND THIS IS THAT AFTER AME NDMENT TO S. 36(2), IN CASE THE ASSESSEE RECOVERS ANY PART OF THE DEBT THE SAME IS ASSESSABLE AS HIS INCOME IN THE YEAR WHE N THE DEBT IS RECOVERED. 8. THE FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSEE WAS TRANSPORTING CEMENT AS PER CONTRACT EN TERED INTO WITH ACC LTD., BARMANA. DURING THE COURSE OF TRANSPORTATION, CEMENT WAS SHORT TRANSPORTED ON ACC OUNT OF SALE BY THE TRUCKS OWNERS. THE ACC LTD., BARMAN A RAISED DEBIT NOTES FOR THE CEMENT SHORT SUPPLIED WH ICH THE ASSESSEE CLAIMED AS PROVISION FOR LOSS OF CEMENT AMOUNTING TO RS.21,60,188/- IN THE IMPUGNED YEAR. IT IS THIS CLAIM OF PROVISION ON ACCOUNT OF LOSS ON SALE OF CEMENT WHICH AS PER THE DIRECTIONS OF THE HON'BLE H IGH COURT IS TO BE EXAMINED IN THE LIGHT OF THE DECISIO N OF THE HON'BLE HIGH COURT IN THE CASE OF SURESH GUGGAL (S UPRA). IN SHORT, IT IS TO BE SEEN WHETHER THIS PROVISION 7 TANTAMOUNTS TO BAD DEBT WRITTEN OFF FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 36(1)(VII) R.W.S. 36(2) OF T HE ACT. 9. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT ITS CLAIM OF P ROVISION ON ACCOUNT OF LOSS OF CEMENT WAS ALLOWABLE AS PER T HE PROVISION OF SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT SINCE IT WAS IN THE NATURE OF BAD DEBT WRITTEN OFF IN ITS BOOKS. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE PROFIT & LOSS ACCOUNT FOR THE IMPUGNED YEAR PLACED AT PAPER BOOK PAGE NO.3 AND THE DETAIL OF FREIGHT CONT RACT EXPENSES DEBITED TO THE PROFIT & LOSS A/C PLACED AT PAPER BOOK PAGE NO.20, REFLECTING THE CLAIM OF WRITE OFF IN THE SAME. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED T HAT ITS CLAIM IS IN THE NATURE OF BAD DEBT WRITTEN OFF SINC E THIS CLAIM MADE BY ACC LTD. WOULD REDUCE THE AMOUNT RECOVERABLE FROM IT ON ACCOUNT OF TRANSPORTATION UNDERTAKEN BY THE ASSESSEE 10. THE LD. DR, ON THE OTHER HAND, COUNTERED BY STATING THAT THE ASSESSEE HAD CLAIMED PROVISION FOR LOSS OF SALE OF CEMENT IN ITS PROFIT & LOSS ACCOUNT WHICH C OULD NOT BE TERMED AS BAD DEBT WRITTEN OFF,HENCE THE ASS ESSEES CLAIM DID NOT FALL WITHIN THE PURVIEW OF SECTION 36 (1)(VII) R.W.S. 36(2) OF THE ACT. THE LD. DR ALSO POINTED O UT THAT THE SAID PROVISION FOR LOSS OF CEMENT HAD BEEN CREA TED ON ACCOUNT OF DEBIT NOTES RAISED ON THE ASSESSEE BY AC C LIMITED, BARMANA AND HP STATE CIVIL SUPPLIES CORPOR ATION LTD. FOR WHOM THE ASSESSEE HAD UNDERTAKEN THE WORK OF 8 CARRIAGE OF GOODS AND THE SAID DEBIT NOTES HAD BEEN RAISED ON ACCOUNT OF CEMENT WHICH HAD BEEN SOLD DURING THE COURSE OF CARRIAGE BY THE TRUCK OWNERS AND SUPPLIED SHORT TO THESE PARTIES. THE LD. DR RELIED UPON THE ORDER OF THE I.T.A.T. IN THIS REGARD AND STATED THAT THE ASSESSE E WAS ONLY ACTING AS AN AGENT BETWEEN THE PARTIES REQUIRI NG TRANSPORTATION OF GOODS AND TRUCKS OWNERS AND WAS G ETTING COMMISSION FOR ARRANGING CONTRACTS FOR THE TRUCKS O WNERS. THE DEDUCTION MADE BY THE ACC LTD. ON ACCOUNT OF SHORTAGE OF CEMENT WAS IN FACT DEDUCTION FROM CARRI AGE OF TRUCKS OWNERS WHICH HAD TO BE RECOVERED FROM THE TR UCKS OWNERS AND THE ASSESSEE HAD NO LIABILITY IN THIS RE GARD. THEREFORE, THE SAME WAS NOT ALLOWABLE ON ACCOUNT OF BAD DEBT U/S 36(1)(VII) OF THE ACT. 11. HAVING HEARD BOTH THE PARTIES AND CONSIDERING THE FACTS OF THE CASE, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE SAID PROVISION AS A WRITE OFF ANY DEBT AND IS THUS NOT ENTITLED TO DEDUCTION OF THE SAME I N THE LIGHT OF THE DECISION OF THE HON'BLE HIGH COURT IN THE CASE OF SURESH GUGGAL (SUPRA). IT IS NOT DISPUTED THAT THE ASSESSEE IS IN THE BUSINESS OF TRANSPORTATION. IT IS ALSO NOT DENIED THAT LIABILITY FOR LOSS ON ACCOUNT OF GO ODS LOST IN TRANSIT LIES ON THE ASSESSEE AS PER THE CONTRACT ENTERED INTO WITH THE PARTIES AS IT WAS POINTED OUT TO US D URING THE COURSE OF HEARING BY THE LD. COUNSEL FOR THE AS SESSEE HIMSELF DRAWING OUR ATTENTION TO THE RELEVANT CLAUS E OF THE 9 AGREEMENT AT PAPER BOOK PAGE NO.35 WHICH READS AS UNDER: 17. ONCE THE CEMENT IS DELIVERED EX-WORKS TO YOU, OUR/OUR WORKS RESPONSIBILITY CEASES. THEREAFTER, IT WILL BE ENTIRELY YOUR RESPONSIBILITY TO ENSURE THAT CEMENT IS DELIVERED IN GOOD CONDITION AND CORRECT IN WEIGHT TO THE DEALERS OR CONSIGNMENT STOCKISTS AT THEIR GODOWNS. ANY COMPLAINT REGARDING SHORTAGE SHORT WEIGHT, DAMAGE, LOSS TO THE CONSIGNMENT ETC. WILL BE ENTIRELY YOUR RESPONSIBILITY AND ANY CLAIM ARISING THEREOF WILL BE SETTLED BY YOU WITH THE DEALERS DIRECT WITHOUT DELAY UNDER INTIMATION TO US. 12. IT IS ALSO NOT DENIED THAT THE PRESENT PROVISI ON HAS BEEN CREATED ON ACCOUNT OF THE AFORESTATED LOSS IN TRANSIT OF GOODS WHICH THE ASSESSEE HIMSELF ADMITTE D BY PLACING COPIES OF DEBIT NOTES RAISED BY ACC LTD. IN THIS REGARD BEFORE US. CLEARLY, THE SAID CLAIM IS NOTHI NG BUT IS BUSINESS LOSS OF THE ASSESSEE AND ADMITTEDLY THIS W HAT THE ASSESSEE HAS BEEN CLAIMING BEFORE THE LOWER AUTHORI TIES ALSO ALL ALONG WHICH IS EVIDENT FROM THE ORDERS OF THE LOWER AUTHORITIES. BY NO STRETCH OF IMAGINATION, T HE SAID CLAIM CAN BE TERMED AS A WRITE OFF OF DEBT. THE IM MEDIATE NATURE OF THE SAID CLAIM IS UNDOUBTEDLY A LOSS TO T HE ASSESSEE, ON ACCOUNT OF CEMENT TRANSPORTED SHORT BY THE TRUCK DRIVERS, THE LIABILITY FOR WHICH AS PER THE A GREEMENT ,UNDOUBTEDLY RESTS WITH THE ASSESSEE. MERELY BECAUS E SUCH LOSS IS SET OFF FROM THE AMOUNT TO BE RECOVERE D FROM THE DEBTORS, WHO HAVE CLAIMED REIMBURSEMENT OF THE LOSS, DOES NOT CHANGE THE CHARACTER OR NATURE OF THE TRAN SACTION 10 TO WRITE OFF OF DEBT. A WRITE OFF OF DEBT OCCURS WH EN THERE IS A CERTAIN CLAIM OF RECOVERY FROM DEBTORS WHICH O N ACCOUNT OF NON-RECOVERY IS WRITTEN OFF. THERE BEIN G A DIRECT NEXUS BETWEEN THE NON-RECOVERY AND THE CLAIM OF THIS WRITE OFF IN THE BOOKS, THE CLAIM IS NOT CAPAB LE OF BEING RECOVERED AT ALL AND IS THUS WRITTEN OFF. WH EN THE ASSESSEE ARRIVES AT CONCLUSION THAT THE DEBT IS NO LONGER CAPABLE OF BEING RECOVERED, HE WRITES OFF THE SAME IN ITS BOOKS. IN THE PRESENT CASE, THE CLAIM MADE BY THE ASSESSEE IS ON ACCOUNT OF LOSS IN TRANSIT OF GOODS, LIABILITY ON ACCOUNT OF WHICH LAY ON THE ASSESSEE. THUS SUCH LIABILITY IS DISTINCT AND SEPARATE FROM THE DEBIT B ALANCE TO BE RECOVERED FROM THE PARTIES AND SETTING OFF OF TH IS LIABILITY FROM THE BALANCE TO BE RECOVERED FROM THE DEBTORS, DOES NOT MAKE IT IN THE NATURE OF A WRITE OFF OF DEBT. THE TRUE NATURE OF THE CLAIM OF THE ASSESSEE IS A LIABILITY FIXED ON HIM WHICH HAS TO BE PAID TO THE PARTIES WHETHER OR NOT ANY RECOVERY HAS TO BE MADE FROM THE M OR NOT. THERE IS NO NEXUS OR LINK BETWEEN THE DEBT TO BE RECOVERED AND THE CLAIM MADE THOUGH AS A MATTER OF CONVENIENCE THE LIABILITY IS SET OFF FROM THE AMOUN T TO BE RECOVERED FROM THE DEBTORS TO ARRIVE AT THE NET REC OVERY. THIS IS THE ONLY PURPOSE FOR SETTING OFF THIS LIABI LITY AGAINST THE DEBT TO BE RECOVERED AND IS NOT ON ACCO UNT OF THE FACT THAT THE AMOUNT IS NO LONGER RECOVERABLE F ROM THE DEBTOR DESPITE ALL EFFORTS MADE. THEREFORE, WE HAV E NO HESITATION IN HOLDING THAT THE PROVISION IS NOT A W RITE OFF OF A DEBT. HAVING SAID SO ,IT LOGICALLY FOLLOWS THA T THE 11 ASSESSEE IS NOT ENTITLED TO CLAIM THE SAME U/S 36(1 )(VII) R.W.S.36(2) OF THE ACT, WHICH DEALS WITH DEDUCTION CLAIMED ON ACCOUNT OF BAD DEBTS WRITTEN OFF AS IRRECOVERABL E IN THE ACCOUNTS OF THE ASSESSEE. 13. FURTHER, SINCE WE HAVE HELD THAT THE ASSESSEE HAS NOT CLAIMED ANY WRITE OFF OF DEBT AT ALL, AS PER TH E PROPOSITION LAID DOWN BY THE HON'BLE HIGH COURT IN THE CASE OF SURESH GUGGAL (SUPRA), THE ASSESSEE IS NOT ENTITLED TO BENEFIT U/S 36(2) OF THE ACT AT ALL. 14. THE ALTERNATIVE CLAIM OF THE ASSESSEE IS THAT IT HAS SUFFERED LOSS IN THE COURSE OF CARRYING ON ITS BUSINESS AND THE SAME IS ALLOWABLE NOTWITHSTANDING THE FACT THAT IT WAS INCURRED IN EARLIER YEARS. THE LD. DR COUNTERE D THAT SINCE IT DID NOT PERTAIN TO THE YEAR, IT WAS NOT AL LOWABLE. WE AGREE WITH THE CONTENTION OF THE LD. DR THAT THE FACT BEING THAT THE LOSS DID NOT RELATE TO THE YEAR AND NOTHING HAVING BROUGHT BEFORE US TO DEMONSTRATE ITS CRYSTALLIZATION IN THE IMPUGNED YEAR, IT WAS NOT AL LOWABLE IN THE IMPUGNED YEAR. 15. IN VIEW OF THE ABOVE, WE HOLD THAT THE ASSESSE E IS NOT ENTITLED TO CLAIM THE PROVISION ON ACCOUNT O F LOSS OF CEMENT EITHER AS A BUSINESS LOSS OR EVEN AS A WRITE OFF OF DEBT AS PER THE PROVISIONS OF SECTION 36(1)(VII) R. W.S.36(2) OF THE ACT. GROUND OF APPEAL RAISED BY THE ASSESSEE IN THIS REG ARD IS, THEREFORE, DISMISSED. 12 16. THE OTHER ISSUE INVOLVED IN THE APPEAL RELATES TO DISALLOWANCE OF RS.34,64,569/- OUT OF INTEREST SUBS IDY OF RS.43,55,078/-. THE FACTS RELATING TO THE ISSUE AR E THAT THE ASSESSEE CORPORATION WAS COMPETENT TO PAY SUBSI DY TO TRUCK OWNERS WHICH WAS IN TURN REIMBURSED BY THE GOVERNMENT. IN THE PRESENT CASE, SUBSIDY AMOUNTING TO RS.43,55,078/- WAS NOT REIMBURSED BY THE GOVERNMENT AND THE ASSESSEE CLAIMED THE SAME AS A EXPENSE IN I TS PROFIT & LOSS ACCOUNT. THE ASSESSING OFFICER DENIE D THE CLAIM OF THE ASSESSEE IN THE ABSENCE OF ANY EVIDENC E TO JUSTIFY THE SAID CLAIM. THE LD. CIT (APPEALS) REST RICTED THE DISALLOWANCE TO RS.34,64,569/- HOLDING THE REST TO THE RELATING TO THE IMPUGNED YEAR WHILE THE AMOUNT DISA LLOWED AS RELATING TO EARLIER YEARS. 17. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE ARGUMENTS MADE BEFORE THE LOWER AUTHORITIES THAT SINCE ITS CLAIM FOR REIMBURSEMENT FOR SUBSIDY WAS DENIED IN THE IMPUGNED YEAR, IT HAD CLA IMED THE SAME AS AN EXPENSES IN THE IMPUGNED YEAR SINCE THE LIABILITY HAD CRYSTALLIZED IN THE IMPUGNED YEAR ITS ELF. THE ASSESSEE REITERATED CONTENTIONS MADE BEFORE THE LOW ER AUTHORITIES AND NO NEW FACTS WERE BROUGHT BEFORE US . 18. EVIDENTLY IT IS NOT DISPUTED THAT THE INTEREST SUBSIDY DISALLOWED AMOUNTING TO RS.34,64,569/- PERT AINED TO EARLIER YEARS. IT IS ALSO NOT DISPUTED THAT THE PRIMARY LIABILITY FOR THESE SUBSIDIES LIES WITH THE ASSESSE E. THEREFORE UNDOUBTEDLY LIABILITY PERTAINING TO THESE 13 SUBSIDIES CRYSTALLIZED IN THE EARLIER YEARS TO WHIC H THEY RELATE. THE ASSESSEES CLAIM THAT THE LIABILITY CRYS TALLIZED IN THE IMPUGNED YEAR WHEN THE HP GOVT. REFUSED TO REIMBURSE THE SAME IS UNTENABLE SINCE CLEARLY THE F IXATION OF LIABILITY IS UNCONNECTED WITH THE REIMBURSEMENT OF THE SAME BY THE HP GOVT. 19. IN VIEW OF THE SAME, WE UPHOLD THE DISALLOWANC E OF RS.34,64,569/- ON ACCOUNT OF INTEREST SUBSIDY CL AIMED. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IN THIS REGARD IS ALSO DISMISSED. 20. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD MARCH, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH