The DCIT, Circle-2, JAMNAGAR V. Saurashtra Cement Ltd., PORBANDAR

ITA 260/RJT/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6615 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

: : IN THE INCOME TAX APPELLATE TRIBUN AL: RAJKOT BENCH: RAJKOT BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI K. NAR ASIMHA CHA RY , JUDICIAL MEMBER ./ ITA NO . 260 /R JT /201 3 / ASSESSMENT YEAR : 20 09 - 10 DCIT, CIRCLE - 2 , JAMNAGAR VS SAURASHTRA CEMENT LTD., NEAR RAILWAY STATION, RANAVAV, JAMNAGAR PAN : A A HFS5211J / (APPELLANT) / (RESPONDENT) REVENUE BY : SMT USHA SHROTE , D.R ASSESSEE BY : SHRI VIMAL DESAI, C.A / DATE OF HEARING : 23 / 03/2017 / DATE OF PRONOUNCEMENT: 24 /03/2017 / O R D E R PER SHRI S.V. MEHROTRA , ACCOUNTANT MEMBER : THE DEPARTMENT HAS FILED THE ABOVE APPEAL AGAINST TH E ORDER OF LD.CIT(A) , JAMNAGAR DATED 21 / 03 / 201 3 F OR ASSESSMENT YEAR 2009 - 10 . 2 . BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY HAS FILED ITS E - RETURN OF INCOME ON 29/09/2009, FOR THE YEAR UNDER CONSIDERATION, DECLARING TOTAL LOSS OF RS.22,79,01,066/ - . THE ASSESSMENT WAS COMPLETED AT A TOTAL LOSS OF RS.12,85,32,585/ - MAKING FOLLOWING TWO DISALLOWANCE: I. DISALLOWANCE OF INTEREST WRITTEN OFF - 2,81,72,000/ - II DISALLOWANCE OUT OF ADMINISTRATIVE & OTHER EXPENSES - 9,91,000/ - 3. THE LD.CIT( A), ALLOWED ASSESSEE S APPEAL. BEING AGGRIEVED DEPARTMENT IS IN APPEAL BEFORE TRIBUNAL AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL. ITA NO.260 /RJT/201 3 A.Y.20 0 9 - 10 - 2 - 1. THE CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE ADDITION AMOUNTING TO RS.2,81,72,000/ - MADE BY AO ON ACCOUNT OF DISALL OWANCE OF THE CLAIM OF THE ASSESSEE FOR WRITE OFF OF INTEREST RECEIVABLE AMOUNTING TO RS.2,81,72,000/ - 2. THE CIT(A) FAILED TO APPRECIATE THE FACT THAT THE CASE OF THE DEBTOR OF THE ASSESSEE, I.E. MTZ (INDIA) LIMITED WAS PENDING BEFORE THE BIFR AND AS SUCH , THE WRITE OFF OF SUCH AMOUNT WITHOUT WITHDRAWING ITS CLAIM BEFORE THE BIFR AND WITHOUT WAINTING TO THE DECISION OF THE BIFR WAS PREMATURE ONE. 3. THE CIT(A) ERRED IN LAW AND IN FACTS IN DELETING THE DISALLOWANCE OF RS.9,91,000/ - MADE BY AO OUT OF ADMINIS TRATIVE AND OTHER EXPENSES ON ACCOUNT OF NON - VERIFIABLE NATURE OF THE EXPENSES. THE CIT(A) ALSO FAILED TO APPRECIATE THAT THE DISALLOWANCE FORMS A MERE 1% OF THE ENTIRE EXPENSES CLAIMED AND NOT 10 % AS OBSERVED BY THE CIT(A). 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD.CIT(A) BE SET ASIDE THAT OF THE ASSESSING OFFICER BE RESTORED. 4. BRIEF FACTS APROPOS TO GROUND NO.1 AND 2 ARE THAT ASSESSEE HAS WRITTEN OFF INTEREST RECEIVABLE IN THE PROFIT AND LOSS ACCOUNT AT RS.281.72 LAKHS. IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE HAD GIVEN FOLLOWING EXPLANATION. AS REGARDS AMOUNT OF RS.281.72 LACS SHOWN AS INTEREST RECEIVABLE WRITTEN OFF, WE WISH TO STATE THAT THE ASSESSEE COMPANY HAD GIVEN INTER CORPORATE DEPOSIT (ICD)OF RS.310 LACS TO M/S MTZ(INDIA) LIMITED DURING THE PERIOD FROM 1995 TO 01.07.2000 TO 31.07.2007, THE PARTY DID NOT MAKE ANY PAYMENT OF INTEREST ALTHOUGH THE AS SESSEE COMPANY USED TO ACCRUE INTEREST @13%P.A ON DEPOSIT OF RS.310 LACS IN ITS BOOKS OF ACCOUNTS. THE TOTAL AMOUNT OF INTEREST ACCRUED AMOUNTED TO RS.2,81,71,507/ - PER STATEMENT ENCLOSED. LATER, IN PURSUANCE OF THE NOTICE GIVEN IN NEWSPAPER BY THE HIGH CO URT FOR ACQUIRING THE ASSETS OF MTZ (INDIA) LIMITED, THE COMPANY HAD CLAIMED THE SAID DEPOSIT OF ICD OF RS.281.72 LACS IN THE HIGH COURT. HOWEVER, ON 16.12.2008, THE COMMITTEE CONSTITUTED BY THE BIFR HAS PUBLISHED NOTICE IN THE NEWSPAPER FOR THE SALE OF AS SETS OF MTZ (INDIA) LIMITED. SINCE THE ICD ITA NO.260 /RJT/201 3 A.Y.20 0 9 - 10 - 3 - AND INTEREST ACCRUED THEREON WERE UNSECURED, THERE WAS NO CHANCE OF RECOVERY OF ICD OF RS.310 LACS AND INTEREST THEREON. THEREFORE, THE COMPANY HAS MADE PROVISIONS FOR DOUBTFUL ICD OF RS.310 LACS IN THE BOOKS OF ACCOUNTS AS ON 31.12.2008 AND ALSO WRITTEN OFF INTEREST RECEIVABLES ON ICD OF RS.281.72 LACS WHICH WERE APPROVED BY THE BOARD . 5. ASSESSING OFFICER CONCLUDED WI TH THE WRITE OFF WAS PRE MATURE BECAUSE THE COMMITTEE CONSTITUTED BY BIFR ON 16.12.2008, HAS PUBLISHED NOTICE IN THE NEWSPAPER FOR SALE OF THE ASSETS , AND PROCEEDS FROM WHICH WERE TO BE USED FOR PAYMENTS TO THE CREDITORS, THE ASSESSEE BEING ONE OF THEM. 6. THE HON BLE SUPREME COURT IN THE CASE OF TRF LIMITED VS CIT (323 ITR 397 ) ALLOWED THE ASSES SEE S CLAIM. 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD OF THE CASE. AFTER THE AMENDMENT BROUGHT TO SEC.36(1)(IV) WITH EFFECT FROM 01.04 .89, IN ORDER TO OBTAIN DEDUCTION IN RELATION TO BAD DEBT, IT IS NOT NECESSARY FO R THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAD BECOME IRRECOVERABLE . IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE. IT IS NOT DISPUTED THAT THE INTEREST INCOME HAD BEEN TAKE N INTO CONSIDERATION IN EARL IER YEARS. UNDER SUCH CIRCUMSTANCE WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A). EVEN OTHERWISE LD.COUNSEL HAS EXPLAINED THAT THE PRINCIPAL OF ICD AND THE INTEREST ACCRUED THEREON, BOTH WERE UNSECURED AND THEREFORE, THERE WAS NO C HANCE OF RECOVERY OF ICD AND INTEREST THEREON. HE FURTHER POINTED OUT THAT THE COMPANY IS ALSO UNDER LIQUIDATION. UNDER SUCH CIRCUMSTANCES , WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF L D.CIT(A). ITA NO.260 /RJT/201 3 A.Y.20 0 9 - 10 - 4 - 8. IN THE RESULT APPEAL OF THE APPEAL OF THE REVENUE IS DISMISSED ORDER PRONOUNCED IN THE COURT ON 24 TH MARCH, 2017. SD/ - SD/ - ( K. NAR ASIMHA CHA RY ) JUDICIAL MEMBER ( S.V. MEHROTRA ) ACCOUNTANT MEMBER RAJKOT , DATED 24 / 03 /20 17 * MANISH / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT - 2 . / RESPONDENT - 3 . / CONCERNED CIT /DIT 4 . - / CIT (A) - IV, RAJKOT 5 . , , / DR, I TAT, RAJKOT 6 . / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) / ITAT, RAJKOT