Sterling Holiday Resorts India Ltd., CHENNAI V. ACIT, CHENNAI

ITA 2369/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90699 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 02-06-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 19-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KRISHNAMURTHY
• Assessee Lawyers: R VISWANATHAN
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # , $ & BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO . 2369/MDS/2014 ( / ASSESSMENT YEAR:2006-07) STERLING HOLIDAY RESORTS INDIA LTD. 7, 3 RD CROSS STREET, CITI TOWER, KASTURBA NAGAR ADYAR, CHENNAI-600 020. VS ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-VI(4), CHENNAI-600 034. PAN:AADCS4841D ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VISWANATHAN, C.A /RESPONDENT BY : MR. KRISHNAMURTHY, CIT /DATE OF HEARING : 2 ND JUNE, 2015 /DATE OF PRONOUNCEMENT : 24 TH JULY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF THE COMMISSIONER OF INCOME TAX (APPEALS-)-VI, CHENN AI DATED 17.07.2014 FOR THE ASSESSMENT YEAR 2006-07. 2. THE FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN SUSTA INING THE DISALLOWANCE UNDER SECTION 36(1)(VII) OF THE AC T IN RESPECT OF PROVISION OF DOUBTFUL ADVANCE OF ` 38,54,270/-. 2 ITA NO.2369 /MDS/2014 3. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS T HAT DISALLOWANCE WHICH WAS MADE BY THE ASSESSING OFFICE R TOWARDS PROVISION FOR DOUBTFUL ADVANCE OF ` 38,54,270/- HAS ALREADY BEEN ADDED BACK BY THE ASSESSEE IN ITS COMP UTATION OF INCOME FILED FOR THE ASSESSMENT YEAR UNDER CONSI DERATION. HE INVITED OUR ATTENTION TO PAGE 5 OF THE PAPER BOO K WHICH IS COMPUTATION FILED FOR THE ASSESSMENT YEAR 2006-07 AND SUBMITS THAT ASSESSEE HAS DISALLOWED ` 69,66,588/- UNDER SECTION 36(1)(VII) OF THE ACT. FURTHER REFERRING TO PAGE 6 OF THE PAPER BOOK WHICH IS SCHEDULE 12 OF THE BALANCE SHEE T I.E. ADMINISTRATION AND OTHER EXPENSES, COUNSEL SUBMITS THAT THE SAID AMOUNT OF ` 69,66,588/- CONSISTS OF PROVISION FOR DOUBTFUL DEBTS OF ` 31,12,318/- AND PROVISION OF DOUBTFUL ADVANCE OF ` 38,54,270/-. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE GROUND RAISED BY THE ASSESSEE EARLIER BEFORE THE TR IBUNAL WAS WITH RESPECT TO DISALLOWANCE OF ` 31,12,318/- REGARDING PROVISION FOR DOUBTFUL DEBTS AND THIS GROUND WAS N OT PRESSED BEFORE THE TRIBUNAL FOR THE REASONS NOT KNOWN. HE S UBMITS THAT TRIBUNAL THEREFORE HAD NO OCCASION TO ADJUDICA TE ON THE DISALLOWANCE OF PROVISION FOR DOUBTFUL DEBTS. THE ISSUE IN QUESTION IN THE PRESENT APPEAL IS DISALLOWANCE FO R PROVISION 3 ITA NO.2369 /MDS/2014 FOR DOUBTFUL ADVANCE OF ` 38,54,270/- AND SINCE DOUBTFUL ADVANCE OF ` 38,54,270/- WHICH WAS ALREADY INCLUDED IN ` 69,66,588/- AND WAS DISALLOWED BY THE ASSESSEE I N ITS COMPUTATION OF INCOME, THERE IS NO JUSTIFICATION AT ALL IN DISALLOWING THE SAID AMOUNT ONCE AGAIN. 4. DEPARTMENTAL REPRESENTATIVE SUPPORTS THE ORDERS OF LOWER AUTHORITIES. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE PAPER BOOK FILED BY THE ASSESSEE. THE TRIBU NAL VIDE ORDER DATED 30.08.2012 DISMISSED THE GROUND IN RESP ECT OF PROVISION FOR DOUBTFUL ADVANCE AS NOT PRESSED. THER E WAS NO OCCASION FOR THE TRIBUNAL TO ADJUDICATE THE ISSUE O F PROVISION FOR DOUBTFUL ADVANCE IN THAT APPEAL. THEREFORE, LOW ER AUTHORITIES PLACING RELIANCE ON THE DECISION OF THI S TRIBUNAL IN NOT CONSIDERING THE PLEA OF THE ASSESSEE THAT PROVI SION FOR DOUBTFUL ADVANCE OF ` 38,54,270/- WAS ALREADY CONSIDERED BY THE ASSESSEE ITSELF IN THE RETURN OF INCOME, APP EARS TO BE NOT PROPER. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 47 OF THE 4 ITA NO.2369 /MDS/2014 ACT DISALLOWED PROVISION FOR DOUBTFUL ADVANCE OF ` 38,54,270/- REJECTING THE CONTENTION OF THE ASSESSEE THAT THIS AMOUNT HAS ALREADY INCLUDED IN ` 69,66,588/- WHICH WAS DISALLOWED BY THE ASSESSEE ITSELF IN COMPUTATION UNDER SECTION 36(1)( VII) OF THE ACT. THE ASSESSING OFFICERS CONTENTION WAS THAT A SSESSEE DID NOT OBJECT BEFORE THE TRIBUNAL WITH REGARD TO D ISALLOWANCE OF ` 31,12,318/- TOWARDS PROVISION FOR DOUBTFUL DEBTS MA DE BY THE ASSESSING OFFICER. THEREFORE, HE WAS OF THE OPI NION THAT SINCE THE ASSESSEE WAS NOT OBJECTED FOR DISALLOWANC E TOWARDS PROVISION FOR DOUBTFUL DEBTS, HE DOUBTED TH E SUBMISSION OF THE ASSESSEE THAT PROVISION FOR DOUBT FUL ADVANCE AMOUNTING TO ` 38,54,270/- IS PART OF ` 69,66,588/- AND THEREFORE MADE DISALLOWANCE. THE COMMISSIONER O F INCOME TAX (APPEALS) ALSO SUSTAINED THE DISALLOWANC E OBSERVING THAT THE TRIBUNAL DISMISSED THE APPEAL OF THE ASSESSEE ON A SIMILAR ADDITION IN RESPECT OF PROVIS ION FOR DOUBTFUL DEBTS WHICH WAS PART OF CLAIM OF ` 69,66,588/-, AS THE ASSESSEE DID NOT PRESS FOR ADJUDICATION OF THAT GROUND . 5 ITA NO.2369 /MDS/2014 6. WE HAVE PERUSED THE COMPUTATION OF INCOME AND TH E SCHEDULE AT PAGE 6 OF THE PAPER BOOK WITH REGARD TO ADMINISTRATION AND OTHER EXPENSES WHICH CLEARLY SH OWS THAT ASSESSEE IN FACT HAD DISALLOWED BOTH THE PROVISION FOR DOUBTFUL DEBTS OF ` 31,12,318/- AND PROVISION FOR DOUBTFUL ADVANCES OF ` 38,54,270/- WHILE COMPUTING INCOME FOR THE ASSESSMENT YEAR 2006-07. THUS, WE DIRECT THE ASSESS ING OFFICER TO DELETE THE DISALLOWANCE MADE IN RESPECT OF PROVISION FOR DOUBTFUL ADVANCE OF ` 38,54,270/- AS THE ASSESSEE ITSELF HAD DISALLOWED THE AMOUNT IN ITS CO MPUTATION. 7. THE NEXT ISSUE IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF CARRY FORWARD BUSINESS LO SS. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 5 OF THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) SUBMITS THAT COMMISSIONER OF INCOME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF THE ASSESS EE THAT BUSINESS LOSS FOR THE ASSESSMENT YEAR 1998-99 CAN B E CARRIED FORWARD UPTO ASSESSMENT YEAR 2006-07 AND NO T BEYOND THAT PERIOD. HOWEVER, WHILE GIVING SUCH DIRE CTION THE 6 ITA NO.2369 /MDS/2014 COMMISSIONER OF INCOME TAX (APPEALS) INADVERTENTLY MENTIONED THAT GROUND OF APPEAL IS REJECTED. 8. COUNSEL FOR THE ASSESSEE PLEADS FOR SIMILAR DIRE CTION MAY BE GIVEN TO THE ASSESSING OFFICER TO ASCERTAIN THE SUBMISSION OF THE ASSESSEE THAT CARRY FORWARD BUSIN ESS LOSS OF ASSESSMENT YEAR 1998-99 IS CARRIED FORWARD ONLY UPTO THE ASSESSMENT YEAR 2006-07 BUT NOT BEYOND THAT PERIOD . THE ASSESSING OFFICER WAS WRONGLY UNDER THE IMPRESSION THAT ASSESSEE CARRIED FORWARD THE BUSINESS LOSS OF ASSES SMENT YEAR 1998-99 TILL THE ASSESSMENT YEAR 2007-08. 9. DEPARTMENTAL REPRESENTATIVE HAS NO SERIOUS OBJEC TION IN GIVING SIMILAR DIRECTION TO THE ASSESSING OFFICE R. 10. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHO RITIES. COMMISSIONER OF INCOME TAX (APPEALS) WITH REGARD TO THE CLAIM OF THE ASSESSEE IN RESPECT OF CARRY FORWARD B USINESS LOSS FOR THE ASSESSMENT YEAR 1998-99 HELD AS UNDER: - 7 ITA NO.2369 /MDS/2014 6.2 DISALLOWANCE OF CARRY FORWARD BUSINESS LOSS - A.Y. 1998-99 OF RS.23,47,88,896/- THE SECOND GROUND FILED BY THE APPELLANT IS AGAINST THE ACTION OF THE AO IN MAKING DISALLOWANCE OF RS.23,47,88,896/- UNDER THE HEAD DISALLOWANCE OF CARRIED FORWARD BUSINESS LOSS. THIS ISSUE WAS DISCUSSED BY THE AO AT PARA 5 OF THE ASSESSMENT ORDER AS UNDER: 5. IT WAS SEEN FROM THE STATEMENT OF TOTAL INCOME THAT THE ASSESSEE AFTER ACCOUNTING FOR BROUGHT FORWARD LOSSES HAS CARRIED FORWARD BUSINESS AND DEPRECIATION LOSSES PERTAINING TO AYS 1996-97 TO 2005-06 FOR SET OFF. IN THIS REGARD, BUSINESS LOSS OF AY 1998-99 AFTER ADJUSTING THE LOSSES OF CURRENT YEAR HAS BEEN CARRIED FORWARD FOR SET OFF TO AN EXTENT OF RS.23 1 47 1 88,896/-. AS PER THE PROVISIONS OF SEE 72, THE BROUGHT FORWARD OF A PARTICULAR AY CANNOT BE CARRIED FORWARD BEYOND EIGHT S UCCESSIVE AYS. IN THIS EASEL THE BUSINESS TOSS OF AY 1998-99 CAN BE CARRIED FORWARD UP TO AY 2006-07 ONLY AND NOT BEYOND THAT. HENCE, THE BUSINESS LOSS CARRIED FORWARD BY THE ASSESSEE RELATING TO AY 1998-99 HAS TO BE DISALLOWED FOR CARRY FORWARD. WHEN THIS WAS POINTED OUT TO THE ASSESSEE'S ARI HE STATED DURING THE HEARING ON 28.10.2013 THAT THE BUSINESS LOSS OF AY 1998-99 WAS MENTIONED IN THE CARRY FORWARD OF LOSSES ONLY FOR REPORTING PURPOSES AND AGREED FOR DISALLOWANCE OF THE SAME. HENCE, THE CARRY FORWARD OF BUSINESS LOSS OF AY 1998-99 AMOUNTING TO RS.2,47,88 , 896/- IS DISALLOWED. 6.2.1 ON THIS ISSUE THE AR OF THE APPELLANT VIDE HI S SUBMISSIONDATED 03.06.2014 STATED AS UNDER: THE AO HAS WRONGLY UNDERSTOOD THAT BUSINESS LOSS OF A Y 1998-99 HAS BEEN CARRIED FORWARD TILL AY 2007-08. WE HEREBY ENCLOSE A CHART SHOWING THE LOSSES TO BE CARRIED FORWARD WHEREIN IT IS CLEARLY MENTIONED THAT BUSINESS LOSS OF AY 1998-99 HAS NOT BEEN CARRIED FORWARD TO AY 2007-08. WE HAVE ALSO FILED 154 PETITION BEFORE AD ON 8 ITA NO.2369 /MDS/2014 28.01.2014(COPY ENCLOSED). TILL DATE IT HAS NOT BEEN DISPOSED OFF. BASED ON THE ABOVE SUBMISSION WE PRAY THAT APPEAL BE ALLOWED.' 6.2.2 I HAVE CONSIDERED THE FINDINGS OF THE ASSESSING OFFICER AS WELL AS THE SUBMISSIONS MADE BY THE AR OF THE APPELLANT ON THIS ISSUE CAREFULLY. THE ASSESSING OFFICER SIMPLY MENTIONED IN THE ORDER OF THE ASSESSMENT THAT THE BUSINESS LOSS FOR THE ASSESSMENT YEAR 1998-99 CAN BE FORWARD UPTO AY 2006-07 ONLY AND NOT BEYOND THAT. THIS LEGAL POSITION WAS NOT DISPUTED BY THE APPELLANT AND SAME WAS AGREED DURING THE COURSE OF ASSESSMENT. THE SUBMISSION OF THE AR OF THE APPELLANT IS ALSO NOT DIFFERENT FROM THE STAND TAKE N BY THE ASSESSING OFFICER IN THE ORDER OF ASSESSMENT. HOWEVER, THE ASSESSING OFFICER MAY VERIFY THE CLAIMS OF THE APPELLANT FROM HIS RECORD. THEREFORE, THIS GROUND OF APPEAL IS REJECTED. 11. AS COULD BE SEEN FROM THE ABOVE, THE COMMISSION ER OF INCOME TAX (APPEALS) IN THE LAST LINE OF THE ORDER IN PARA 6.2.2 STATED THAT THE GROUND IS REJECTED. WE THINK IT IS ONLY AN INADVERTENT MISTAKE OF COMMISSIONER OF INCOME TAX (APPEALS) IN REJECTING THE GROUND. SINCE HE HAS ALR EADY DIRECTED THE ASSESSING OFFICER TO VERIFY WHETHER BU SINESS LOSS OF ASSESSMENT YEAR 1998-99 IS CARRIED FORWARD ONLY UPTO ASSESSMENT YEAR 2006-07 OR NOT. THUS, WE RESTORE TH IS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTI ON TO CARRY OUT THE OBSERVATIONS/DIRECTIONS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND ASCERTAIN AS TO WHETHER BUSINESS LOSS OF 9 ITA NO.2369 /MDS/2014 THE ASSESSMENT YEAR 1998-99 IS CARRIED FORWARD ONLY UPTO 2006-07 AND NOT BEYOND THAT PERIOD. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 24 TH JULY, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .