DCIT, CHENNAI V. M/s. Jain Granites & Projects India Ltd, CHENNAI

ITA 2280/CHNY/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8069 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-08-2016
• Assessment Year: 1999-2000
• Appeal Filed On: 27-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: N DEVANTHAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . ! , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO. 2280/MDS/2013 $ %$ /ASSESSMENT YEAR : 1999-2000 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(3), ROOM NO.513, 5 TH FLOOR, NEW BLOCK, 121, M.G.ROAD,. CHENNAI 600 034. V. M/S.JAIN GRANITES & PROJECTS INDIA LTD., 89, HARRINGTON ROAD, CHENNAI 600 030. PAN : AAACJ 1767 E ( &' /APPELLANT) ( ()&' /RESPONDENT) &' * + /APPELLANT BY : SHRI V.NANDAKUMAR, JCIT ()&'*+ /RESPONDENT BY : SHRI N.DEVANTHAN, ADVOCATE , *-' /DATE OF HEARING : 18.08.2016 . % *-' /DATE OF PRONOUNCEMENT : 07.11.2016 /O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A) IV CHENNAI DATED 30.08.2013 AND PERTAINS TO ASSESSM ENT YEAR 1999-2000. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ADDIT ION MADE BY THE ASSESSING OFFICER TOWARDS THE INTEREST INCOME ON IN TER CORPORATE DEPOSITS 2 I.T.A. NO.2280/MDS/2013 AND ADVANCES. SHRI V.NANDAKUMAR, THE LEARNED REPRES ENTATIVE FOR THE DEPARTMENT SUBMITTED THAT THE ASSESSEE MADE INTER C ORPORATE DEPOSITS AND ADVANCED LOAN. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS NOT RECOGNIZED ANY INTEREST INCOME EITHER FROM INTER CO RPORATE DEPOSIT OR LOAN. THE ASSESSEE BEING A COMPANY, ACCORDING TO THE LEAR NED DEPARTMENT REPRESENTATIVE, THE INCOME HAS TO BE RECOGNIZED ON ACCRUAL BASIS AS PER THE PROVISIONS OF SECTION 209 (3)(B) OF THE COMPANI ES ACT, 1956. AS PER THE ACCOUNTING STANDARD SUGGESTED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA ALSO PROVIDES FOR RECOGNIZING T HE INTEREST INCOME ON ACCRUAL BASIS. SINCE THE INTEREST INCOME WAS NOT RE COGNIZED BY THE ASSESSEE, THE ASSESSING OFFICER ESTIMATED THE INTER EST INCOME AT 14%. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) DELE TED THE ADDITION MADE BY THE ASSESSING OFFICER BY PLACING RELIANCE O N THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEAR 1998-99. ACCORDING TO THE LEARNED REPRESENTATIVE FOR THE ASS ESSMENT YEAR 1998-99, THIS TRIBUNAL REMANDED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR RE-CONSIDERATION. THE CIT(A) FOUND THAT THE AMO UNT OUTSTANDING WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT. WHILE RECORDIN G THAT FINDING, THE CIT(A) FAILED TO TAKE INTO CONSIDERATION THE CLOSIN G BALANCE IN RESPECT OF 18 PARTIES AS ON 31.03.1999. WITHOUT CONSIDERING THE C LOSING BALANCE, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. 3 I.T.A. NO.2280/MDS/2013 3. ON THE CONTRARY, SHRI N.DEVANATHAN, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT FOR THE ASSESSMENT YEAR 199 8-99 IN ASSESSEES OWN CASE, THIS TRIBUNAL FOUND THAT THE OUTSTANDING LOAN WAS WRITTEN OFF. SINCE THE RECOVERY OF THE OUTSTANDING AMOUNT FROM I NTER CORPORATE DEPOSIT AND THE LOAN WAS DOUBTED, THE ASSESSEE HAS NOT RECO GNIZED ANY INCOME. THE PRINCIPLES OF ACCRUAL OF INCOME COMES TO PLAY O NLY WHEN THE INCOME WAS RECOGNIZED BY THE ASSESSEE. IN THIS CASE, ADMIT TEDLY, NO INCOME WAS RECOGNIZED BY THE ASSESSEE. THEREFORE, THE FACT IS SIMILAR TO ASSESSMENT YEAR 1999-2000. MOREOVER, BALANCES OUTSTANDING WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THEREFORE, THE C IT(A) BY PLACING RELIANCE ON THE ORDER OF THIS TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED HIS RELIANCE ON THE JUDGMENT OF THE DELHI HIGH COURT IN CIT VS. VAS ISTH CHAY VYAPAR LTD. REPORTED IN 330 ITR 440. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE OUTSTANDING AMOUNT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT IS NOT IN D ISPUTE. THE ONLY CONTENTION OF THE REVENUE BEFORE THIS TRIBUNAL IS T HAT THE CIT(A) WITHOUT REFERRING TO CLOSING BALANCE AVAILABLE AS ON 31.03. 1999, ALLOWED THE CLAIM OF THE ASSESSEE. IT IS AN ADMITTED FACT THAT THE AS SESSEE HAS NOT RECEIVED THE INTEREST ON INTER CORPORATE DEPOSIT OR ADVANCES MADE TO OTHER COMPANIES. THEREFORE, IN VIEW OF THE JUDGMENT OF TH E DELHI HIGH COURT IN 4 I.T.A. NO.2280/MDS/2013 VASISTH CHAY VYAPAR LTD. (SUPRA), WHEN THE INTEREST INCOME WAS NOT RECOGNIZED AND THE RECOVERY OF THE PRINCIPAL AMOUNT IS DOUBTFUL, IT CANNOT BE SAID THAT INCOME WAS ACCRUED TO THE ASSESSEE EVE N ON THE MERCANTILE SYSTEM OF ACCOUNTING EVEN THOUGH THE ASSESSEE COMPA NY IS EXPECTED TO MAINTAIN THE ACCOUNTS OF MERCANTILE SYSTEM. SINCE T HE RECOVERY OF THE PRINCIPAL OUTSTANDING AMOUNT ITSELF IS DOUBTFUL AND THE ASSESSEE WRITTEN OFF THE OUTSTANDING AMOUNT, INTEREST INCOME CANNOT BE A CCRUED TO THE ASSESSEE. HENCE, THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSSSEE. 5. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. ORDER PRONOUNCED ON 07 TH NOVEMBER, 2016 AT CHENNAI. SD/- SD/- ( . ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) ' /ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, / /DATED, THE 07 TH NOVEMBER, 2016. SP. * (-01 21%- /COPY TO: 1. &' /APPELLANT 2. ()&' /RESPONDENT 3. , 3- ( )/CIT(A) 4. , 3- /CIT, 5. 14 (- /DR 6. 5$ 6 /GF.