The ACIT, Vapi Circle, Vapi V. M/s. Alfa Lamination., Daman

ITA 2234/AHD/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1994 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Bad and doubtful debts
• Section: 143(3); 80IB; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : A BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HON' BLE SHRI A.N.PAHUJA, A.M. ) I.T.A. NO. 2234/AHD./2010 ASSESSMENT YEAR : 2004-2005 THE A.C.I.T., VAPI CIRCLE, VAPI -VS.- ALFA LAMINATION, DAMAN (PAN : AAAFA 3357Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.K.DHANESTA, D. R. RESPONDENT BY : SHRI S.N.SOPARKAR, A.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE OR DER DATED 23.03.2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), VALSA D DELETING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.25,69,705/- MADE BY THE ASSESSING O FFICER FOR THE ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED THE FACTS ARE THAT THE ASSESSEE I S A COMPANY ENGAGED IN PURCHASE OF CRGO (COLD ROLLED GRAIN ORIENTED) ROLLS AND CUTTING THEM INTO SHEETS OF VARIOUS SIZES. FOR THE ASSESSMENT YEAR UNDER APPEAL, IT FILED THE RETURN O F INCOME ON 29.10.04 DECLARING TOTAL INCOME OF RS.32,80,000/-. THE ASSESSING OFFICER FRAMED THE AS SESSMENT UNDER SECTION 143(3) ON TOTAL INCOME OF RS.44,40,000/-. THEREAFTER, THIS ASSESSME NT WAS REOPENED UNDER SECTION 147 AFTER RECORDING THE REASONS FOR DOING SO. SUBSEQUENTLY, O N 29.12.2009, THE ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTI ON 147 ON A TOTAL INCOME OF RS.52,07,280/- WHEREIN HE DISALLOWED BAD DEBTS AMOUNTING TO RS.25, 69,705/-. 3. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) DELETED THE ADDITION OF RS.25,69,705/- FOLLOWING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T,R.F. LTD. VS- CIT S INCE REPORTED IN 323 ITR PAGE 397 (SC). 2 ITA NO. 2234-AHD-2010 4. AGGRIEVED WITH THE ORDER OF THE LD. LEARNED COMM ISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING BEFORE US, SHRI R.K.DHANE STA, LD. D.R. APPEARED ON BEHALF OF THE REVENUE AND CONTENDED THAT IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT IF BAD DEBT IS ALLOWED, THE ASSESSEE COMPANY W ILL HAVE DOUBLE BENEFITS BY VIRTUE OF AVAILING 100% DEDUCTION UNDER SECTION 80IB OF THE I.T. ACT. HE SUBMITTED THAT THE DECISION OF THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS NOT ACCEPTABLE BECAUSE HE ERRED IN HOLDING THAT ALLOWANCE OF BAD DEBTS HAS NO RELATION WITH OF FERING OF INCOME IN EARLIER YEARS. HE FURTHER SUBMITTED THAT IN THE IMPUGNED ORDER, THE LD. LEARN ED COMMISSIONER OF INCOME TAX(APPEALS) FAILED TO APPRECIATE THAT BAD DEBTS CLAIMED BY THE ASSESSEE WAS RELATING TO SALES EFFECTED IN THE YEAR IN WHICH THE ASSESSEE WAS ELIGIBLE FOR DEDUCTI ON @100% AND NO TAX WAS OFFERED ON SUCH SALES. THUS, ALLOWING THE CLAIM OF BAD DEBTS IN THE ASSESSMENT YEAR UNDER APPEAL WOULD AMOUNT TO DOUBLE BENEFITS TO THE ASSESSEE. CONTINUING HIS ARGUMENT, THE LD. D.R. POINTED OUT THAT THE INTENTION OF THE LEGISLATURE IS DEFINITELY TO GRANT DEDUCTION UNDER SECTION 80IB TO THE INDUSTRIAL UNDERTAKINGS TO DEVELOP AND PROMOTE SOME SPECIFIED BACKWARD AREAS BUT IT NEVER INTENDED TO GIVE DOUBLE BENEFIT TO THE SAME INDUSTRIAL UNDERTAK INGS ON THE SAME SALES. HE SUBMITTED THAT THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) FAI LED TO DISTINGUISH THE FOLLOWING FACTS BROUGHT-IN BY THE ASSESSING OFFICER, WHILE FINALIZI NG THE ASSESSMENT, IT ITS ENTIRETY: (1) THE YEAR UNDER CONSIDERATION WAS THE 7 TH , YEAR OF OPERATION OF THE UNDERTAKING AND HENCE ASSESSEE WAS ELIGIBLE FOR DED UCTION U/S. 80IB @25%. ASSESSEE COULD HAVE CLAIMED THE BAD DEBT IN EARLIER YEARS, WHEREIN IT WAS ELIGIBLE FOR DEDUCTION U/S.80IB @100% RATHER WAITING TILL T HE ASSESSMENT YEAR UNDER CONSIDERATION WHEN THE LIABILITY TO PAY THE TAX HAS ARISEN TO THE ASSESSEE @75% ON THE PROFITS AND GAINS OF BUSINESS. (2) THE PROFIT ON THE SALE [WHICH HAS BEEN CLAIMED AS BAD DEBT DURING THE YEAR] WAS CLAIMED AS EXEMPT U/S.80IB IN THE EARLIER YEARS AND HENCE ALLOWANCE OF DEDUCTION, ON ACCOUNT OF BAD DEBT ON THE SAID SALES DURING THE YEAR WOULD AMOUNT TO DOUBLE DEDUCTION. 3 ITA NO. 2234-AHD-2010 ON THE BASIS OF THE AFORESAID SUBMISSIONS, THE LD. D.R. ARGUED THAT DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.25,69,705/- BY THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPE ALS) BE RESTORED. 6. ON THE OTHER HAND, SHRI S.N.SOPARKAR, LD. A.R. A PPEARING ON BEHALF OF THE ASSESSEE HEAVILY SUPPORTED THE ORDER OF THE LD. LEARNED COMM ISSIONER OF INCOME TAX(APPEALS). THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT AS PER THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. ( SUPRA ), LAW AFTER 1 ST APRIL, 1989, THE ASSESSEE ONLY TO ESTABLISH THAT D EBTS WERE WRITTEN OFF AND IT IS NOT NECESSARY TO ESTABLI SH THAT DEBTS IN FACT HAD BECOME IRRECOVERABLE. HE SUBMITTED THAT THE VIEW TAKEN BY THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS IN CONFORMITY WITH THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. ( SUPRA ). THEREFORE, THE VIEW TAKEN BY THE LD. LEARNED COMMIS SIONER OF INCOME TAX(APPEALS) BE UPHELD. 7. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY G ONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE JUDGEMENT OF THE HON'BLE SUPRE ME COURT IN THE CASE OF T.R.F. LTD. ( SUPRA ). ADMITTEDLY, THE BAD DEBTS IN QUESTION ARE WRITTEN O FF IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER APPEAL. THE HON'BLE SUPREME C OURT IN THE CASE OF T.R.F. LTD. ( SUPRA ) HELD AS UNDER: AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE IN COME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1, 1989, IN ORDER TO OBTAIN A DEDUCTION IN RE LATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FAC T, HAS BECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE . THE VIEW TAKEN BY THE LD. LEARNED COMMISSIONER OF I NCOME TAX(APPEALS) IS IN CONFORMITY OF THE RATIO OF THE DECISION OF THE HON'BLE SUPREME CO URT IN THE CASE OF T.R.F. LTD. ( SUPRA ). THE BAD DEBTS, IN QUESTION, WERE NEITHER WRITTEN OFF NOR CL AIMED IN THE EARLIER ASSESSMENT YEARS. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS CLAIMED THE DOUBLE DEDUCTION IN RESPECT OF THE DEBTS WHICH IS ALLOWABLE AS BAD DEBTS IN THE AS SESSMENT YEAR UNDER APPEAL. IN THESE CIRCUMSTANCES, WE HAVE NO OPTION BUT TO UPHOLD THE VIEW TAKEN BY THE LD. LEARNED COMMISSIONER 4 ITA NO. 2234-AHD-2010 OF INCOME TAX(APPEALS). HENCE, WE DECLINE TO INTERF ERE. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. THE ORDER PRONOUNCED IN THE COURT ON 11-02-2011. SD/- SD/- (A.N.PAHUJA) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11/ 02 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE 2) THE DEPARTMENT. 3) CIT(A.) CONCERNED, (4) CIT CONCERNED, (5) D.R. , ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR, ITAT, AHMEDABAD TALUKDAR/SR.P.S.