Carrier Race Technologies Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 1997/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81276 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 23-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTAJCIT
• Assessee Lawyers: RAJEEV P T
• Keywords: Bad and doubtful debts

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . !' , # $ BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.1997/MDS./2014 ( / ASSESSMENT YEAR :2010-11) M/S. CARRIER RACE TECHNOLOGIES PVT LTD., ( FORMERLY KNOWN AS M/S.SAUTER RACE TECHNOLOGIES P LTD.) OLD NO.248,NEW NO.114, ROYAPETTAHHIGH ROAD, CHENNAI 600 014. VS. DT. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(1), CHENNAI. PAN AAB CR 1863 L ( %& / APPELLANT ) ( '(%& / RESPONDENT ) / APPELLANT BY : MR.RAJEEV P.T., C.A. / RESPONDENT BY : MR.S.DAS GUPTA,JCIT D.R / DATE OF HEARING : 15.10.2014 ! /DATE OF PRONOUNCEMENT : 28.11.2014 ) / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A)-VI, CHEN NAI, DATED 28.03.2014 IN APPEAL NO.1357/13-14 PASSED U/S 143(3 ) READ WITH SECTION 250 OF THE ACT. ITA NO. 1997/MDS/14 2 2. THE ASSESSEE HAS RAISED SIX GROUNDS IN ITS APPE AL; HOWEVER THE CRUX OF THE ISSUE IS THAT THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT (A), WHO HAS PARTLY ALLOWED BAD DEBTS OF ` 10,68,613/- AS AGAINST ` 34,43,077/- CLAIMED BY THE ASSESSEE COMPANY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY, ENGAGED IN THE BUSINESS OF PRODUC ING BUILDING AUTOMATION SYSTEMS, FILED ITS RETURN OF INCOME ON 1 3.10.2010 ADMITTING ITS TOTAL INCOME OF ` 1,17,76,327/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED U/S.143 ( 3) OF THE ACT ON 11.02.2013. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, WHILE VERIFYING THE BOOKS OF ACCOUNTS, THE LD. ASSESSING OFFICER NOTICED THAT ON 31.03.2010 AN AMOUNT OF ` 34,43,077/- WAS DEBITED AS PROVISION FOR DOUBTFUL DEBTS AND THE SAME WAS ADDED BACK IN T HE COMPUTATION OF TOTAL INCOME. ON APPEAL, THE LD. CIT (A) OBSERVE D THAT THE ASSESSEE HAD WRITTEN OFF BAD DEBTS TO THE EXTENT OF ` 10,68,613/- BY DEBITING TO THE P&L A/C AS BAD DEBTS AND CREDITING THE SAME TO THE LEDGER ACCOUNTS OF CERTAIN PARTIES AND THEREBY CLOS ING THEIR ACCOUNTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE LD. C IT (A) FURTHER ITA NO. 1997/MDS/14 3 OBSERVED THAT WITH CERTAIN OTHER PARTIES THE ASSESS EE HAD PARTIALLY WRITTEN OFF BAD DEBTS IN THE SAME MANNER, HOWEVER T HERE WERE SOME BALANCES STANDING TO THEIR DEBIT. THE LD. CIT (A) OPINED BY RELYING ON THE DECISION OF THE CASE IN M/S.T.R.F LIMITED VS. C IT REPORTED IN [2010] 323 ITR 397(SC) THAT THE RATIO DECIDENDI OF THE CASE WAS APPLICABLE WHEN THE ENTIRE BALANCE OF THE DEBTORS A RE WRITTEN OFF AS BAD DEBTS AND NOT IN THE SITUATION WHEN PARTIAL AMO UNT IS WRITTEN OFF. THEREFORE, THE LD. CIT (A) ALLOWED THE CLAIM OF BAD DEBT FULLY WRITTEN OFF TO THE EXTENT OF ` 10,68,613/- WITH RESPECT TO CERTAIN PARTIES AND SUSTAINED THE ADDITION OF ` 23,74,464/- WITH RESPECT TO BAD DEBTS PARTIALLY WRITTEN OFF IN REGARD TO OTHER PARTIES. 4. LD. A.R. ARGUED BEFORE US STATING THAT IN CERTA IN CASES THE CLIENTS OF THE ASSESSEE HAD NOT AGREED TO THE FULL AMOUNT DEBITED TO THEIR ACCOUNT IN THE ASSESSEES BOOKS OF ACCOUNTS A ND THEREFORE TO SUSTAIN THE GOODWILL OF THE ASSESSEE BEFORE ITS CLI ENTS HAD AGREED FOR A LESSER AMOUNT TO BE DUE FROM THEM AND ACCORDINGLY TREATED THE AMOUNT NOT AGREED BY THE CLIENTS AS BAD DEBTS AND WRITTEN OFF THE SAME IN ITS BOOKS OF ACCOUNTS. HE FURTHER ARGUED T HAT THE RATIO OF THE CASE TRF (SUPRA) IS SQUARELY APPLICABLE TO THE CA SE OF THE ASSESSEE ITA NO. 1997/MDS/14 4 AND THEREFORE IT WAS REQUESTED THAT THE ENTIRE CLAI M OF BAD DEBTS OF ` 34,43,077/- MAY BE ALLOWED. LD. D.R ON THE OTHER H AND ARGUED IN SUPPORT OF THE ORDER OF THE LD. CIT (A). 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFU LLY PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE CASE OF M/S. T.R.F LIMITED (SUPRA) IT WAS HELD BY THE HONBLE APEX COURT THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE . IT IS ENOUGH IF THE BAD DEBTS WRITTEN OFF AS IRRECO VERABLE IN THE ACCOUNT OF THE ASSESSEE . FROM THE FACTS OF THE GIVEN CASE BEFORE US, IT IS EVIDENT THAT THE ASSESSEE HAS WRITTEN OFF THE ENTIRE AMOUNT OF ` 34,43,077/- AS BAD DEBT IN ITS BOOKS OF ACCOUNTS BY DEBITING THE BAD DEBTS ACCOUNT AND CREDITING THE ASSESSEES CLIENTS ACCOUNT. THIS HAS RESULTED IN NIL BALANCE IN SOME OF THE ACCOUNTS O F THE ASSESSEES CLIENTS AND THERE WERE BALANCE DUE TO BE RECOVERED IN FEW OTHER ASSESSEES CLIENTS. AT THIS JUNCTURE IT IS PERTINENT TO NOTE THAT THE HONBLE APEX COURT HAS ONLY LAID DOWN THE RATIO THA T IF DEBTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS, THE SAME SHOU LD BE ALLOWED AS DEDUCTION. THERE IS NO REFERENCE AS TO ANY TREATME NT EITHER WITH RESPECT TO TOTAL CLOSURE OF THE ASSESSEES CLIENTS ACCOUNTS OR PARTIAL ITA NO. 1997/MDS/14 5 CLOSURE OF THE ASSESSEES CLIENTS ACCOUNTS. THERE FORE, AS POINTED OUT BY THE LD. A.R. ACCORDING TO THE DECISION RENDERED BY HONBLE APEX COURT, THE REVENUE IS BOUND TO ALLOW THE ENTIRE CLA IM OF BAD DEBT OF ` 34,43,077/-, IF SUCH AMOUNT IS WRITTEN OFF IN ITS B OOKS OF ACCOUNTS. THEREFORE, WE HEREBY DIRECT THE LD. ASSESSING OFFIC ER TO ALLOW THE ENTIRE CLAIM OF BAD DEBTS OF ` 34,43,077/- WHILE COMPUTING THE INCOME OF THE ASSESSEE PROVIDED IT IS WRITTEN OFF IN ITS B OOKS OF ACCOUNTS. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED AS INDICATED HEREIN ABOVE. ORDER PRONOUNCED ON 28 TH NOVEMBER, 2014. SD/- SD/- (V. DURGA RAO) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 28 TH NOVEMBER, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE