Kalavati Finance Ltd., Ahmedabad V. The ACIT.,(OSD)-Range-4, Ahmedabad

ITA 1963/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6668 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B R POPAT
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH (BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND D.K. TYAGI, JUDICIAL MEMBER) ITA NO.1963/AHD/2009 [ASSTT. YEAR : 2006-2007] KALAVATI FINANCE LTD. 172, NEW CLOTH MARKET AHMEDABAD 380 001. PAN NO.AACCK 0030 F VS. ACIT(OSD)-1 RANGE-4, AHMEDABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI B.R. POPAT REVENUE BY : SHRI RAJESH OJHA O R D E R PER BENCH: THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDABAD DATED 27.02.2009 ARISING OUT OF THE ORDER OF THE ASSESSIN G OFFICER PASSED UNDER SECTION 143(3) THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL BY THE ASS ESSEE IS AGAINST THE DISALLOWANCE OF RS.12,72,517/- BEING THE BAD DEBT W RITTEN OFF BY THE ASSESSEE. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY THE LEARNED COUNSEL THAT DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE DEBITED SUM OF RS.12,72,570/- DUE FROM M/S.AARATHEE EXPORTS , SALEM. THE AO HAD DISALLOWED THE SUM ON THE ONLY GROUND THAT THE ONLY TRANSACTION BETWEEN THE ASSESSEE AND AARATHEE EXPORTS IN THE YE AR 2001-2002 WAS FOR TRANSFER OF FUND FROM ONE PARTY TO OTHER AND THEREF ORE SINCE THE AMOUNT WRITTEN OFF WAS NOT OFFERED AS INCOME IN THE RELEVA NT PREVIOUS YEAR OR EARLIER YEAR, THE BAD DEBT WRITTEN OFF CANNOT BE AL LOWED. IT IS STATED BY THE LEARNED COUNSEL THAT THE ASSESSEE WAS IN THE BUSINE SS OF CHEQUE DISCOUNTING AND DURING THE FINANCIAL YEAR 2001-2002 , THE CHEQUE OF ITA NO.1963/AHD/2009 -2- AARATHEE EXPORTS WERE DISCOUNTED BY THE ASSESSEE ON WHICH DISCOUNT INCOME OF RS.5,51,771/- WAS RECEIVED AND OFFERED TO TAX. CHEQUE-WISE DETAILS OF THE DISCOUNT RECEIVED ARE GIVEN AT PAGE NO.17 AND 18 OF THE ASSESSEES PAPER BOOK. HE FURTHER STATED THAT THE SPECIAL BENCH OF THE ITAT IN THE CASE OF GUJARAT GAS FINANCIAL SERVICE L TD. ACIT, 115 ITD 218 HAS CONSIDERED THE IDENTICAL ISSUE AND STATED T HAT BAD DEBTS IN THE BILL DISCOUNTING BUSINESS WOULD BE ALLOWABLE. HE ALSO STATED THAT IN THIS CASE, THE AO HAS NOT DOUBTED THAT THE AMOUNT HAS AC TUALLY BECOME BAD. NOW AS PER THE DECISION OF THE HONBLE APEX COURT I N THE CASE OF TRF LTD. VS. CIT, 323 ITR 397. IT IS NOT REQUIRED FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT HAS ACTUALLY BECOME BAD AND MERE WRIT ING OFF OF THE AMOUNT IN THE BOOKS OF ACCOUNTS WOULD BE SUFFICIENT. IT I S NOT IN DISPUTE THAT IN THE BOOKS OF ACCOUNTS, THE ASSESSEE HAS DULY WRITTE N OFF THE AMOUNT AS BAD DEBTS. HE THEREFORE STATED THAT AS PER THE ABOVE D ECISION OF THE SPECIAL BENCH OF THE ITAT AS WELL AS OF HONBLE APEX COURT, THE ASSESSEES CLAIM OF BAD DEBT MAY BE ALLOWED. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 3. WE FIND THAT THE SPECIAL BENCH OF THE ITAT, AHME DABAD BENCHES IN THE CASE OF GUJARAT GAS FINANCIAL SERVICES LTD. (SUPRA) HELD AS UNDER: AS REGARDS BILL DISCOUNTING WE ARE NOT IN AGREEMEN T WITH THE CIT(A) THAT IT CANNOT BE EQUATED WITH THE BUSINESS OF BANKING OR OF MONEY LENDING BUSINESS. IN THIS ACTIVITY THE FINANC E IS PROVIDE AGAINST BILLS THAT ARE DISCOUNTED AND THE INCOME TH EREFROM IS APPEARING IN PROFIT AND LOSS ACCOUNT. THE MERE FACT THAT IT IS LESS OR NOT EARNED THIS YEAR AS ON 31-3-2001 DOES NOT MAKE ANY DIFFERENCE SO LONG AS THE CARRIES THE BUSINESS AS AN ACTIVITY. WE THEREFORE VACATE THE ORDER OF THE REVENUE AUTHORITIES ON THIS ISSUE AND ALLOW THE CLAIM OF THE ASSESSEE. ITA NO.1963/AHD/2009 -3- IN THE CASE OF THE ASSESSEE IT IS NOT IN DISPUTE TH AT THE ASSESSEE WAS IN THE BUSINESS OF BILL DISCOUNTING AND FROM AARATHEE EXPO RTS THE DISCOUNT OF RS.5,51,771/- WAS RECEIVED DURING THE FINANCIAL YEA R 2001-2002 I.E. THE YEAR IN WHICH THE ASSESSEE DID CHEQUE DISCOUNTING F OR THEM. ON THIS FACT, THE ABOVE DECISION OF THE SPECIAL BENCH WOULD BE SQ UARELY APPLICABLE. IT IS NOT IN DISPUTE THAT THE AMOUNT WAS ACTUALLY WRIT TEN OFF IN THE ASSESSEES BOOKS OF ACCOUNTS. THEREFORE, THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF TRF LTD.(SUPRA) WOULD ALSO BE APPLICABL E. RELYING UPON THE ABOVE DECISION OF THE HONBLE APEX COURT AS WELL AS THE SPECIAL BENCH OF THE ITAT, WE ALLOW THE CLAIM OF BAD DEBTS MADE B Y THE ASSESSEE. 4. IN RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 19 TH MAY, 2011 SD/- SD/- (D.K. TYAGI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 15-05-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD 1. DATE OF DICTATION : 15-04-2011 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER. : 19-04-2011 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./P.S : 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT. : 5. DATE ON WHICH FAIR ORDER PLACED BEFORE OTHER MEMBER : ITA NO.1963/AHD/2009 -4- 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./P.S. : 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK. : 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK. : 19-05-2011 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER. : 10. DATE OF DESPATCH OF THE ORDER :