DCIT, Circle-5(1), Kolkata, Kolkata V. M/S. Adventz Investments And Holdings Ltd., Kolkata

ITA 2203/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1615 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 09-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOURABH KUMAR
• Keywords: Bad and doubtful debts
• Section: 142(1); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA (BEFORE SHRI J. SUDHAKAR REDDY, A.M. & SHRI S.S. VISWANETHRA RAVI, J.M.) ITA NO. 2203/KOL/2014 ASSESSMENT YEAR : 2010-11 D.C.I.T. CIR-5(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE KOLKATA - 700069 VS M/S. ADVENTZ INVESTMENTS AND HOLDINGS LTD. HONGKONG HOUSE, 31, BBD BAG (SOUTH), 1 ST FLOOR, DALHOUSIE, KOLKATA - 700001 PAN NO. AACCP3995N (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SOURABH KUMAR, ADDL. CIT ASSESSEE BY : NONE DATE OF HEARING : 18.04.2017 DATE OF PRONOUNCEMENT : 30-06-2017 ORDER SHRI S.S. VISWANETHRA RAVI, JM THIS APPEAL BY THE REVENUE AGAINST THE ORDER DATED 25.09.2014 PASSED BY THE CIT(APPEALS)-VII, KOLKATA FOR ASSESSMENT YEAR 2010-11. 2. THE ONLY ISSUE IS TO BE DECIDED IS AS TO WHETHER THE CIT(A) IS JUSTIFIED IN ALLOWING A DEDUCTION OF RS. 71,84,387/- ON ACCOUNT OF BAD DEBTS WRITTEN OFF IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY AND ENGAGED IN THE BUSINESS OF FINANCING, INVESTMENT AND SHARES AND SECURITIES AND DERIVES RENTAL ITA NO. 2203/KOL/2014 2 INCOME. THE ASSESSEE FILED RETURN OF INCOME SHOWING A TOTAL INCOME OF RS. 2,18,19,050/-. NOTICES UNDER SECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE THE ASSESSEE FILED THE DETAILS. 4. THE AO ON AN EXAMINATION OF RECORD FOUND THAT THE ASSESSEE WRITTEN OFF THE INTEREST WHICH WERE NOT RECEIVED FROM THREE PARTIES I.E. ENSO LTD., DUNESH KUMAR SINGHANIA & WILLARD INDIA LTD. IN EXPLANATION, THE ASSESSEE FILED ALL THE DETAILS OF INTEREST RECEIVED AND INTEREST WRITTEN OFF IN THIS REGARD. ACCORDING TO AO THE LOANS ADVANCED TO THE SAID PARTIES WERE STILL INTACT AND THE ASSESSEE CANNOT WRITE OFF INTEREST ON SUCH LOANS. ACCORDINGLY DEDUCTION UNDER SECTION 36(1)(VII) DENIED AND A SUM OF RS. 7,14,387/- WERE ADDED TO THE INCOME OF THE ASSESSEE AND THEREAFTER THE SAID AMOUNT HAS BEEN RECTIFIED AS 71,84,387/- VIDE HIS ORDER DATED UNDER SECTION 154 OF THE ACT. 5. BEFORE THE CIT(A), THAT IT WAS CONTENDED THAT THE ASSESSEE IS A NON-BANKING FINANCING COMPANY REGISTERED WITH THE RESERVE BANK OF INDIA. THE ASSESSEE HAS SUBMITTED THE IMPUGNED ADDITION WHICH CONSTITUTES THE INTEREST BEING NOT RECEIVABLE FROM THESE PARTIES TO WHOM INTER CORPORATE DEPOSIT WERE ADVANCED. THE ASSESSEE ALSO CONTENDED THAT THE TAXES WERE PAID ON THE SAID INTEREST INCOME IN PREVIOUS YEARS AND THE SAME HAS BEEN WRITTEN OFF DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND BY RELYING ON THE DECISION OF HONBLE SUPREME COURT AND IN THE CASE OF TRF ITA NO. 2203/KOL/2014 3 LTD. REPORTED IN 323 ITR 397 ALLOWED THE DEDUCTION TO THE ASSESSEE UNDER SECTION 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT. THE RELEVANT PORTION OF WHICH IS REPRODUCED HERE- IN-BELOW: I HAVE CONSIDERED FACTS OF THE CASE. THE APPELLANT IS A NON- BANKING FINANCE COMPANY REGISTERED WITH RBI. IT HAS, IN THE EARLIER YEARS, GIVEN LOANS TO THE THREE PARTIES I.E. ENSO LTD., DINESH KUMAR SINGHANIA AND WILLARD INDIA LTD. IN COURSE OF ITS REGULAR BUSINESS OF FINANCE. INTEREST ON THESE LOANS HAD BEEN ACCOUNTED FOR ON ACCRUAL BASIS AND HAD BEEN OFFERED FOR TAXATION IN THE EARLIER YEARS. IN THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS WRITTEN OFF THE SAID INTEREST. THE APPELLANT WAS NOT RECEIVING INTEREST FROM THESE PARTIES AND THEREFORE, THE LOANS HAD BEEN CLASSIFIED AS NPA. SINCE THE LOANS HAD BECOME