Nalwa Sons Investments Ltd., Haryana V. DCIT, New Delhi

ITA 2124/DEL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5910 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2005-2006
• Appeal Filed On: 19-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY VERMA
• Assessee Lawyers: ROHIT JAIN
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT & SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO.2124/DEL/2016 ASSESSMENT YEAR: 2005-06 NELWA SONS INVESTMENT LTD. (EARLIER KNOWN AS JINDAL STRIPS LTD.) O.P. JINDAL MARG, HARYANA, INDIA. VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-13(1), NEW DELHI. TAN/PAN: AAACJ 2734R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ROHIT JAIN, ADV. & SHRI DEEPESH JAIN, CA RESPONDENT BY: SHRI VIJAY VERMA, CIT-DR DATE OF HEARING: 14 06 2018 DATE OF PRONOUNCEMENT: 21 06 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE IMPUGNED ORDER DATED 04.06.2015, PASSED BY LD. CIT (APPEALS)-XX, NEW DELHI FOR THE ASSESSMENT YEAR 2005-06 IN RELATION TO PENALTY PROCEEDINGS U/S.271(1)(C). 2. THE ASSESSEE IS AGGRIEVED BY LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF RS.1811.73 LACS IN RESPE CT OF LOAN AND ADVANCES WRITTEN OFF DURING THE RELEVAN T ASSESSMENT YEAR. I.T.A. NO.2124/DEL/2016 2 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE, MR. ROHIT JAIN SUBMITTED THAT IN THE QUANTUM PROCEEDING S THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESS EE WHEREIN THE TRIBUNAL HAS DELETED THE ENTIRE ADDITIO N MADE ON THIS COUNT. 4. LEARNED DR TOO ADMITTED THAT IN THE QUANTUM PROCEEDINGS, THIS MATTER STANDS DECIDED IN FAVOUR O F THE ASSESSEE. 5. FROM THE PERUSAL OF THE IMPUGNED ORDER AS WELL AS THE QUANTUM ORDER OF THE TRIBUNAL IN ITA NO.1425/DEL/2013 ORDER DATED 16.04.2018, WE FIND THAT THE TRIBUNAL HAS DELETED THE ADDITION OF RS.1811.73 LAC AFTER OBSERVING AND HOLDING AS UNDER :- WE HAVE CONSIDERED RIVAL SUBMISSIONS. ON GROUND NO .1, IT IS HELD THAT THE ASSESSEE WAS AN NBFC IN AY UNDE R APPEAL AND THE REGISTRATION AS SUCH IS EFFECTIVE FR OM THE DATE OF APPLICATION DATED 09.03.2004 BECAUSE OF THE SCHEME OF ARRANGEMENT AND DEMERGER APPROVED BY THE HONBLE PUNJAB & HARYANA HIGH COURT VIDE JUDGEMENT DATED 30.06.2003 WHEREBY THE ASSESSEE SHALL BE DEEM ED TO BE AN INVESTMENT COMPANY AND SHALL BE REGISTERED AS NON BANKING FINANCIAL COMPANY AS PER RBI ACT. THE ASSESSEE HAS FILED THE BALANCE SHEET OF THE DEBTOR COMPANY TO SHOW THAT THEY HAVE ACCUMULATED LOSS FRO M EARLIER YEARS. THE INVESTMENT WAS MADE BY THE ASSES SEE WAY BACK IN 1998 AND NOT IN THE YEAR UNDER CONSIDERATION. THE PRINCIPAL AMOUNT COULD NOT BE RECOVERED AND EVEN THE INTEREST WAS ALSO NOT RECOVE RABLE. I.T.A. NO.2124/DEL/2016 3 THE ASSESSEE COMPANY, THEREFORE, WRITTEN OFF THE PR INCIPAL AMOUNT AS WELL AS INTERESTS AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNTS AS PER SECTION 36(L)(VII) OF THE ACT. T HE ASSESSEE, THEREFORE, SATISFIED THE CONDITION OF SEC TION 36(1)(VII) OF THE ACT. LD.CIT(A) FOUND AS REGARDS I NTEREST AMOUNT THAT IT IS ALLOWABLE UNDER ABOVE PROVISION A ND ISSUE IS COVERED BY THE JUDGEMENT OF HONBLE SUPREM E COURT IN THE CASE OF TRF LTD. (SUPRA). SINCE THE AS SESSEE WAS AN INVESTMENT COMPANY AND IT WAS A PRINCIPAL BUSINESS OF THE ASSESSEE TO GRANT LOAN AND ADVANCE WHICH WAS ALSO GRANTED EARLIER, THEREFORE, IF THE P RINCIPAL AMOUNT AND INTERESTS IS NOT RECOVERABLE FROM DEBTOR COMPANY FOR LAST SEVERAL YEARS, THE ASSESSEE CORREC TLY WRITE OFF SAME IN ITS BOOKS OF ACCOUNT AS IRRECOVER ABLE. THE CLAIM OF THE ASSESSEE IS SUPPORTED BY THE BALAN CE SHEET OF THE DEBTOR COMPANY TO SHOW THAT THEY HAVE ACCUMULATED LOSSES. THE DECISIONS RELIED UPON BY LD . COUNSEL FOR THE ASSESSEE SUPPORT THE CLAIM OF BAD D EBT ON PRINCIPAL AMOUNT AS WELL AS ON INTERESTS. THE AO TH US SHOULD NOT HAVE REJECTED THE CLAIM OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE THUS ALLOWABLE AS BAD DEBTS A S WELL AS BUSINESS LOSS. WE ACCORDINGLY, SET ASIDE TH E ORDERS OF THE AUTHORITIES BELOW AND DELETE THE ADDI TION OF RS. 1811.73 LAKHS SUSTAINED BY THE LD.CIT(A). GROUN D NO.2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED 6. ONCE THE ADDITION ITSELF HAS BEEN DELETED IN THE QUANTUM PROCEEDINGS, THEN LEVY OF PENALTY U/S.271(1)(C) FOR THE SAME ADDITION CANNOT BE SUSTAINED. ACCORDINGLY, PENALTY LEVIED BY THE ASSESSING OFFICER STANDS DELETED. I.T.A. NO.2124/DEL/2016 4 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JUNE, 2018. SD/- SD/- [G.D. AGRAWAL] [AMIT SHUKLA] PRESIDENT JUDICIAL MEMBER DATED: 21 ST JUNE, 2018