THE DCIT, Circle-1, V. M/S BIRLA VXL LTD., JAMNAGAR

ITA 232/RJT/1999

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0390 (ITAT-RAJKOT)
• Duration Of Justice: 19 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 1995-1996
• Appeal Filed On: 04-06-1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./I.T.A. NO.206 /RJT/1999 /ASSESSMENT YEAR : 1995-96 BIRLA VXL LIMIED, C/O.SARDA & SARDA, 102, KANCHAN JANQHA APTS., OPP.CRICKET GROUND, JAMNAGAR. [PAN: 31-801-CZ-1414] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT. APPELLANT /RESPONDENT . . ./I.T.A. NO.232/RJT/1999 /ASSESSMENT YEAR : 1995-96 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, RAJKOT. VS. BIRLA VXL LIMIED, C/O.SARDA & SARDA, 102, KANCHAN JANQHA APTS., OPP.CRICKET GROUND, JAMNAGAR. [PAN: 31-801-CZ-1414] APPELLANT /RESPONDENT /ASSESSEE BY SHRI VIMAL DESAI A.R. /REVENUE BY SHRI JITENDRA KUMAR CIT(DR) / DATE OF HEARING: 2 6 .11. 2018 /PRONOUNCEMENT ON 30 . 1 1 .2018 BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 2 OF 8 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THESE TWO APPEALS FILED BY THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI, AHMEDABAD(IN SHORT THE CIT (A)) DATED 30.03.1999 PERTAINING TO ASSESSMENT YEAR 1995-96 WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE AO, CENTRAL CIRCLE-1, RAJKOT(IN SHORT THE AO) DATED 31.03.1998 UNDER SECTION 143(3) OF INCOME TAX ACT,1961 (IN SHORT THE ACT). 2. THESE ARE CROSS APPEALS BY THE REVENUE AND ASSESSEE WHICH ARE DECIDED BY ITAT ORDER DATED 30.06.2008. HOWEVER, THE GROUND NO.6 OF BOTH THE APPEALS IS COMMON WAS REMAINED TO DECIDED, HENCE, ORDER OF ITAT WAS RECALLED TO DECIDE THE GROUND NO.6, WHICH IS AS UNDER : 3. ASSESSEE RAISED THE FOLLOWING GROUND OF APPEAL : (6) THE HONBLE CIT(A) HAS ERRED O FACTS AND IN LAW IN DISALLOWING THE CLAIM OF SUNDRY BALANCES WRITTEN OFF OF RS.1,32,66,216/-. 4. REVENUE RAISED THE FOLLOWING GROUND OF APPEAL : 6. THE LD.CIT(A) ERRED IN LAW AND ON FACTS IN PARTLY DELETING THE DISALLOWANCE OF SUNDRY BALANCES WRITTEN OFF AMOUNTING TO RS.12,00,798/-. BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 3 OF 8 5. GROUND NO.6 RELATES TO CONFIRMING ADDITION OF RS.1,32,66,216/- WHICH HAS BEEN CHALLENGED BY THE ASSESSEE AND DELETION OF THE ADDITION OF RS.12,00,798/- WHICH IS CHALLENGED BY REVENUE. 6. THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO DISALLOWED THE BAD DEBTS VIDE PARA PAGE 13 AS UNDER: THE BALANCE AMOUNT OF DEBTS OF RS.59,32,334/- HAD BEEN WRITTEN OFF IN THE ACCOUNTING PERIOD RELEVANT TO ASSESSMENT YEAR 1995-96. THE DEBTS OF AMOUNT OF RS.37,97,642/- HAD BEEN REVERTED BACK FROM THE UNIVERSAL ENGINEERING DIVISION IN THE ACCOUNT PERIOD RELEVANT TO ASSESSMENT YEAR 1995-96. 7. IT WAS SUBMITTED THAT IN THE CASE OF UNIVERSAL ELECTRICAL DIVISION BAD DEBT OF RS.59,32,334/- WERE CLAIMED AS BAD DEBT DURING THE YEAR UNDER CONSIDERATION. IT WAS SUBMITTED THAT THIS DIVISION WAS TRANSFERRED TO SUBSIDARY COMPANY WHICH VXL LANDIS AND GYR LTD., VIDE AGREEMENT DATED 30.09.1992 VIDE CLAUSE 14(K) OF THE AGREEMENT ALL THE OUTSTANDING RECEIVABLES OF THE ABOVE UNIT TO BE TRANSFERRED BACK TO THE ASSESSEE COMPANY IF THEY WERE NOT REALIZED BY 30.09.1993 (PAPER-BOOK-147) AS THE DEBTS OF RS.2,77,97,023/- WERE NOT RECOVERED, THEY WERE REVERTED BACK TO ASSESSEE COMPANY OUT OF WHICH RS.2,10,28,129/- WERE CLAIMED FOR IN AY 1994-95 AND CLAIMED AS BAD DEBT. THIS CLAIM WAS ALLOWED BY THE ITAT RAJKOT TO THE EXTENT OF RS.2,06,71,815/- VIDE ITS ORDER DATED 04.11.2011. OUT OF THE BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 4 OF 8 REMAINING BALANCE OF RS.67,68,894/- [RS.2,77,97,023/- -(MINUS) RS.2,10,28,129/-] DEBT OF RS.8,36,560/- HAD BEEN RECOVERED AND REMAINING AMOUNT OF RS.59,32,334/- HAS BEEN CLAIMED AS BAD DEBT IN THE YEAR UNDER CONSIDERATION. THE LD.COUNSEL SUBMITTED THAT ON SIMILAR FACTS THE ITAT HAS ALLOWED THE CLAIM OF BAD DEBTS IN PRECEDING YEAR, THEREFORE, THIS ADDITION SHOULD BE DELETED FOR THE YEAR UNDER CONSIDERATION. 8. WITH REGARD TO BAD DEBT OF RS.32,51,663/- OF UNIVERSAL ENGINEERING DIVISION IT WAS SUBMITTED THAT AS PER THE AGREEMENT, ALL THE OUTSTANDING RECEIVABLES OF THE ABOVE UNIT WERE TO BE TRANSFERRED BACK TO THE ASSESSEE COMPANY, IF THEY WERE NOT REALIZED BY 30.09.1994. OUT OF THE TOTAL OF BAD DEBTS OF RS.37,97,642/- THE AMOUNT OF RS.5,44,979/- RECOVERED BY THE ASSESSEE, AND BALANCE AMOUNT OF RS.32,51,663/- WERE CLAIMED AS BAD DEBT. BEING THE SIMILAR FACTS, AS IN THE CASE UNIVERSAL ELECTRICAL DIVISION THE SAME SHOULD BE ALLOWED AS BAD DEBTS. 9. WITH REGARD TO BAD DEBT OF RS.23,72,908/- THE LD.COUNSEL SUBMITTED THAT THE AMOUNT WRITTEN OFF PERTAINS TO KOCHER OIL MILLS LTD.RS.16,95,418/- 9PB-175-187) TUNGBHADRA INDIA LTD. RS.5,01,293/- (PAPER-BOOK-188-202), KALYAN SOLVENT EXTRACTION RS.1,55,430/- AND MISCELLANEOUS WRITTEN OFF RS.20,767/- WHICH BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 5 OF 8 WERE RELATED TO GOODS SOLD TO THESE PARTIES WHICH WERE NOT RECOVERED. THEREFORE, THIS ADDITION NEEDS TO BE DELETED. AS REGARD EXCISE DUTY RECEIVABLE IN RESPECT OF ABOVE DIVISION OF RS.1,44,217/-, OCTROI REFUND OF RS.6,77,584/- SAME IS NOT PRESSED, HENCE REQUIRED TO DISALLOWED. SIMILARLY AN AMOUNT OF RS.6,17,916/- PERTAINING TO CASH SUSTENANCE WHICH WAS OFFERED AS INCOME IN EARLIER YEARS AND WRITTEN OFF AS BAD DEBT BEING NOT RECOVERABLE THE SAME SHOULD BE ALLOWED EITHER AS A BAD DEBT OR AS A TRADING LOSS. HOWEVER, WITH REGARD TO AMOUNT OF RS.5,28,387/- OF OCF, SAHAJANPUR, ORIENTAL VINYLS LTD. RS.14,97,510/- AND STORE ADVANCE OF RS.54,495/- WERE NOT PRESSED BEFORE US. 10. WITH REGARD TO DELETION OF DISALLOWANCE OF SUNDRY BALANCE WRITTEN OFF OF AMOUNT TO RS.12,00,798/- AGITATED BY THE REVENUE BEFORE US, THE LD.COUNSEL SUBMITTED THAT THE CIT(A) HAS RIGHTLY DELETED THE SAID AMOUNT PERTAINING TO OCM UNIT OF THE ASSESSEE COMPANY OF RS.6,17,916/- REPRESENTING THE WRITTEN OFF AMOUNT DUE TO DDGFT BY CASH ASSISTANCE AND ALSO IN RESPECT OF THE AMOUNT OF RS.5,20,387/- DUE FROM OCM, SAHAJANPUR U/S.36(1)(VII) OF THE ACT AND SAME IS COVERED BY DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD., VS. CIT 223 ITR 397 (SC). SIMILARLY, BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 6 OF 8 THE DISALLOWANCES CONFIRMED BY CIT(A) ARE ALSO COVERED BY THIS DECISION AS WELL AS DECISION OF ITAT IN THE CASE OF ASSESSEE IN ITA NO.250/RJT/2011 FOR A.Y. 1994-95 DATED 04.11.2011. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAS TRANSFERRED THE UNIVERSAL ELECTRICAL DIVISION ON 30.09.1992 TO ITS SUBSIDIARY COMPANY NAMELY VXL LANDIS AND GEYR LTD., SIMILARLY, UNIVERSAL ENGINEERING DIVISION HAS BEEN TRANSFERRED TO SUBSIDIARY COMPANY NAMELY UNITRON LTD., ON 29.09.1993. AS PER CLAUSE 12(K) OF THE AGREEMENT FOR THE TRANSFER OF UNIVERSAL ELECTRICAL DIVISION STATES THAT ALL THE RECEIVABLE TRANSFERRED WITH THE FACTORY AS ON THE EFFECTIVE DATE WHICH REMAINS UNREALIZED ON 30.09.1993 SHALL BE TRANSFERRED BACK TO THE VENDOR BY ADJUSTMENT AGAINST THE AMOUNT OF LOAN FROM THE VENDOR [AS PER CLAUSE 3(B) OF THE AGREEMENT] OUTSTANDING IF ANY ON THAT DAY. ACCORDINGLY, AN AMOUNT OF BAD DEBTS OF RS.2,77,97,023/- WERE NOT RECOVERED AND THEY WERE WRITTEN OFF FOR ANY A.Y. 1994-95 AND CLAIMED AS BAD DEBT OF AMOUNTING RS.2,10,28,129/- WERE WRITTEN OFF IN A.Y. 1994-95 AND CLAIMED AS BAD DEBT. THE SAME WAS ALLOWED BY ITAT RAJKOT IN THE CASE OF ASSESSEE TO THE EXTENT OF RS.2,06,71,185/- VIDE ORDER DATED 04.11.2011. SIMILARLY, OUT OF TOTAL BAD DEBTS OF BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 7 OF 8 RS.37,97,642/- IN RESPECT OF UNIVERSAL ENGINEERING DIVISION AN AMOUNT OF RS.5,44,979/- HAS BEEN RECOVERED AND BALANCE AMOUNT OF RS.32,51,663/- HAS BEEN CLAIMED AS BAD DEBT. SINCE THE AMOUNT HAS BEEN REFERRED BACK AS PER CLAUSE 14K OF THE AGREEMENT THESE BAD DEBTS BECOMES OUTSTANDING LIABILITY OF THE ASSESSEE, HENCE FOLLOWING THE DECISION OF TRIBUNAL IN THE ASSESSEES OWN CASE OF UNIVERSAL ELECTRICAL DIVISION AND RS.32,51,663/- IN THE CASE OF UNIVERSAL ENGINEERING DIVISION IS DIRECTED TO BE DELETED. 12. WITH REGARD TO CLAIM OF RS.23,72,908/- OF SIDDHA SOYA DIVISION WE FIND THAT THESE PERTAINS TO PARTIES TO WHOM GOODS WERE SOLD OF WHICH EVIDENCES ARE PLACED AT PAPER-BOOK 175- 205. SINCE THE ASSESSEE HAS WRITTEN OFF THE SAME IN HIS BOOKS OF ACCOUNTS, THEREFORE SAME ARE ALLOWED AS BAD DEBTS IN THE LIGHT OF DECISION OF SUPREME COURT IN THE CASE OF TRF LTD.(SUPRA), ACCORDINGLY THE ADDITION OF RS.23,72,908/- IS DIRECTED TO BE DELETED. WITH REGARD TO EXCISE DUTY RECEIVABLE TO RS.1,44,217/- AND OCTROI OF THE REFUND OF RS.67,584/- AND OCF, SAHAJANPUR RECEIPT OF RS.5,28,387/- ORIENTAL VINYLS LTD., RS.14,97,510/- AND STORE ADVANCE OF RS.54,495/- ARE NOT PRESSED BEFORE US, HENCE DISALLOWANCE IN RESPECT OF THESE BAD DEBTS CLAIM IS UPHELD. WITH BIRLA VSL LTD., VS. DCIT, CENTRAL CIRCLE-1, RAJKOT /ITA NOS. 206(A) & 232(D) /RJT/1999/A.Y.1995-96 PAGE 8 OF 8 REGARD TO AMOUNT OF CASH ASSISTANCE OF RS.6,17,916/- IS ALSO DELETED, AS IT IS WRITTEN OFF AS BAD DEBT AND ALSO ALLOWABLE AS TRADING LOSS. 13. IN THE RESULT, APPEAL OF THE ASSESSEE PARTLY ALLOWED. ITA NO.232/RJT/1999 FOR A.Y. 1995-96 (BY REVENUE) : 14. WITH REGARD TO GROUND OF REVENUE IN RESPECT OF DELETION OF RS.12,00,798/- IS CONCERNED, WE FIND THAT THE ASSESSEE HAS WRITTEN OFF SAME IN THE BOOKS OF ACCOUNTS, THEREFORE, THE SAME HAS BEEN RIGHTLY DELETED BY CIT(A) AND ISSUE IS ALSO COVERED BY DECISION OF HONBLE SUPREME COURT IN THE CASE TRF LTD.(SUP). IN VIEW OF THESE FACTS, THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. 16. THE ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2018. SD/- SD/- ( .. /C.M. GARG) ( .. / O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER / RAJKOT, DATED : 30 TH NOVEMBER , 2018/ S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, RAJKOT