ACIT, Meerut V. M/s. Accord Communication Ltd., Meerut

ITA 2017/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3664 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 03-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRENDRA KUMAR
• Section: 148; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A NO. 2017/DEL/10 ASSTT. YEAR 2006-07 ACIT CIRCLE-1, MEERUT VS. M/S. ACCORD COMM UNICATION LTD. 2-3, BASEMENT KANOHARLAL MARKET, SHARDA ROAD, MEERUT. (APPELLANT) (RESPONDENT) APPELLANT BY: AMRENDRA KUMAR, SR. DR RESPONDENT BY: NONE ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 1 ST FEBRUARY, 2010 PASSED FOR ASSTT. YEAR 2006-07. THE NOTICE OF HEARING WAS ISSUED BY THE REGISTRY FOR SERVING UPON THE ASSESSEE ON 29 TH JUNE 2010. IT APPEARS THAT NOTICE HAS NOT BEEN SERV ED UPON THE ASSESSEE. HOWEVER AFTER GOING THROUGH THE ORDER OF LD. CIT(A) WITH THE ITA NO. 2017/DEL/2010 ASSTT. YEAR 2006-07 2 ASSISTANCE OF LD. DR WE DO NOT FIND ANY MERIT IN TH IS APPEAL OF REVENUE. THEREFORE, WE DO NOT DEEM IT NECESSARY TO EXPLORE T HE SERVICE OF NOTICE UPON THE ASSESSEE BY OTHER MODES. WE ARE DECIDING APPEAL OF THE REVENUE EX PARTE QUA THE ASSESSEE. 2. IN THE FIRST GROUND OF APPEAL IT IS PLEADED BY T HE REVENUE THAT LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS. 1 1,52,901/- ADDED BY THE AO BY MAKING A DISALLOWANCE OUT OF BAD DEBT CLA IM. 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED ITS RETURN OF INCOME ON 29 TH JUNE 2006 DECLARING AN INCOME OF RS. 1,64,80,293/- . THE ASSESSMENT WAS REOPENED BY ISSUANCE OF NOTICE U/S 1 48 ON 18.12.2007. THE AO THEREAFTER ISSUED NOTICE U/S 143(2) ON 29.9. 2008, SHRI RAVINDER AGGARWAL , CHARTERED ACCOUNTANT APPEARED FROM TIME TO TIME AND FILED DETAILS BEFORE THE AO. ON SCRUTINY OF THE ACCOUNTS LD. AO FOUND THAT ASSESSEE HAS DEBITED A SUM OF RS.11,52,901/- AS BAD DEBT. IT EMERGES OUT FROM THE ASSTT. ORDER THAT SMALL AMOUNTS AGAINS T 63 PARTIES WERE OUTSTANDING, WHICH WERE WRITTEN OFF BY THE ASSESSEE ON ACCOUNT OF UNRECOVERABLE. OUT OF TOTAL SUM OF RS. 11,52,901/- A SUM OF RS. 1,59,149/- REPRESENTS VARIOUS ADVANCES MADE DURING THE NORMAL COURSE OF BUSINESS WHICH COULD NOT BE RECOVERED. THE ASSES SEE CLAIMED THAT ITA NO. 2017/DEL/2010 ASSTT. YEAR 2006-07 3 WRITING OF THESE AMOUNTS IS ALLOWABLE U/S 37 OF THE ACT. THE AO WAS OF THE OPINION THAT ASSESSEE FAILED TO PROVE THAT THES E DEBTS HAVE ACTUALLY BECOME BAD. THEREFORE ITS CLAIM CANNOT BE ALLOWED. 4. ON APPEAL LD. CIT(A) HAS DELETED THE DISALLOWANC E BY PUTTING RELIANCE UPON THE DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE OF CIT VS. AUTOMETERS LTD. 292 ITR 345. ACCORDING TO T HE LD. CIT(A) THERE IS A SIGNIFICANT DIFFERENCE BETWEEN THE PROVISIONS OF SECTION 36 (I)(VII) AS IT STOOD PRIOR TO 1.4.89, AND THE PROVISION AS STAN DS TILL DATE. PRIOR TO 1.4.89, IT WAS NECESSARY FOR THE ASSESSEE TO ESTABL ISH THAT THE DEBT HAD BECOME BAD, WHEREAS AFTER 1.4.89 FOR THE DEBT TO BE CLASSIFIED AS BAD, THE ASSESSEE HAS ONLY TO WRITE IT OFF AS IRRECOVERA BLE IN ITS ACCOUNT. LD. CIT (A) HAS FURTHER MADE A REFERENCE TO VARIOUS OTH ER CASE LAWS ON THIS ISSUE, NAMELY SURESH GAGGAL VS. ITO 222 CTR 96(HP), WITH THE ASSISTANCE OF LD. DR WE HAVE GONE THROUGH THE ORDER OF LD. CIT(A) AND DO NOT FIND ANY ERROR IN THE VIEW TAKEN BY THE LD. CIT(A). THE VIEW OF THE LD. CIT(A) IS DIRECTLY IN CONSONANCE WITH VARIOUS A UTHORITATIVE PRONOUNCEMENT REFERRED BY LD. CIT (A) IN IMPUGNED O RDER, NAMELY CIT VS. AUTOMETERS, SURESH GAGGAL VS. ITO ETC. THERE IS NO DISPUTE IN THE PREPOSITION THAT AFTER 1.4.89 ASSESSEE IS NOT SUPPO SED TO BRING DEMONSTRATIVE PROOF ON THE RECORD TO SHOW THAT DEBT S HAVE ACTUALLY ITA NO. 2017/DEL/2010 ASSTT. YEAR 2006-07 4 BECOME BAD. THE REQUIREMENT IS THAT SUCH DEBTS HAVE BEEN WRITTEN OFF IN THE ACCOUNTS AS IRRECOVERABLE. IN VIEW OF THE ABOVE DISCUSSION GROUND NO. 1 RAISED BY THE REVENUE IS REJECTED. 5. IN THE NEXT GROUND OF APPEAL THE GRIEVANCE OF RE VENUE IS THAT LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS . 50,000/- OUT OF TELEPHONE EXPENSES. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFA CTURING OF TELECOM EQUIPMENTS MAINLY CONSISTING OF EPABX (TELEPHONE EX CHANGE). IT HAS DECLARED A TOTAL TURN OVER OF RS. 19,53,29,480/-. T HE ASSESSEE HAD INCURRED A SUM OF RS. 20,15,082/- TOWARDS THE TELEP HONE EXPENSES. THE AO DISALLOWED A SUM OF RS. 50,000/- ON THE GROUND T HAT ELEMENT OF PERSONAL USE OF THIS FACILITY CANNOT BE RULED OUT. LD. CIT(A) DELETED THE DISALLOWANCE BY FOLLOWING THE JUDGMENTS OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF SAYAJI IRON & ENGG. CO. VS. CIT REPORTED IN 253 ITR 749. ACCORDING TO THIS DECISION IN A CASE OF A COMPANY NO DISALLOWANCE FOR PERSONAL USE CAN BE MADE. APART FR OM THIS LD. CIT(A) HAS PLACED A RELIANCE ON LARGE NUMBER OF OTHER CASE S NOTICED ON PAGE 9 OF THE IMPUGNED ORDER. ITA NO. 2017/DEL/2010 ASSTT. YEAR 2006-07 5 6. ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTAN CES, THE TOTAL TURN OVER DECLARED BY THE ASSESSEE, THE QUANTUM OF TELEP HONE EXPENSES DEBITED, WE DO NOT FIND ANY MERIT IN THE FINDING OF AO FOR WORKING OUT AN ADHOC DISALLOWANCE OF RS. 50,000/-. MORE PARTICULAR LY WHEN ASSESSEE IS A COMPANY WHERE NO PERSONAL USER OF SUCH FACILITIES CAN BE CONSIDERED. THIS GROUND OF APPEAL IS REJECTED. 7. IN THE NEXT GROUND OF APPEAL THE GRIEVANCE OF T HE REVENUE IS THAT LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 3897/-OUT OF CLUB EXPENSES. A SUM OF RS. 3,897/- WAS PAID TO WHE ELERS CLUB FOR EMPLOYEE DIRECTOR. ACCORDING TO THE ASSESSEE IT CAN NOT BE SAID TO BE PERSONAL EXPENDITURE AND THEREFORE IT CANNOT BE DIS ALLOWED. LD. CIT(A) DELETED THE DISALLOWANCE AFTER CONSIDERING THE FACT S AND CIRCUMSTANCES. 8. ON DUE CONSIDERATION OF THE ORDER OF THE LD. CIT (A) IN THE LIGHT OF JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE O F CIT VS. NESTLE INDIA REPORTED IN 296 ITR 682 WHEREIN IT HAS BEEN HELD TH AT PAYMENT MADE AS CLUB MEMBERSHIP FEES IS ALLOWABLE BUSINESS EXPENDIT URE. WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). THE AO HAS NOT DISCUSSED THE NATURE OF PAYMENT . HE TREATED IT AS PERSONAL EXPENSES. ITA NO. 2017/DEL/2010 ASSTT. YEAR 2006-07 6 LD. CIT(A) HAS HELD THAT IN CASE OF COMPANY THERE C ANNOT BE ANY PERSONAL EXPENSE. LD. CIT(A) HAS RIGHTLY DELETED T HE ABOVE. 9. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 9.7.2010. SD- [K.G. BANSAL] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 9.7.2010 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT