Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 4905 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
10-04-2017
Appeal Filed By
Assessee
Bench Allotted
B
Next Hearing Date
23-02-2017
Assessment Year
2012-2013
Appeal Filed On
01-09-2016
Judgement Text
, / , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B/SMC, CHENNAI , ! ' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER ./ITA NO.2564/MDS/2016 # $ %&$ / ASSESSMENT YEAR : 2012-13 GLOBALUTION SHOES PVT. LTD., NO.2/24, AMMAN NAGAR, NO.45, CHENNAI BANGALORE ROAD, MELAMANOOR VILLAGE, VELLORE 632 010. [PAN: AACCG 7396L] ( '( /APPELLANT) VS. INCOME TAX OFFICER, CORPORATE WARD-2(3) CHENNAI. ( )*'( /RESPONDENT) '( + , /APPELLANT BY : SHRI T.BANUSEKAR, CA )*'( + , /RESPONDENT BY : SHRI N.GOPIKRISHNA, JT. CI T - % + . /DATE OF HEARING : 23.02.2017 /& + . /DATE OF PRONOUNCEMENT : 10.04.2017 /O R D E R PER SANJAY ARORA, AM : THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-6, COIMBATORE (CIT(A) FOR SHORT) DATED 30.06.2016, DISMISSING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S. 143(3)OF THE INCOME TAX ACT, 1961 (THE ACT HEREIN AFTER) DATED 23.03.2015 FOR ASSESSMENT YEAR (AY) 2012-13. 2 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO 2. OPENING THE ARGUMENTS FOR AN ON BEHALF OF THE A SSESSEE, IT WAS SUBMITTED BY THE ASSESSEES COUNSEL, SHRI T.BANUSEKAR, THAT T HE CLAIM ON ACCOUNT OF A DEBT WRITTEN OFF AS IRRECOVERABLE STANDS DISALLOWED BY T HE REVENUE, WHICH IS THE ONLY ISSUE IN APPEAL, ON TWO COUNTS. FIRSTLY, IT IS HELD TO BE PENAL IN NATURE. THIS IS AS THE SAME, BEING VAT CREDIT RECEIVABLE, HAS BEEN DEN IED (BY THE SALES TAX DEPARTMENT OF THE GOVERNMENT OF TAMIL NADU) AS THE CLAIM IN ITS RESPECT WAS MADE BEYOND THE PERMISSIBLE TIME LIMIT OF ONE HUNDR ED AND EIGHTY (180) DAYS OF THE DATE OF THE RELEVANT EXPORT SALE/S. THE ASSESSE E MAKES ITS PURCHASES INCLUSIVE OF VALUE ADDED TAX (VAT) INCIDENT THEREON. CREDIT F OR THE SAME, HOWEVER, IS AVAILABLE ON SALE, EITHER AS INPUT CREDIT, WHERE TH E SALE IS TAXABLE, OR BY WAY OF REFUND, WHERE NOT, AS IN THE INSTANT CASE, BEING BY WAY OF EXPORT OUT OF INDIA, WHICH IS NOT LIABLE TO ANY DOMESTIC TAX. THE ASSESS EE ACCORDINGLY IS ENTITLED TO REFUND OF THE SAME, WHICH IS ACCOUNTED FOR SEPARATE LY AT THE TIME OF PURCHASE. A PURCHASE OF . 100 (SAY), INCLUSIVE OF VAT AT . 10/-, HE WOULD CLARIFY, IS RECORDED IN THE BOOKS OF ACCOUNT AT . 90/-(I.E., NET OF VAT), DEBITING THE TAX COMPONENT OF . 10/- TO AN ACCOUNT TITLED VAT CREDIT RECEIVABLE , WHICH IS TAKEN AS A PART OF THE ASSESSEES CURRENT ASSETS IN THE BALANCE-SHEET. THE RELEVANT STATUTE (TAMIL NADU VALUE ADDED TAX ACT, 2006), HOW EVER, PROVIDES A PERIOD OF 180 DAYS FROM THE DATE OF SALE FOR MAKING THE CLAIM FOR REFUND. THE SAME HAVING BEEN MADE BEYOND THE SAID PRESCRIBED PERIOD, CAME T O BE REJECTED, WHICH LED TO THE WRITE OFF, THE GENUINENESS OF WHICH IS THUS EST ABLISHED BEYOND DOUBT. THERE IS THUS NO QUESTION OF ANY PENALTY. THE SECOND REAS ON STATED BY THE REVENUE IS THAT THE LOSS CRYSTALLIZED ONLY IN THE FINANCIAL YEAR (FY) 2015-16, I.E., RELEVANT TO AY 2016-17, IN-AS-MUCH AS THE ORDER BY THE VAT AUTH ORITY WAS PASSED ONLY IN THAT YEAR. THIS, HE CONTINUED, WAS NOT CORRECT AS T HE LOSS TO THE ASSESSEE OCCURRED ON THE 181 ST DAY (OF THE DATE OF SALE), I.E., AS SOON AS THE 18 0 DAY PERIOD, DURING WHICH THE CLAIM COULD BE MADE, EXPIRED. THE RE WAS THUS NO NEED FOR THE ASSESSEE TO AWAIT THE ORDER/S BY THE VAT AUTHORITIE S FOR BOOKING THE LOSS, SINCE 3 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO OCCURRED, SO THAT THE SECOND OBJECTION OF THE REVEN UE AGAIN DOES NOT HOLD. HE WOULD THEN TAKE US TO THE RELEVANT PARTS OF THE ASS ESSMENT AND THE APPELLATE ORDER, ALSO FURNISHING THE COPY OF THE ORDER REJEC TING THE ASSESSEES CLAIM (FOR REFUND OF VAT). THE LD. DEPARTMENTAL REPRESENTATIVE (DR) WOULD, ON THE OTHER HAND, SUBMIT THAT THE LOSS COULD BE SAID TO HAVE ARISEN ONLY ON ITS REJECTION, I.E., IN A SUBSEQUENT YEAR. IN FACT, THE CLAIM WAS NOT ENTERTA INED AS IT HAD BECOME BARRED BY TIME, SO THAT IT IS NOT A DEBT OR RECEIVABLE WHI CH HAD SUBSEQUENTLY BECOME BAD FOR RECOVERY, BUT IN THE NATURE OF A BUSINESS LOSS. THE LD. AR WOULD, UPON THIS, STATE THAT IT IS IN T HE NATURE OF A BUSINESS LOSS AND, FURTHER, THAT THE REVENUE COULD NOT ADOPT AN A MBIVALENT STAND. HAVING ONCE ACCEPTED IT AS INCOME OF AN EARLIER YEAR, IT WAS NO T OPEN FOR IT TO DENY A CLAIM FOR DEDUCTION IN ITS RESPECT WHEN THE SAME BECOMES IRRE COVERABLE, FOR WHATEVER REASON. 3. I HAVE HEARD THE PARTIES, AND PERUSED THE MATERI AL ON RECORD. THE QUESTION ARISING FOR ADJUDICATION IS THE MAINT AINABILITY OF THE ASSESSEES CLAIM FOR DEDUCTION IN THE IMPUGNED SUM FOR THE CUR RENT YEAR. SO CONSTRUED, IT IS BECOMES IMMATERIAL WHETHER THE SAME IS CONSIDERED A S ON ACCOUNT OF A DEBT WRITTEN OFF AS IRRECOVERABLE, I.E., U/S. 36(1)(VII) , OR AS A BUSINESS LOSS U/S. 28. THERE IS NO DISPUTE WITH REGARD TO THE PRIMARY FACT S; THE ASSESSEE CLAIMING A WRITE OFF AT . 25,44,230 IN ITS ACCOUNTS IN RESPECT OF VAT INPUT CREDIT. AT THE OUTSET, IT NEEDS TO THE CLARIFIED THAT THE LOSS ARISES TO THE ASSESSEE NOT FOR THE REASON THAT IT HAS PAID TAX, WHICH IT WOULD HAVE, AND FOR WHICH IT IS ENTITLED TO THE DEDUCTION AS A PART OF PURCHASE COS T, SO RECKONED IN TERMS OF S. 145A, FOR THE YEAR OF PURCHASE, BUT FOR THE DENIAL OF THE REFUND IN ITS RESPECT, TO WHICH IT CLAIMS TO BE ENTITLED, I.E., BUT FOR THE A PPLICATION BEING NOT MADE (WITH THE APPROPRIATE AUTHORITY) WITHIN THE PRESCRIBED TI ME, I.E., WITHIN 180 DAYS OF THE EXPORT SALE, SELLING THE GOODS PURCHASED (EITHER AS SUCH OR ON CONVERSION INTO 4 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO FINISHED/PROCESSED GOODS). IT IS IMPORTANT TO DRAW THIS DISTINCTION AS THE EMPHASIS OF THE LD. AR ALL THROUGH THE HEARING WAS TO THE INEQUITY THAT APPARENTLY STEMS FROM THE DENIAL OF THE CLAIM OF LO SS QUA THE TAX PAID FOR WHICH THE ASSESSEE HAD NOT CLAIMED DEDUCTION, INFLATING I TS PROFIT FOR THE YEAR OF PURCHASE TO THAT EXTENT. THE SAME IS MISPLACED. IRR ESPECTIVE OF THE METHOD OF ACCOUNTING, AS EMPHASIZED DURING THE HEARING AS WEL L, THE INCOME FROM BUSINESS IS TO BE COMPUTED BY VALUING THE PURCHASES, SALES, AS WELL AS INVENTORIES (AS AT THE BEGINNING AND THE END OF THE RELEVANT YEAR), IN CLUSIVE OF ALL TAXES INCIDENT THEREON. THE ASSESSEE CAN THUS ONLY BE CONSIDERED A S HAVING CLAIMED AND BEEN ALLOWED DEDUCTION FOR THE TAX PAID AS A PART OF THE PURCHASE COST AND, FURTHER, OF HAVING CREDITED ITS PROFIT AND LOSS ACCOUNT FOR TH E AMOUNT OF REFUND QUA THE TAX PAID (AT . 10, AS PER THE EXAMPLE BY THE LD. AR), NEUTRALIZI NG THE EFFECT OF THE PURCHASE BEING CONSIDERED AT INCLUSIVE OF TAX. IT IS A LAPSE OF THIS REFUND, TO WHICH THE ASSESSEE IS ENTITLED BY VIRTUE OF THE STA TUTE, THAT RESULTS IN THE LOSS. THAT SO CONSTRUING WOULD YET YIELD THE SAME OPERATING RE SULT, I.E., AS BY RECORDING THE PURCHASE AT NET OF TAX, IS BESIDES THE POINT. IN FA CT, IT MAY NOT NECESSARILY BE SO, AS WHERE THE CORRESPONDING SALES, I.E., WHICH GIVES RISE TO THE REFUND, DO NOT TAKE PLACE DURING THE YEAR OF PURCHASE ITSELF, AND THE C REDIT FOR THE REFUND (OF THE TAX PAID) IS SPREAD OVER DIFFERENT YEARS. WHY, IN A GIV EN CASE, THE EXPORT SALE MAY NOT FRUCTIFY IN WHOLE OR IN PART, FOR ANY REASON, VIZ., THE GOODS PRODUCED BEING DEFECTIVE, OR THE GOODS BOUGHT OR MANUFACTURED FOR BEING SOLD GETTING DESTROYED, OR SUCH LIKE CONTINGENCIES, RESULTING IN A DIFFEREN T IMPACT ON THE PROFIT FOR THE RELEVANT YEAR/S. THE WHOLE PURPORT OF WHAT IS BEING SOUGHT TO BE CLARIFIED IS THAT THE PRECISE REASON FOR THE LOSS IS NOT THE TAX PAID , WHICH FALLS FOR BEING CLAIMED, AND ALLOWED, AS A PART OF THE PURCHASE COST OF THE RELEVANT GOODS, BUT FOR THE LAPSE OF THE RIGHT TO RECEIVE THE REFUND IN ITS RES PECT, HAVING BEEN RECOGNIZED AS INCOME, A DEBT DUE, IN AN EARLIER YEAR. 5 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO CONTINUING FURTHER, IT IS OBSERVED THAT THE DISPUT E IS WITH REFERENCE TO THE YEAR OF LOSS, SO THAT IT NEEDS TO BE ASCERTAINED, O R REQUIRES BEING EXAMINED, IF THE LOSS HAS INDEED ARISEN DURING THE RELEVANT YEAR. IT THEREFORE BECOMES NECESSARY TO CONSIDER THE EXACT NATURE OF THE LOSS FOR WHICH THE DEDUCTION IS BEING CLAIMED. THIS IS AS ONLY WHERE A LEGALLY ENFORCEABLE CLAIM ( FOR REFUND) HAS ARISEN TO OR IN FAVOUR OF THE ASSESSEE DURING THE CURRENT OR IN AN EARLIER YEAR, THAT IT COULD BE SAID TO HAVE INCURRED A LOSS QUA THE SAME, I.E., QUA A VALID DEBT DUE FROM THE GOVERNMENT. THIS IS ALSO RELEVANT FROM THE STAND PO INT OF ANOTHER ASPECT OF THE MATTER. THIS IS AS IF IT IS QUA A BAD DEBT WRITTEN OFF, IT COULD BE CLAIMED ONLY F OR THE YEAR FOR WHICH THE DEBT STANDS ACTUALLY WRITTEN OFF IN ACCOUNTS AS IRRECOVERABLE, AND FOR WHICH THEREFORE THE BALANCE- SHEET AS AT THE YEAR-END WOULD BE DETERMINATIVE IN-AS-MUCH AS IF IT REFLECTS THE R ELEVANT DEBT/S AT THE RELEVANT YEAR-END, IT CANNOT BE SAID TO BE WRITTEN OFF DURIN G THE RELEVANT YEAR. TOWARD THIS, WE MAY EXAMINE THE RELEVANT PROVISION/ S OF THE STATUTE, ON THE BASIS OF WHICH THE RIGHT TO REFUND ENURES TO THE AS SESSEE-DEALER. SECTION 18 OF THE TAMIL NADU VAT ACT, 2006 READS AS UNDER: 18. ZERO-RATING - (1) THE FOLLOWING SHALL BE ZERO RATE SALE FOR THE PURPOSE OF THIS ACT, AND SHALL BE ELIGIBLE FOR INPUT TAX CREDIT OR REFUN D OF THE AMOUNT OF THE TAX PAID ON THE PURCHASE OF GOODS SPECIFIED IN THE FIRS T SCHEDULE INCLUDING CAPITAL GOODS, BY A REGISTERED DEALER IN THE STATE, SUBJECT TO SUCH RESTRICTIONS AND CONDITIONS AS MAY BE PRESCRIBED:- (I) A SALE AS SPECIFIED UNDER SUB-SECTION (1) OR (3 ) OF SECTION 5 OF THE CENTRAL SALES TAX ACT, 1956 (CENTRAL ACT 74 OF 1956); (II) SALE OF GOODS TO ANY REGISTERED DEALER LOCATED IN SPECIAL ECONOMIC ZONE IN THE STATE, IF SUCH REGISTERED DEAL ER HAS BEEN AUTHORIZED TO ESTABLISH SUCH UNITS BY THE AUTHORITY SPECIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF; AND (III) SALE OF GOODS TO INTERNATIONAL ORGANISATIONS LISTED OUT IN THE FIFTH SCHEDULE. (2) THE DEALER, WHO MAKES ZERO RATE SALE, SHALL B E ENTITLED TO REFUND OF INPUT TAX PAID OR PAYABLE BY HIM ON PURCHASE OF THO SE GOODS, WHICH ARE EXPORTED AS SUCH OR CONSUMED OR USED IN MANUFACTURE OF OTHER GOODS THAT ARE EXPORTED AS SPECIFIED IN SUB-SECTION (1), SUBJE CT TO SUCH RESTRICTIONS AND CONDITIONS AS MAY BE PRESCRIBED. 6 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO (3) WHERE THE DEALER HAS NOT ADJUSTED THE INPUT TAX CREDIT OR HAS NOT MADE A CLAIM FOR REFUND WITHIN A PERIOD OF ONE HUND RED AND EIGHTY DAYS FROM THE DATE OF MAKING ZERO RATE SALES, SUCH CREDI T SHALL LAPSE TO THE GOVERNMENT. THE RELEVANT RULE OF THE TAMIL NADU VAT RULES, 2007 READS AS UNDER: 11. REFUNDS. (1) THE ASSESSING AUTHORITY SHALL I SSUE REFUND OF AMOUNT SPECIFIED IN FORM P WITHIN NINETY DAYS FROM THE DATE OF SERVICE OF TH E SAID FORM, FAILING WHICH THE ASSESSING AUTHORITY SHALL ALSO PAY THE INTEREST AT THE RATE P RESCRIBED UNDER THE ACT ALONG WITH SUCH REFUND AMOUNT. (2) THE DEALER WHO CLAIMS REFUND DUE TO SALE EFFECT ED BY HIM UNDER SUB-SECTION (1) OF SECTION 18 SHALL FILE AN APPLICATION IN FORM W TO T HE ASSESSING AUTHORITY ALONG WITH COPIES OF INVOICES OR BILLS OF RELATED PURCHASES WITHIN ON E HUNDRED AND EIGHTY DAYS FROM THE DATE OF ACCRUAL OF SUCH CLAIM. THE ASSESSING AUTHORITY A FTER VERIFICATION OF THE CORRECTNESS OF THE CLAIM, SHALL ISSUE REFUND WITHIN NINETY DAYS FROM T HE DATE OF THE RECEIPT OF THE APPLICATION IN FORM W. A DEALER BECOMES ELIGIBLE TO A REFUND OF THE INPUT TAX SUBJECT TO SUCH CONDITIONS OR RESTRICTIONS AS MAY BE PRESCRIBED (S.18 (2)). WHATEVER THOSE CONDITIONS OR RESTRICTIONS MAY BE, IT IS CLEAR THAT THE SAME DO N OT INCLUDE CLAIMING THE REFUND WITHIN 180 DAYS OF THE ZERO-RATE (EXPORT) SALE, WHI CH IS STATED BY WAY OF A SEPARATE PROVISION (SUB-SECTION (3) OF SECTION 18), AND WHICH IS THE REASON FOR THE DECLINE OF THE ASSESSEES CLAIM FOR REFUND. THE WOR DS MAKING ZERO-RATE SALES IN S.18(3) SUBSTITUTE THE WORDS ACCRUAL OF SUCH INPUT CREDIT BY AMENDMENT ACT (9 OF) 2010, W.E.F. 01.4.2010, SIGNIFYING THE LEGISLAT IVE INTENT; THE SUBSTITUTED WORDS DEFINING THE EVENT MARKING THE ACCRUAL OF INPUT CRE DIT. IN OTHER WORDS, THE RIGHT TO REFUND VESTS IN THE ASSESSEE UPON THE EXPORT SAL ES. RULE 11(2) ALSO ENDORSES THIS INASMUCH AS IT SPECIFIES THE PERIOD OF TIME (1 80 DAYS) AFTER ITS ACCRUAL WITHIN WHICH THE RIGHT TO CLAIM REFUND IS TO BE EXERCISED. THE RIGHT TO RECEIVE IMPLIES ACCRUAL OF INCOME. IT WOULD BE A DIFFERENT MATTER W HERE THE SAID RIGHT WAS, BY LAW, ITSELF SUBJECT TO THE CONDITION OF MAKING THE CLAIM WITHIN 180 DAYS (OF THE SALE). A DEALER NOT DOING SO COULD NOT, NOTWITHSTAN DING THE ENTRIES PASSED IN ITS ACCOUNTS OR OFFERING THE INCOME QUA THE SAID REFUND PER ITS RETURN OF INCOME, BE 7 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO SAID TO BE ENTITLED TO THE REFUND IN THE FIRST PLAC E, FOR IT TO CLAIM ANY DEDUCTION IN ITS RESPECT UPON WRITE OFF IN A SUBSEQUENT YEAR. THE INCOME HAVING ACCRUED TO THE ASSESSEE IN AN EAR LIER YEAR ON, AS STATED, MAKING OR EFFECTING THE EXPORT SALE/S, WE PROCEED T O EXAMINE NEXT THE ASPECT OF THE YEAR OF THE LOSS. THE LOSS BEING OF A VALID CLA IM OR A DEBT FROM THE GOVERNMENT, INCOME QUA WHICH STANDS RECORDED IN THE BOOKS OF ACCOUNT IN AN EARLIER YEAR (OR OTHERWISE TAKEN INTO ACCOUNT IN CO MPUTING THE INCOME FOR SUCH YEAR), THE QUESTION THAT ARISES IN THE MATTER IS IF THE LOSS IS ON THE ACCOUNT OF A BAD DEBT/S, I.E., A DEBT THAT HAS BECOME IRRECOVERABLE, IF ONLY BY LAPSE OF TIME ALLOWED FOR ITS RECOVERY, OR IS IT IN THE NATURE OF A BUSIN ESS LOSS. THIS ASSUMES RELEVANCE IN DETERMINING, AS AFORE-STATED, THE YEAR OF THE CL AIM FOR DEDUCTION QUA THE SAID SUM, AS ALSO FOR EXAMINING IF ANY CONDITIONS ATTACH ED THERETO ARE SATISFIED. IN MY CONSIDERED VIEW, THE IMPUGNED LOSS IS ONLY QUA A DEBT ARISING IN THE COURSE OF TRADE, THAT HAS BECOME IRRECOVERABLE, I.E., HAS BEC OME BAD FOR RECOVERY. THE DEBT BEING DUE FROM THE STATE GOVERNMENT, WHICH BEING A PART OF AN INDEPENDENT STATE (UNION OF INDIA), SO THAT IT HAS ATTRIBUTES OF SOVE REIGNTY, CANNOT ORDINARILY BECOME BAD. THE SAME, HOWEVER, HAS BECOME IRRECOVER ABLE BY LAPSE OF TIME IN VIEW OF THE PROVISION OF THE STATUTE CREATING THE R IGHT TO REFUND, WHICH STANDS LOST TO THE GOVERNMENT. THE ASSESSEE IS THEREFORE ENTITL ED TO CLAIM DEDUCTION IN ITS RESPECT ON ITS WRITE OFF IN ACCOUNTS. ONE COULD ARGUE THAT THE LOSS ARISES ON THE EXPIRY OF THE STIPULATED TIME PERIOD, I.E., BY WHICH REFUND COULD BE CLAIMED, AFT ER WHICH IT AUTOMATICALLY LAPSES TO THE GOVERNMENT (S.18 (3) OF TAMIL NADU VA T ACT). THE ARGUMENT, APPEALING AT FIRST SIGHT, IS MISPLACED. THE DEDUCTI ON U/S. 36(1)(VII) IS ONLY IN RESPECT OF A DEBT, TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF ANY PREVIOUS YEAR, WHICH HAS BECOMES IRRECOVERABLE. THE WRITE OF F IN ACCOUNTS IS THUS ONLY OF A DEBT THAT HAS BECOME BAD FOR RECOVERY, WITH THE W RITE OFF ONLY SIGNIFYING THE SAME. THE DEBT UNDER REFERENCE THUS SATISFIES ALL T HE ATTRIBUTES OF A DEBT IN 8 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO CONTEMPLATION FOR DEDUCTION U/S. 36(1)(VII). THAT T HE IRRECOVERABILITY IS BY FORCE OF LAW IS OF LITTLE CONSEQUENCE. INDEED, THE SAME B EING DUE FROM THE STATE GOVERNMENT, IT WOULD NOT OTHERWISE, OR AT LEAST ORD INARILY, BECOME BAD. THE SAID PROVISION OF LAW (S.18(3)) THUS ESTABLISHES THAT TH E DEBT HAS INDEED BECOME BAD. A CLAIM FOR BAD DEBT, AS INDEED ANY CLAIM, HAS TO B E BONA FIDE AND GENUINE (REFER DIT(IT) V. OMAN INTERNATIONAL BANK [2009] 313 ITR 128 (BOM)). THE CONDITION OF IT BEING WRITTEN OFF IN ACCOUNTS (FOR THE RELEVA NT YEAR) CLARIFIES TWO INTER- RELATED ASPECTS IN THE MATTER. IT RESOLVES THE ISSU E AS TO THE YEAR OF LOSS; THE LAW DEEMING IT TO BE THE YEAR OF WRITE OFF, ELIMINATING ANY SCOPE FOR DISPUTE IN ITS RESPECT. TWO, IT SIGNIFIES IN NO UNCERTAIN TERMS TH AT THE ASSESSEE DOES NOT REGARD IT AS RECOVERABLE AND, THUS, AS A DEBT, IN-AS-MUCH AS THE ACCOUNTS ARE ONLY TOWARD REPRESENTING THE TRUE AND FAIR STATE OF AFFAIRS AS AT THE VALUE DATE, SO THAT WHERE SO, I.E., WRITTEN OFF IN ACCOUNTS, THE REVENUE CANN OT SIT IN JUDGMENT OVER THAT OF THE ASSESSEE IN THE MATTER OF RECOVERABILITY. THE S ECOND ASPECT DOES NOT OBTAIN IN THE PRESENT CASE AS IRRECOVERABILITY IS ESTABLISHED BY VIRTUE OF A STATUTORY PROVISION. THAT, HOWEVER, IS BY ITSELF OF LITTLE CO NSEQUENCE. A BUSINESS LOSS IS QUA A BUSINESS OUTGO, ALMOST INVARIABLY ON ACCOUNT OF AN EXPENDITURE INCURRED FOR BUSINESS PURPOSE/S. TRUE, THE LOSS TO THE ASSES SEE ACCRUES ON THE 181 ST DAY OF THE RELEVANT SALE/S, I.E., ON THE EXPIRY OF THE STI PULATED 180 DAY TIME PERIOD ALLOWED FOR CLAIMING THE REFUND. THE SAME IS, THUS, DUE TO THE NON-SATISFACTION OF THE STATUTORY MANDATE AND NOT QUA A BUSINESS DECISION. FURTHER, AS EXPLAINED, IT IS NOT ANY DEBT, BUT ONLY THAT WHICH IS IRRECOVERABLE, IN WHOLE OR IN PART, THAT IS CONTEMPLATED FOR BEING ALLOWED, TO THAT EXTENT, ON ITS WRITE OFF. THAT THE ASSESSEE DOES NOT REQUIRE TO PROVE ITS IRRECOVERABILITY TO T HE SATISFACTION OF THE REVENUE IS ANOTHER ASPECT OF THE MATTER. THE SAME, BESIDES GIV ING DUE DEFERENCE TO ITS ACCOUNTS, WHICH PURPORT TO STATE THE TRUE AND FAIR STATE OF AFFAIRS, IS ALSO ASSOCIATED WITH PRACTICAL HARDSHIPS AND BUSINESS CO NSIDERATIONS, ALSO REQUIRING MAKING VALUE JUDGMENTS, I.E., IN RELATION TO THE DE CISION FOR WRITE OFF, VIZ. THE 9 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO RELATION WITH THE CONCERNED TRADE CUSTOMER ON AN ON GOING BASIS; THE COST - DIRECT OR INDIRECT, OF RECOVERY, ETC. IN FACT, BUT FOR IT BECOMING IRRECOVERABLE, THERE WAS NO QUESTION OF ANY LOSS TO THE ASSESSEE, BEING A DE BT DUE FROM THE GOVERNMENT. RATHER, BEING DUE FROM THE GOVERNMENT, BUT FOR THE LAW, A CLAIM FOR BAD DEBT IN ITS RESPECT WOULD ORDINARILY INVITE AN OBJECTION, B EING ALMOST A CONTRADICTION. THE IRRECOVERABILITY IS THUS AN INTEGRAL ASPECT OF THE CLAIM FOR BAD DEBT WRITTEN OFF U/S. 36(1)(VII) AND, THUS, NOTHING TURNS ON THE IRRECOVERABILITY HAVING SET IN ON THE LAPSE OF THE STIPULATED TIME PERIOD FOR ITS REC OVERY. IF NOTHING, IT ONLY PROVES THE CLAIM TO BE GENUINE AND BONA FIDE . THE IMPUGNED CLAIM IS THUS ONLY QUA A BAD DEBT LIABLE FOR DEDUCTION U/S. 36(1)(VII) AND N OT QUA A LOSS U/S. 28 OF THE ACT. IN VIEW OF THE FOREGOING, THE ASSESSEE SHALL THERE FORE BE ENTITLED TO THE IMPUGNED LOSS SUBJECT TO THE SATISFACTION OF THE CO NDITIONS OF S. 36(1)(VII). THAT IS, THE RELEVANT DEBT/S: A) MUST HAVE BECOME IRRECOVERABLE, I.E., THE 180 DAY P ERIOD EXPIRED QUA THE SAME AS AT THE YEAR-END; B) MUST BE WRITTEN OFF IN ACCOUNTS FOR THE RELEVANT YE AR. THE MATTER, ACCORDINGLY, IS RESTORED TO THE FILE OF THE AO, WHO SHALL PER A SPEAKING ORDER GIVE EFFECT TO THIS ORDER AFTER ALLO WING THE ASSESSEE A REASONABLE OPPORTUNITY TO EXHIBIT ITS CASE. THE ASSESSEE SHAL L ALSO RECONCILE THE DIFFERENCE BETWEEN THE AMOUNT CLAIMED ( . 25.44 LACS) AND THAT FOR WHICH THE ORDER STANDS PASSED BY THE VAT AUTHORITY ( . 23.91 LACS). FURTHER, TO THE EXTENT NOT WRITTEN OFF, THE CLAIM IN ITS RESPECT WOULD HAVE TO NECESSA RILY AWAIT THE SAME, I.E., A WRITE OFF IN ACCOUNTS, A CONDITION PRECEDENT FOR A CLAIM QUA THE SAME, AND WHICH SHALL INCIDENTALLY ALSO ENSURE THAT THERE IS NOT DOUBLE C LAIM QUA THE SAME SUM. I DECIDE ACCORDINGLY. 10 ITA NO.2564/MDS/2016 (AY 2012-13) GLOBALUTION SHOES PVT. LTD. V. ITO 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED ON THE AFORESAID TERMS. ORDER PRONOUNCED ON APRIL 10, 2017 AT CHENNAI . SD/- ( ) (SANJAY ARORA) ! /ACCOUNTANT MEMBER /CHENNAI, 0 /DATED, APRIL 10, 2017. EDN 1 + )#.23 43&. /COPY TO: 1. '( /APPELLANT 2. )*'( /RESPONDENT 3. - 5. ( )/CIT(A) 4. - 5. /CIT 5. 3%67 )#.# /DR 6. 78$ 9 /GF