NPA, THE APPELLANT STOPPED RECOGNIZING INTEREST INCOME ON THE SAME AND HAS WRITTEN OFF INCOME BOOKED IN EARLIER YEARS AMOUNTING TO RS. 71,84,387/-. AS PER PROVISIONS OF SECTION 36(1)(VII), AN ASSESSEE CAN CLAIM DEDUCTION IN RESPECT OF ANY BAD DEBT WRITTEN OFF AS A IRRECOVERABLE IN THE ACCOUNTS SUBJECT TO PROVISIONS OF SUB-SECTION (2). SUB-SECTION (2) OF SECTION 36 PRESCRIBES, THAT SUCH DEBT SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING INCOME OF THE ASSESSEE IN THE PREVIOUS YEAR OR AN EARLIER PREVIOUS YEAR OR SHOULD BE MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY LENDING CARRIED ON BY THE ASSESSEE. IN THE APPELLANTS CASE, INTEREST UNDER CONSIDERATION RELATES TO LOANS GIVEN IN ORDINARY COURSE OF BUSINESS, INTEREST HAVE BEEN TAKEN INTO ACCOUNT IN COMPUTING INCOME OF EARLIER YEARS AND HAS BEEN WRITTEN OFF IN THE ACCOUNTS FOR THE YEAR UNDER CONSIDERATION AS IRRECOVERABLE. THUS, IT FULFIL ALL THE CONDITIONS PRESCRIBED U/S 36(1)(VII) READ WITH SECTION 36(2) OF THE I.T. ACT. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER, THAT THE WRITE OFF WAS NOT BONA FIDE. IT HAS BEEN HELD IN A NUMBER OF DECISIONS INCLUDING THAT OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS CIT 323 ITR 397 THAT AFTER APRIL 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. AS LONG AS THE CONDITIONS PRESCRIBED U/S 36(1)(VII) AND 36(2) WERE SATISFIED DEDUCTION FOR BAD DEBT WAS TO BE ALLOWED. CONSIDERING THIS AND THE FACTS AND CIRCUMSTANCES OF THE CASE, DISALLOWANCE MADE BY THE ASSESSING OFFICER IN RESPECT OF INTEREST RECEIVABLE WRITTEN OFF IS DELETED. ITA NO. 2203/KOL/2014 4 6. THE LEARNED DR RELIED ON THE ORDERS OF THE AO. THE LEARNED AR REITERATED THE SUBMISSIONS AS MADE BEFORE THE CIT(A) AND SUPPORTED THE ORDER OF CIT(A) 7. HEARD RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. 8. WE FIND THAT THE ASSESSEE OFFERED INTEREST INCOME EARNED ON THE LOANS ADVANCED DURING THE COURSE OF ITS BUSINESS FOR TAXATION IN THE EARLIER YEARS. IT IS ALSO OBSERVED THAT THE ASSESSEE WAS NOT RECEIVING INTEREST FROM THE THREE PARTIES AND THE LOANS ADVANCE TO THEM ARE BECOME NPA. THEREAFTER, THE ASSESSEE STOPPED RECOGNISING THE INTEREST INCOME ON THE SAME AND ACCORDINGLY WRITTEN OFF IN ITS BOOKS OF ACCOUNTS. WE FIND THAT THE ASSESSEE HAS WRITTEN OFF THE IMPUGNED ADDITION IN ITS BOOKS ON ACCOUNT OF BAD DEBTS AND AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. SUPRA AS RELIED ON BY THE CIT(A) IN HIS IMPUGNED ORDER. THAT THE BAD DEBTS IS WRITTEN OFF IN THE ACCOUNTS, A DEDUCTION AS PROVIDED IN SECTION 36(1)(VII) CAN BE ALLOWED SUBJECT TO THE CONDITIONS CONTEMPLATED IN SECTION 36(2) OF THE ACT. WE FIND THAT CIT(A) EXAMINED THE FACTS OF THE CASE WITH THAT OF CONDITIONS PROVIDED IN SEC. 36(2) AND FOUND SATISFIED THAT THE ASSESSEE FULFILLED THE CONDITION UNDER CLAUSE (III) TO SUB SECTION (2) OF SECTION 36 OF THE ACT. THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. IN PARA 4 HELD THAT A DEDUCTION CAN BE GRANTED IF THE DEBT IS WRITTEN OFF IN THE BOOKS OF ACCOUNT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA), WE FIND ITA NO. 2203/KOL/2014 5 NO INFIRMITY IN THE ORDER OF CIT(A) AND IT IS JUSTIFIED. GROUND RAISED BY THE REVENUE IN THIS REGARD IS ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-06-2017 SD/- SD/- (J. SUDHAKAR REDDY) ( S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 30-06-2017 BISWAJIT COPY OF ORDER FORWARDED TO: 1 M/S. ADVENTZ INVESTMENTS AND HOLDINGS LTD. HONGKONG HOUSE, 31, BBD BAG (SOUTH), 1 ST FLOOR, DALHOUSIE, KOLKATA - 700001 2 D.C.I.T. CIR-5(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA - 700069 3 THE CIT(A), 4 THE CIT 5 DR TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA