ACIT Cle III, Coimbatore V. S.S.Manian, Coimbatore

ITA 2348/CHNY/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73662 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-02-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 31-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM IRS
• Keywords: Bad and doubtful debts
• Section: 143(3); 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , ! '# , $ !%' !& BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENTAND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ! ./ ITA NO.2348(MDS)/2012 $ ' (' / ASSESSMENT YEAR : 2009-10 & C.O. NO. 28(MDS)/2013 & C.O. NO. 16(MDS)/2014 (IN ITA NO.2348(MDS)/2012) THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE III, 63, RACE COURSE ROAD, COIMBATORE 641 018. V. SHRI S.S. MANIAN, NO.285, N.H. ROAD, UKKADAM, COIMBATORE 641 001. PAN : ADJPM 0921 E ( #* ) (APPELLANT) ( ,-#* ) (RESPONDENT & CROSS-OBJECTOR) #* . ! / APPELLANT BY : SHRI GURU BHASHYAM, IRS, JCIT ,-#* . ! / RESPONDENT BY : NONE ! / . 01 / DATE OF HEARING : 10 TH FEBRUARY, 2014 23( . 01 / DATE OF PRONOUNCEMENT : 10 TH FEBRUARY, 2014 2 I.T.A. NO. 2348/MDS/2012 C.O. NO. 28/MDS/2013 C.O. NO. 16/MDS/2014 / O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT THE APPEAL IS FILED BY THE REVENUE, THE CROSS-OBJ ECTIONS ARE FILED BY THE ASSESSEE. THE MATTER RELATES TO ASSES SMENT YEAR 2009- 10. THE APPEAL AND CROSS-OBJECTIONS ARE DIRECTED A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-I AT COIMBA TORE, DATED 9.10.2012 AND ARISE OUT OF THE ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. WHEN THE MATTER WAS CALLED ON FOR HEARING, NOBOD Y WAS PRESENT FOR THE RESPONDENT-ASSESSEE, INSPITE OF NOT ICE. THEREFORE, WE PROCEED TO DISPOSE OF THE APPEAL AND CROSS-OBJEC TIONS, EXPARTE, QUA THE ASSESSEE. 3. WE HEARD SHRI GURU BHASHYAM, THE LEARNED JOINT COMMISSIONER OF INCOME TAX, APPEARING FOR THE REVEN UE. 4. THE ONLY ISSUE RAISED IN THE APPEAL FILED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS E RRED IN ALLOWING A SUM OF ` 11,15,473/- AS DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. IT IS THE CASE OF THE REVE NUE THAT THE SAID 3 I.T.A. NO. 2348/MDS/2012 C.O. NO. 28/MDS/2013 C.O. NO. 16/MDS/2014 AMOUNT WAS CLAIMED AS DEDUCTION BY THE ASSESSEE, BY WAY OF BAD DEBTS. THE AMOUNT ACTUALLY RELATED TO NON-RECOVERY OF SHOP ADVANCES GIVEN BY THE ASSESSEE FOR TAKING SHOP PREM ISES ON RENT FOR RUNNING HIS BRANCHES AT DIFFERENT PLACES LIKE, ERODE, SALEM, CHENNAI, MADURAI, ETC. AS SHOPS WERE CLOSED DOWN B Y THE ASSESSEE IN THE LIGHT OF THE BAN IMPOSED BY THE STA TE GOVERNMENT ON SALE OF LOTTERY TICKETS, THE SHOP ADVANCES WERE NOT PAID BACK BY THE LAND LORDS. IT IS IN THESE CIRCUMSTANCES, THE ASSESSEE HAS CLAIMED THOSE ADVANCES AS DEDUCTION BY WAY OF BAD D EBTS. 5. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF TH E ASSESSEE TREATING THE ADVANCES IN THE NATURE OF CAPITAL ASSE T AND THEREFORE, THE LOSS WAS IN THE NATURE OF A CAPITAL LOSS. IT I S THE CASE OF THE REVENUE THAT THE SHOP ADVANCES WERE SHOWN BY THE AS SESSEE IN HIS BALANCE SHEET UNDER THE HEAD ADVANCES AND NOT AS SUNDRY DEBTORS. THEREFORE, IT IS THE CASE OF THE REVENUE THAT THE SAME SHOULD HAVE BEEN DISALLOWED AS CAPITAL IN NATURE. 6. BUT, IN FIRST APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THESE AMOUNTS WERE ADVANCES GIV EN BY THE ASSESSEE FOR AVAILING SHOPS ON RENT AND THE SAME WA S DONE IN THE COURSE OF CARRYING ON HIS BUSINESS FOR THE PURPOSE OF BUSINESS 4 I.T.A. NO. 2348/MDS/2012 C.O. NO. 28/MDS/2013 C.O. NO. 16/MDS/2014 ALONE. HE ACCORDINGLY HELD THAT THESE IRRECOVERABL E SHOP ADVANCES COULD NOT BE HELD TO BE CAPITAL IN NATURE. HE, THE REFORE, ACCEPTED THE CONTENTION OF THE ASSESSEE AND DIRECTED THE ASS ESSING OFFICER TO GIVE DEDUCTION FOR THE DISPUTED AMOUNT OF ` 11,15,473/-. 7. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE F IND NO REASON TO DEVIATE FROM THE CONCLUSION ARRIVED AT BY THE COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE MIGHT HAVE CLAIMED THE DEDUCTION BY WAY OF BAD DEBTS OR THE AS SESSEE MIGHT HAVE GROUPED THE ADVANCES UNDER THE HEAD ADVANCES AND NOT AS SUNDRY DEBTORS. BUT, THIS NOMENCLATURE GIVEN BY THE ASSESSEE ALONE IS NOT THE MATTER TO BE LOOKED INTO. IT IS T HE PITH AND SUBSTANCE OF THE ISSUE. THE ASSESSEE HAS TAKEN A N UMBER OF SHOPS TO OPEN HIS BRANCH OFFICES AT DIFFERENT PLACES. IT IS OBVIOUS THAT THE ASSESSEE HAD TO PAY ADVANCES FOR OBTAINING SHOPS ON LEASE. WHEN THE BUSINESS WAS CLOSED DOWN ALL OF A SUDDEN, BECAU SE OF THE BAN IMPOSED BY THE STATE GOVERNMENT ON SALE OF LOTTERY TICKETS, THE ASSESSEE WAS NOT SUCCESSFUL IN GETTING BACK THE SHO P ADVANCES GIVEN TO SHOP OWNERS. THEREFORE, THE ASSESSEE HAS NO OTHER WAY BUT TO CLAIM THOSE IRRECOVERABLE ADVANCES AS LOSS I NCURRED IN THE COURSE OF CARRYING ON OF BUSINESS. EVEN IF THE ASS ESSEE HAS QUALIFIED THE DEDUCTION AGAINST BAD DEBTS, IT IS STILL DEDUCTIBLE 5 I.T.A. NO. 2348/MDS/2012 C.O. NO. 28/MDS/2013 C.O. NO. 16/MDS/2014 UNDER SECTION 37 AS BUSINESS LOSS. NEITHER THE SHO P ADVANCES COULD BE CONSIDERED AS CAPITAL IN NATURE. THE ADVA NCES WERE PAID BY THE ASSESSEE TO OBTAIN LEASE AND LICENSE OF THE PREMISES WITH A PERMISSIBLE RIGHT TO USE THE PROPERTY. THE ASSESSE E WAS NOT ACQUIRING ANY ENDURING BENEFIT OR ACQUIRING ANY TAN GIBLE OR INTANGIBLE ASSET. THEREFORE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE CLAIM OF THE EXPENDITURE MADE BY THE A SSESSEE AS CAPITAL IN NATURE. 8. THEREFORE, WE FIND THAT THERE IS NO MERIT IN THE APPEAL FILED BY THE REVENUE. THEREFORE, ITS APPEAL IS LIABLE TO BE DISMISSED. 9. AS FAR AS THE CROSS-OBJECTION IN C.O. NO. 28/MDS /2013 IS CONCERNED, THE ASSESSEE HAS MAINLY CONTENDED FOR SU STAINING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). AS THE APPEAL FILED BY THE REVENUE HAS ALREADY BEEN DISMISSED, TH IS CROSS- OBJECTION DOES NOT SURVIVE AND IT IS THEREFORE TO B E DISMISSED AS INFRUCTUOUS. 10. THE OTHER CROSS-OBJECTION IN C.O. NO. 16/MDS/20 14 FILED BY THE ASSESSEE IS ONLY A DUPLICATE FILING. MOREOVER, IT IS BARRED BY LIMITATION AS WELL. THE SAID C.O. IS LIABLE TO REJ ECTED AS NOT ADMITTED ON RECORD. 6 I.T.A. NO. 2348/MDS/2012 C.O. NO. 28/MDS/2013 C.O. NO. 16/MDS/2014 11. IN RESULT, THE APPEAL FILED BY THE REVENUE AND THE TWO CROSS- OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDERS PRONOUNCED IN THE OPEN COURT AT THE TIME O F HEARING ON MONDAY, THE 10 TH OF FEBRUARY, 2014 AT CHENNAI. SD/- SD/- (VIKAS AWASTHY) (DR. O.K. NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED, THE 10 TH FEBRUARY, 2014. KRI. COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT-I, COI MBATORE 4. CIT(A)-I, COIMBATORE 5. DR 6. GF.