Deputy Commissioner of Income Tax, Circle-1(1), Hyderabad V. M/s. Andhra Pradesh State Financial Corporation Limited, Hyderabad

ITA 2068/Hyd/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4593 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2009-2010
• Appeal Filed On: 08-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Bad and doubtful debts; Provision of bad debts
• Section: 143(3); 143(1); 201; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI A. M OH AN ALANKAMONY , ACCOUNTANT MEMBER I.T.A. NO. 2068 /HYD/201 8 ASSESSMENT YEAR: 20 09 - 10 DY. COMMISSIONER OF INCOME - TAX, CIRCLE 1 (2), HYDERABAD. VS ANDHRA PRADESH STATE FINANCIAL CORPORATION, HYDERABAD . PAN AABCA 9106B (APPELLANT) (RESPONDENT) DATE OF HEARING : 29 - 0 9 - 20 20 DATE OF PRONOUNCEMENT : 06 - 1 0 - 20 20 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : THIS IS REVENUE S APPEAL FOR THE AY 20 09 - 10 AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 8 , HYDERABAD, DATED 27 / 09 / 201 7 . THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY FILED ITS ORIGINAL RETURN OF INCOME FOR THE AY 2009 - 10 ON 23/09/2009 ADMITTING TOTAL INCOME AT RS. 30,62,57,624/ - AND BOOK PROFIT AT RS. FOR REVENUE : SHRI RAVI BABU FOR ASSESSEE : SHRI E.S. RANGANATH ITA NO. 2068 /HYD/201 7 ANDHRA PRADESH STATE FINANCIAL CORPORATION, HYD. : - 2 - : 44,43,59,576/ - . THE RETURN WAS INITIALLY PROCESSED U/S 143(1) OF THE I.T. ACT AND SUBSEQUENTLY SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143(3) WAS COMPLETED ON 02/12/2011 ASSESSING THE INCOME AT RS. 32,43,84,622/ - . THEREAFTER, FROM THE FINANCIALS SUBMITTED BY THE ASSESSEE, THE AO NOTICED THAT AN AMOUNT OF RS. 1337.79 WA S STATED TO BE CREDITED TO P&L ACCOUNT TOWARDS EXCESS PROVISION OF BAD DEBTS, BUT, ONLY RS. 966.33 LAKHS WAS THE ACTUAL CREDIT OFFERED TO TAX RESULTING IN UNDERSTATEMENT OF INCOME BY RS. 371.46 LAKHS AND AN AMOUNT OF RS. 2854.89 LAKHS WAS WRITTEN OFF AS B AD DEBTS, BUT, IN THE P&L ACCOUNT AN AMOUNT OF RS. 2946.83 LAKHS WAS DEBITED AS BAD DEBTS WRITTEN OFF, WHICH RESULTED IN EXCESS ALLOWANCE OF RS. 91.94 LAKHS. THEREFORE, BELIEVING THAT THERE WAS AN ESCAPEMENT OF INCOME CHARGEABLE TO TAX, HE REOPENED THE ASS ESSMENT BY ISSU ANCE OF NOTICE U/S 148 OF THE ACT ON 07/02/2014. THE ASSESSEE FILED THE REQUIRE D INFORMATION AND AFTER PERUSAL OF THE SAME, THE AO OBSERVED THAT THE DETAILS WITH REGARD TO BAD DEBTS WRITTEN OFF AT RS. 2946.83 LAKHS WAS NOT FURNISHED AND, THEREFORE, THERE WAS AN EXCESS ALLOWANCE OF RS. 91.94 LAKHS , WHICH HAS TO BE DISALLOWED AND HE ACC ORDINGLY BROUGHT THE SAID AMOUNT TO TAX . 3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) STATING THAT DURING THE COURSE OF RECOVERY OF LOANS, THE ASSESSEE HAD TO INCUR EXPENSES LIKE TRAVELLING EXPENSES, ITA NO. 2068 /HYD/201 7 ANDHRA PRADESH STATE FINANCIAL CORPORATION, HYD. : - 3 - : ADVERTISEMENT EXPENSES, TOWARDS SE CURITY SERVICE ETC., WHICH WERE RECOVERED ALONG WITH PRINCIPAL AND INTEREST AT THE TIME OF RECOVERY OF LOAN. HOWEVER, WHERE RECOVERY COULD NOT BE EFFECTED EITHER IN PART OR IN FULL, THE PRINCIPAL AMOUNT AS WELL AS INTEREST ACCRUED IS ACCOUNTED TOGETHER WI TH EXPENSES FOR RECOVERY AND THE ENTIRE AMOUNT IS WRITTEN OFF AS BAD DEBTS. THE DETAILS OF THE SAID EXPENSES WERE STATED TO BE FURNISHED BEFORE THE AO , AND WAS ALSO FURNISHED BEFORE THE CIT(A). 4. THE CIT(A) PERUSED THE SAME AND OBSERVED THAT AS PER TH E ACCOUNTING POLICY OF THE ASSESSEE, EXPENSES INCURRED FOR RECOVERY OF LOANS ARE NOT DEBITED STRAIGHTWAY TO THE P&L ACCOUNT, BUT, THEY ARE CARRIED TO A SEPARATE ACCOUNT AND IN THE CASE OF LOANS RECOVERY, THE EXPENSES ARE ALSO RECOVERED AND CREDITED TO THIS ACCOUNT AND ONLY IN THE CASE OF BAD DEBTS, SUCH EXPENSES ARE WRITTEN OFF ALONG WITH THE LOAN AMOUNT AND DEBITED TO THE P&L ACCOUNT. HE, THEREFORE, ACCEPTED THE ASSESSEES CLAIM AS ALLOWABLE AND ACCORDINGLY, DELETED THE DISALLOWANCE MADE BY THE AO. 5. A GGRIEVED BY THE RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL: 1 . THE ORDER OF THE LD. CIT (A) IS ERRONEOUS ON FACTS AS WELL AS IN LAW. ITA NO. 2068 /HYD/201 7 ANDHRA PRADESH STATE FINANCIAL CORPORATION, HYD. : - 4 - : II. THE LD. CIT(A) ERRED IN ALLOWING THE EXCESS CLAIM OF BAD DEBTS OF RS. 91.94 LAKHS WITHOUT APPRECIATING THE ACTION OF THE AO AS THE SAME ARE NOT ALLOWABLE EXPENSES UNDER THE HEAD BAD DEBTS WRITTEN OFF. III. THE LD. CIT(A) ERRED IN ACCEPTING THE CONTENTION OF THE ASSESSEE THAT THE EXCESS CLAIM OF BAD DEBTS RELATE TO THE EXPENSES INCURRED FOR RECOVERY OF THE LOANS WHICH HAVE BECOME BAD AS THE SAME DOES NOT CONSTITUTE BAD DEBTS. I V. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING OF APPEAL. 6. THE LD. DR SUPPORTED THE ORDER OF AO , WHILE THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE IS A FINANCIAL CORPORATION AND ADVANCING THE LOANS AND RECOVERY THERE OF ARE ITS REGULAR BUSINESS ACTIVITIES. AS CONTENDED BY THE ASSESSEE, IT HAD TO INCUR CERTAIN EXPENSES TOWARDS RECOVERY OF LOANS AND WHEREVER THE LOANS COULD NOT BE RECOVERED, THE EXPENSES IN RELATION TO SUCH LOANS ARE ALSO WRITTEN OFF AS BAD DEBTS ALONG WITH LOANS. THE CIT(A) HAS VERIFIED THE DETAILS FURNISHED BY THE ASSESSEE AND HAS ACCEPTED THAT THESE EXPENSES ARE ALLOWABLE AS BUSINESS EXPENSES. THE LD . DR HAS NOT BEEN ABLE TO REBUT THIS FINDING OF THE CIT(A) WITH ANY EVIDENCE TO THE CONTRARY. IN VIEW OF THE SAME, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A) AND ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ON THIS COUNT ARE DISM ISSED. ITA NO. 2068 /HYD/201 7 ANDHRA PRADESH STATE FINANCIAL CORPORATION, HYD. : - 5 - : 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER , 20 20 . SD/ - SD/ - ( A . M OH AN ALANKAMONY ) ( P. MADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDE RABAD, DATED : 6 TH OCTOBER , 20 20 . KV COPY TO : 1. DCIT, CIRCLE 1 ( 1 ), ROOM NO. 836 , 8 TH FLOOR, C BLOCK, IT TOWERS, HYDERABAD 500 004 2. M/S ANDHRA PRADESH STATE FINANCIAL CORPORATION, HYDERABAD, 5 - 9 - 194, CHIRAG ALI LANE, HYDERABAD 500 001. 3 . CIT(A PPEALS ) - 8 , HYDERABAD . 4 . THE PR. CIT - 1 , HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.