The ITO, Ward-8(1), Ahmedabad V. Trisun Commodities Pvt.Ltd., Ghandhidham

ITA 1938/AHD/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6412 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAI RAJ KUMAR
• Keywords: Business income; Depreciation; Bad and doubtful debts; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : AH MEDABAD ( BEFORE HONBLE SHRI T.K.SHARMA, J.M. & HONBLE SHRI A.N.PAHUJA, A.M.) I.T.A.NO. 1938/AHD./2009 : ASSESSMENT YEAR 200 6-07 ITO, WARD-8(1), AHMEDABAD VS- TRISAN COM MODITIES PVT. LTD.,GANDHIDHAM (PAN : AABCT 4108Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JAI RAJ KUMAR, SR. D.R. RESPONDENT BY: NONE O R D E R PER SHRI T.K.SHARMA, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF LD. CIT(A)-XIV, AHMEDABAD DATED 13.04.2009 FOR THE ASSESSMENT YEAR 2006-2007. 2. IN THIS CASE, AN APPLICATION FOR ADJOURNMENT WAS RECEIVED FROM S.A.SUKHADIA & CO., TAXATION CONSULTANTS, SEEKING ADJOURNMENT ON T HE GROUND THAT THE CHARTERED ACCOUNTANT, WHO IS GOING TO APPEAR IN THE MATTER, I S UNAVAILABLE. NO POWER OF ATTORNEY IS PLACED ON RECORD. EARLIER ALSO, AT THE REQUEST O F THE ASSESSEE, THIS CASE WAS ADJOURNED TWICE. IN THESE CIRCUMSTANCES, THE ADJOURNMENT SOUG HT IS REFUSED AND WE PROCEED TO DECIDE THIS APPEAL ON THE BASIS OF SUBMISSIONS MADE BY THE LD. D.R. AND THE MATERIALS AVAILABLE ON RECORD. 3. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN THE BUSINESS OF EARNING INCOME FROM HIRE CHARGES. FOR T HE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE FILED THE RETURN OF INCOME ELECTRONICA LLY ON 25.01.2007 DECLARING LOSS OF RS.1,44,330/-. THE AO FRAMED THE ASSESSMENT UNDER S ECTION 143(3) OF THE I.T. ACT, 1961 ON 24.10.2008 WHEREIN HE DISALLOWED BAD DEBTS AMOUNTING TO RS.6,67,355/-, MADE ADDITION OF RS.5,83,000/- ON ACCOUNT OF WAIVER OF INTEREST AND DISALLOWED DEPRECIATION AMOUNTING TO RS.12,17,076/-. 2 ITA NO.1938/AHD./2009 4. ON APPEAL BEFORE THE LD. CIT(A), THE ASSESSEE SU BMITTED THAT THE AO BE DIRECTED TO ALLOW RS.5,88,835/- (RS.6,67,355/- - RS .78,525/-) AND DEPRECIATION ON RS.72,648/- + RS.5,875/- = RS.78,543/- @10% THAT IS RS.5,875/-. 4.1 AFTER CONSIDERING THE DETAILED SUBMISSIONS, IN THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE OF BAD DEBTS TO THE EXTENT OF RS.5,88,835/-. FURTHER, THE LD. CIT(A) DIRECTED THE AO TO ALLOW DEPRECIATIO N IN RESPECT OF WRITE OFF WHICH IS NOT ALLOWED AMOUNTING TO RS.5,875/- AND RS.72,874/- . THE DETAILED REASONING GIVEN BY THE LD. CIT(A) IS CONTAINED IN PARA 2.3, WHICH READ S AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS AS ADVANCED BY THE A.R. OF THE APPELLANT ALONG WITH VARIOUS CAS E LAWS AS RELIED UPON. FROM THE DETAILS FURNISHED BY THE A.O., IT IS SEEN THAT THE BAD DEBTS OF RS. 5,875/- AND RS. 72,874/- STANDING IN THE NAME OF JAIN BROTHERS AND M/S LARSEN AND TUBRO LTD. SHOULD BE DISALLOWED AS THESE ARE CAPITAL DEBT S . THEREFORE, THE DISALLOWANCE MADE TO THIS EXTENT IS HELD TO BE IN O RDER. HOWEVER, IT IS SEEN THAT THE DISALLOWANCE MADE IN THE CASE OF OTHER PARTIES CANNOT BE SUSTAINED, AS THE APPELLANT HAS DULY WRITTEN OFF THE AMOUNTS OUTSTAND ING IN ITS BOOKS OF ACCOUNTS AND CORRESPONDING INCOME HAS BEEN OFFERED IN EARLIE R YEARS. FURTHER, THE APPELLANT HAS FULFILLED THE CONDITIONS TO CLAIM THE BAD DEBT BY WRITING OFF THE SAME IN THE ACCOUNTS, AS AMENDED PROVISION OF S. 36 (1) (VII) IS ABSOLUTELY CLEAR THAT ONCE THE ASSESSEE WRITES OFF ANY BAD DEBT OR A NY PART THEREOF AS BEING IRRECOVERABLE, HE IS ENTITLED TO CLAIM DEDUCTION FO R THE SAME . BY FOLLOWING SEVERAL CASE LAWS, INCLUDING THE LATEST DECISION IN THE CASE OF SURESH GAGGAL, 11 DTR 345, MORGAN SECURITIES, 292 ITR 339 (DEL) SP ACE FINANCIAL SERVICES, 115 TTJ(DELHI)165, I HOLD THAT THE DISALLOWANCE OF BAD DEBT IS NOT JUSTIFIED AND HENCE THE A.O. IS DIRECTED TO DELETE THE DISALLOWAN CE MADE TO THE EXTENT OF RS. 5,88,835/- AS REGARDS THE DISALLOWANCE OF RS.5875 A ND RS.72874/-, THE APPELLANT HAS CONTENDED THAT THE SAME WAS ON ACCOUN T OF CAPITAL EXPENDITURE LIKE CEMENT BILL FOR CONSTRUCTION OF GODOWN WHICH T HE APPELLANT HAS WRITTEN OFF AND HAS NOT CAPITALIZED THE SAME TO THE ASSETS . AS THE WRITE OFF IS NOT ALLOWED, ON SUBMISSION OF DETAILS BY THE APPELLANT AS TO WHI CH ASSET COST WOULD INCREASE, THE A.O. SHALL ALLOW DEPRECIATION, ACCORDINGLY THE A.O. IS DIRECTED TO CONSIDER AND ALLOW DEPRECIATION ON THE SAME . 4.2 IN THE IMPUGNED ORDER, THE LD. CIT(A) ALSO DELE TED THE ADDITION OF RS.5,83,000/- BEING WAIVER OF INTEREST BY BANK FOR THE DETAILED R EASONS GIVEN IN PARA 3.3, WHICH READS AS UNDER: 3.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS AS ADVANCED BY THE A.R. ALONG WITH THE CASE LAWS AS RELIED UPON . FROM THE EVIDENCES AND 3 ITA NO.1938/AHD./2009 PAPERS SUBMITTED BY THE A.R., IT IS SEEN THAT THE A MOUNT PAID WAS ON PRINCIPAL ACCOUNT. THE COPY OF SETTLEMENT PROPOSAL OF THE BAN K SUBMITTED BY THE A.R. AT PAGE 79 OF THE PAPER BOOK SHOWS WAIVER OF PART INTE REST OF RS.5.83 LAKHS FOR THE DEFERRED REPAYMENT PERIOD OF COMPROMISE WAS PROPOSE D. AT PAGE 80 OF THE PAPER BOOK WHICH GIVES FINANCIAL IMPLICATION OF THE PROPOSAL SHOWS FUTURE INTEREST FOR DEFERRED REPAYMENT PERIOD OF COMPROMIS E AS RS. 14.54 LAKHS AND RS.5.83 LAKHS. THUS IT IS SEEN THAT INTEREST HAS NE VER BEEN CLAIMED NOR DEBITED IN EARLIER YEARS BY THE APPELLANT . IN ITS WORKING BANK HAS SHOWN FUTURE INTEREST. THUS THE A.R. SUBMITTED THAT THE APPELLANT HAS NOT CHARGED INTEREST TO PROFIT AND LOSS A/C. AND HENCE PROVISIONS OF SECTION 41(1) ARE NOT APPLICABLE. THUS IT IS CLEAR THAT THIS AMOUNT OF FUTURE INTEREST WORKED OUT BY BANK FOR PROCEDURAL PURPOSE HAS BEEN WAIVED. IN VIEW OF THE ABOVE FACTS , I AM OF THE OPINION THAT THE ADDITION OF RS, 5,83,000/- IN RESPECT OF WAIVER OF INTEREST BY THE BANK IS NOT JUSTIFIED AND THEREFORE, THE A.O. IS DIRECTED TO DE LETE THE SAME . 4.3 FINALLY, IN THE IMPUGNED ORDER, THE LD. CIT(A) DIRECTED THE AO TO ALLOW DEPRECIATION AMOUNTING TO RS.12,17,076/- ON BUILDIN G CONSTRUCTION FOR THE DETAILED REASONS GIVEN IN PARA 4.3, WHICH READS AS UNDER: 1.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE A.R. CAREFULLY. FROM THE DETAILS SHOWN BY THE A.R., IT I S SEEN THAT THE GODOWNS LET OUT BY THE APPELLANT ARE ITS OWN AND IT WAS IN THE BUSINESS OF HIRING OF GODOWNS SINCE 2002. IT IS ALSO SEEN THAT THE APPELLANT HAS SHOWN THE ASSETS IN THE BALANCE SHEET, ON WHICH DEPRECIATION HAS ALREADY BE EN CLAIMED IN EARLIER YEARS AND THE SAME HAS BEEN ALLOWED. THE GODOWN D I.E. GO DOWNS NO.4A AND 4B WERE EXISTING IN F.Y.2002-03 AND 2003-04. THE PLOT NO.12 ALONGWITH SOME STRUCTURE WAS PURCHASED BY THE APPELLANT BY DEED DA TED 1-11-2002 FOR RS.1,39,53,145/-. THERE WAS ADDITION OF RS.6.69 LAK HS IN GODOWN D ( GODOWN 4A AND 4B) DURING F.Y.2002-03 AND 2003-04. THE INCO ME FROM HIRING CHARGES FROM GODOWN D HAS BEEN SHOWN BY THE APPELLANT AS BU SINESS INCOME AND DEPRECIATION HAS BEEN CLAIMED IN A.Y. 2003-04, 2004 -05 AND 2005-06. THE APPELLANT CONSTRUCTED FURTHER GODOWNS NO. !,2,3 AS PER THE CHART GIVEN IN PAGE 8 OF THIS ORDER, ON PLOT NO.12 AND INCURRED EXPENDI TURE OF RS.1.32 CRORES AS ON 31-03-2004 AND THE SAME HAS BEEN SHOWN AS ''BUILDIN G CONSTRUCTION A/C. OF PLOT NO. 12' AND HIRING CHARGES INCOME FROM THE SAI D GODOWNS HAVE BEEN SHOWN BY THE APPELLANT AS BUSINESS INCOME AND DEPRE CIATION HAS BEEN CLAIMED, FOR E.G. DEPRECIATION OF RS.10,67,128/-, RS.12,13,5 60/- AND RS.12,13,560/- HAVE BEEN CLAIMED BY THE APPELLANT IN F.Y.2003-04. 2004-05 AND 2005-06 RESPECTIVELY AS PER DETAILS FILED AT PAGE 100 OF TH E PAPER BOOK. IN VIEW OF THE ABOVE FACTS, AS THE DEPRECIATION HAS BEEN ALLOWED I N THE EARLIER YEARS I.E. A.Y, 2004-05 TO A.Y. 2006- 07 IN RESPECT OF BUILDING CON STRUCTION A/C. ON PLOT NO. 12 CONSISTING OF GODOWNS NO.1,2 AND 3 AND AS INCOME FR OM HIRING OF THESE GODOWHS HAS BEEN SHOWN AS BUSINESS INCOME BY THE AP PELLANT, I HOLD THAT THERE 4 ITA NO.1938/AHD./2009 IS NO REASON TO DISALLOW THE DEPRECIATION, ACCORDIN GLY THE A.O. IS DIRECTED TO ALLOW DEPRECIATION OF RS. 12,17,076/- . THIS GROUND IS THUS ALLOWED. 5. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS: 1) THE LD. CTT(A) HAS ERRED IN LAW AND ON FA CTS WHILE DELETING THE DISALLOWANCE OF BAD DEBTS OF RS.6,67,355/- AND ALSO IN DIRECTING TO ALLOW DEPRECIATION ON SUM OF RS. 78,749/- BEING BAD DEBTS . 2) THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS WHILE DELETING THE ADDITION OF RS. 5,83,000/- BEING WAIVER OF INTEREST BY BANK. 3) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT S WHILE DELETING THE ADDITION OF DEPRECIATION OF RS. 12,17,076/-. 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. COMMISSIONER OF INCOME-TAX (A)-XIV, AHMEDABAD OUGHT TO HAVE UPHE LD THE ORDER OF THE ASSESSING OFFICER. 5) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE ID. COMMISSIONER OF INCOME- TAX(A)-XIV, AHMEDABAD MAY BE SET-ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 6. AT THE TIME OF HEARING BEFORE US, SHRI JAI RAJ K UMAR, SR.D.R., APPEARED ON BEHALF OF THE REVENUE AND, RELYING ON THE REASONING GIVEN BY THE AO IN THE ASSESSMENT ORDER, CONTENDED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING/ALLOWING RELIEF TO THE ASSESSEE IN RESPECT OF THE AFORESAID THREE ADDITIONS MADE IN THE ASSESSMENT ORDER. THE LD. D.R. ALSO POINTED OUT THAT IN THE IM PUGNED ORDER, THE LD. CIT(A) ADMITTED FRESH EVIDENCES. THEREFORE, THE ORDER OF T HE LD. CIT(A) BE SET ASIDE AND THE MATTER BE RESTORED TO THE FILE OF THE AO WITH THE D IRECTION THAT THE ASSESSEE SHOULD FURNISH FRESH EVIDENCES WHICH WERE FILED BEFORE THE LD. CIT(A) AND THE AO WILL CONSIDER THE SAME AND RE-CONSIDER ALL THE THREE ADD ITIONS. 7. AFTER HEARING THE LD. D.R., WE HAVE CAREFULLY GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT NO FRESH EVIDENCE HAS BEEN FILED BEFORE THE LD. CIT(A). THE LD. CIT(A), AFTER CONSIDERING T HE MATERIALS PLACED BEFORE THE AO AND CORRECTLY APPRECIATING THE VARIOUS CONTENTIONS RAISED BEFORE THE AO, ALLOWED 5 ITA NO.1938/AHD./2009 PARTIAL RELIEF TO THE ASSESSEE IN RESPECT OF ALL TH E THREE ADDITIONS. WE, THEREFORE INCLINE TO UPHOLD THE ORDER OF THE LD. CIT(A). RESULTANTLY, ALL THE THREE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.05.2011 SD/- SD/- (A.N.PAHUJA) (T.K.SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24/05/2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT 3) CIT(A) CONCERNED 4) CIT CONCERNED 5) D.R., ITAT, AHMEDABAD TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.