M/s. Sabari Chemicals Pvt. Ltd., Baroda V. The Income Tax Officer, Ward-4(1), Baroda

ITA 24/AHD/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6213 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 06-04-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH MEENA
• Assessee Lawyers: M J SHAH
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 24/AHD/2014 (ASSESSMENT YEAR: 2010-11) M/S. SABARI CHEMICALS PVT. LTD. A/2/236, GIDC, NANDESARI, VADODARA- 391340 V/S INCOME TAX OFFICER, WARD- 4(1), BARODA (APPELLANT) (RESPONDENT) PAN: AACCS9406K APPELLANT BY : SHRI M.J. SHAH, AR RESPONDENT BY : SHRI RAJESH MEENA, SR. D.R. ( )/ ORDER DATE OF HEARING : 06 -04-201 7 DATE OF PRONOUNCEMENT : 12 -04-2017 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE LD. CIT(A)- III, BARODA DATED 21.10.2013 PERTAINING TO A.Y. 201 0-11. ITA NO. 24/A HD/2014 . A.Y. 2010-11 2 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS. 40,6 8,421/-. 3. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF FINE CHEMICALS. THE RETURN FOR THE YEAR WAS FILED ON 24.09.2010 DECLARI NG TOTAL INCOME OF RS. 25,35,370/-. THE RETURN WAS SELECTED FOR SCRUTINY A SSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE ISSUED AND SERVE D UPON THE ASSESSEE. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E A.O. NOTICED THAT THE ASSESSEE HAS WRITTEN OFF BAD DEBTS OF RS. 40,68,421 /- IN CASE OF SABARI AROMATICS PVT. LTD. THE A.O. ASKED THE ASSESSEE TO JUSTIFY ITS CLAIM. THE ASSESSEE REPLIED THAT THE SAID AMOUNT HAS BEEN OFFE RED AS INCOME IN EARLIER YEARS AND, THEREFORE, THE DEBT WRITTEN OFF DURING T HE YEAR HAS TO BE ALLOWED AS PER THE PROVISIONS OF SECTION 36(1)(VII) /36(2) OF THE ACT AFTER THE AMENDMENT WITH EFFECT FROM 01.04.1989. THE CLAIM OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE A.O. WHO WAS OF THE OPINIO N THAT BOTH THE COMPANIES ARE GROUP CONCERNS AND ONE IS SHOWING PRO FIT WHILE THE OTHER IS SHOWING LOSSES. THEREFORE, THE WRITE OFF IS A COLOU RABLE DEVICE TO REDUCE THE TAXABLE INCOME OF THE COMPANY TO EVADE TAX. THE A.O . ACCORDINGLY DISALLOWED THE CLAIM AND MADE AN ADDITION OF RS. 40 ,68,421/-. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) B UT WITHOUT ANY SUCCESS. 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE VEHEMEN TLY STATED THAT WITH THE AMENDMENT BROUGHT IN THE STATUTE WITH EFFECT FROM 0 1.04.1989, THE ITA NO. 24/A HD/2014 . A.Y. 2010-11 3 ASSESSEE HAS TO DEMONSTRATE THAT THE DEBT HAS BEEN ACTUALLY WRITTEN OFF AND THAT SHOULD SUFFICE THE CLAIM. THE LD. COUNSEL DREW OUR ATTENTION TO THE COPY OF THE LEDGER ACCOUNT OF M/S. SABARI AROMATICS PVT. LTD. AND POINTED OUT THE WRITE OFF OF THE DEBT. 7. PER CONTRA, THE LD. D.R. STRONGLY RELIED UPON THE O BSERVATIONS MADE BY THE A.O. 8. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE AUTH ORITIES BELOW QUA THE ISSUE. THE CLAIM OF THE WRITE OFF OF THE BAD DEBTS HAVE TO BE ALLOWED IF THE BAD DEBTS IS WRITTEN OFF AS IRRECOVERABLE IN THE AC COUNTS OF THE ASSESSEE. THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. I N 323 ITR 397 HAS HELD AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE I NCOME-TAX ACT, 1961, WITH EFFECT FROM APRIL 1,1989, IN ORDER TO OBTAIN A DEDU CTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT THE DEBT, IN FACT, HAS BECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD D EBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 9. SINCE, THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE DE BT IN ITS BOOKS OF ACCOUNTS, DRAWING SUPPORT FROM THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT, WE DIRECT THE A.O. TO DELETE THE DIS ALLOWANCE OF RS. 40,68,421/-. ITA NO. 24/A HD/2014 . A.Y. 2010-11 4 10. APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 12 - 04- 20 17 SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY A CCOUNTANT MEMBER AHMEDABAD: DATED 12/04/2017 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD