Nirma Consumer Care Ltd., Ahmedabad V. The Dy.CIT.,Circle-5, Ahmedabad

ITA 2699/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73066 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 18-02-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 16-09-2010
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 244A; 234B; 37(1); 37

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD 0 0 0 0 , ,, , . .. . . . . . ! ! ! !, , , , '# ' $ '# ' $ '# ' $ '# ' $ BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ./ ././ ./ ITA NO. 2699/AHD/2010 & '& & '& & '& & '& / // / ASSESSMENT YEAR 2006-07 NIRMA CONSUMER CARE LIMITED AHMEDABAD. PAN: AAACN5355N VS DCIT, CIRCLE-5, AHMEDABAD. ()/ APPELLANT *+() / RESPONDENT ./ ././ ./ ITA NO. 2370/AHD/2011 & '& & '& & '& & '& / // / ASSESSMENT YEAR 2003-04 DCIT, CIRCLE-5, AHMEDABAD. VS NIRMA CONSUMER CARE LIMITED AHMEDABAD. PAN: AAACN5355N ()/ APPELLANT *+() / RESPONDENT REVENUE BY : SH. SUBHASH BAINS WITH SH. O.P. BATHEJA, SR. D.R. ASSESSEE(S) BY : SH. S.N. SOPARKAR WITH URVASHI SHODHAN, AR , - .#/ // / DATE OF HEARING : 18/02/2014 /0' - .# / DATE OF PRONOUNCEMENT: 26/02/2014 '1 '1 '1 '1/ // / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE TWO APPEALS OF REVENUE AND ASSESSEE A GAINST THE ORDER OF CIT-XI, AHMEDABAD DATED 06.07.2010. 2. GROUND NO. 1 OF THE APPEAL OF THE ASSESSEE IS GE NERAL IN NATURE AND HENCE, REQUIRES NO SEPARATE ADJUDICATION BY US. ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 2 - 3. GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS DI RECTED AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING DISALLOWANCE OUT OF ADVERTISEMENT EXPENSES OF RS 1,00,00,000/-. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E MADE PAYMENT OF RS 8,00,00,000/- TO M/S NIRMA EDUCATION AND RESEARCH F OUNDATION UNDER AN AGREEMENT DATED 05.04.1999 TOWARDS ITS CORPUS FUND. FROM ASSESSMENT YEAR 2000-01, THE ASSESSEE DEBITED RS 1,00,00,000/- EVERY YEAR IN ITS BOOKS OF ACCOUNT AS ADVERTISEMENT EXPENSES. THE ASSESSIN G OFFICER OBSERVING THAT DISALLOWANCE OF RS 1,00,00,000/- WAS BEING MADE EVE RY YEAR RIGHT FROM ASSESSMENT YEAR 2000-01 WHICH WAS CONFIRMED BY THE LD. CIT(A) IN ALL THE EARLIER YEARS, MADE DISALLOWANCE OF RS 1,00,00,000/ - DEBITED BY THE ASSESSEE TOWARDS ADVERTISEMENT EXPENSES. 5. ON APPEAL, THE LD. CIT(A) OBSERVING THAT THE ISS UE HAD BEEN DECIDED AGAINST THE ASSESSEE IN THE IMMEDIATELY PRECEDING A SSESSMENT YEAR 2005- 06 BY LD. CIT(A)-II, AHMEDABAD VIDE ORDER NO. CIT(A )-CC:I(1)/476/2007-08 DATED 22.01.2007 AND THE ISSUE REMAINING THE SAME F OR THE YEAR UNDER CONSIDERATION, FOLLOWING HIS SAID ORDER UPHELD THE DISALLOWANCE. 6. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESS EE SUBMITTED THAT THE TRIBUNAL HAS DECIDED THE ISSUE IN THE ASSESSEES OW N CASE AND ALLOWED THE ADVERTISEMENT EXPENDITURE U/S 37(1) VIDE THE CONSOL IDATED ORDER PASSED FOR ASSESSMENT YEARS 2000-01, 2001-02, 2002-03, 2004-05 AND 2005-06 IN PARA 9 AT PAGES 13 AND 14 OF THE ORDER PASSED IN IT A NO. 497/AHD/2005 FOR ASSESSMENT YEAR 2001-02, ITA NO. 2368/AHD/2005 FOR ASSESSMENT YEAR 2002-03, ITA NO. 1004/AHD/2006 FOR ASSESSMENT YEAR 2000-01, ITA NO. 3799/AHD/2007 FOR ASSESSMENT YEAR 2001-02, ITA NO. 3927/AHD/2008 FOR ASSESSMENT YEAR 2004-05, ITA NO. 422/AHD/2009 FOR A SSESSMENT YEAR 2000-01, ITA NO. 423/AHD/2009 FOR ASSESSMENT YEAR 2 002-03, ITA NO. ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 3 - 848/AHD/2009 FOR ASSESSMENT YEAR 2005-06 CONSOLIDAT ED ORDER DATED 30.07.2010. 7. THE LD. DR AGREED THAT THE ABOVE SUBMISSION OF T HE LD. AR OF THE ASSESSEE. 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS, PERUSIN G THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD, WE FI ND THAT THE TRIBUNAL VIDE ITS CONSOLIDATED ORDER PASSED IN THE ASSESSMENT YEA RS 2000-01, 2001-02, 2002-03, 2004-05 AND 2005-06 HAS HELD AS UNDER : 9. AS ARGUED BY THE LD. COUNSEL FOR THE ASSESSEE T HAT THE FINANCE ACT 1997 OMITTED SUBSECTION (2)(3)(4) OF SECTION 37 WHI CH PROVIDES FOR CERTAIN CEILING ON EXPENDITURE IN THE NATURE OF ENT ERTAINMENT EXPENSES, TRAVELING EXPENSES, ADVERTISEMENT EXPENSE ETC. AS THESE ARTIFICIAL RESTRICTIONS ARE OUT OF TUNE WITH THE' C ONCEPT OF REAL INCOME, AND THE OMISSION HAS BEEN MADE IN ORDER TO REMOVE A LL SUCH CEILING AND TO ALLOW THE EXPENDITURE INCURRED FOR THE PURPO SE I. ANY EXPENDITURE II. NOT BEING IN NATURE OF CAPITAL EXPENDITURE OR III. PERSONAL EXPENSES OF THE ASSESSEE IV. LAID OUT OR EXPENDED. V. WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSIN ESS SHALL BE ALLOWED IN COMPUTING INCOME CHARGEABLE UND ER THE HEAD 'PROFIT & GAINS FROM BUSINESS AND PROFESSIONS.' ACCORDINGLY, WE ARE OF THE VIEW THAT THE PAYMENT MA DE TO NERF IN TERMS OF AGREEMENT IS CERTAINLY EXPENDITURE AND HAS BEEN MADE IN LIEU OF ALLOWING THE USE STRATEGIC POINTS IN ITS CAMPUS ETC IS CERTAINLY AN OUTGOING AND AS IT HAS BEEN CATEGORICALLY AGREED UP ON, THERE IS NO POSSIBILITY OF ANY AMOUNT COMING BACK TO ASSESSEE O N THE GROUND FOR NON-USER OR LESSER USE OF THE SPACE. FURTHER, IT IS CERTAINLY AN EXPENDITURE FOR THE ASSESSEE AND NATURE OF RECEIPT IN THE HANDS OF NERF CANNOT CHANGE THE NATURE CHARACTER OF PAYMENT. IF THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF RUNNING THE BUSINESS AND TO MEET WITH LEGITIMATE NEED OF BUSINESS I.E. ADVERTIS EMENT EXPENSES, IT IS REVENUE EXPENDITURE. THE AIM AND OBJECT OF THE E XPENDITURE WOULD DETERMINE THE CHARACTER OF THE EXPENDITURE AS THE O BJECT IS TO MAKE KNOWN THE BRAND 'NIRMA' MORE EMPHATICALLY IN NEW AN D COMING GENERATION AND IT IS CERTAINLY FOR A FIXED PERIOD, WHICH IS NO T EXCEEDING EIGHT ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 4 - YEARS, THE NATURE OF EXPENDITURE IS REVENUE AND NOT CAPITAL. FURTHER, MERELY SPREAD OVER OF EXPENDITURE FOR EIGHT YEAR WILL NOT CHANGE THE TRUE NATURE OF EXPENDITURE, WHICH IS REVENUE EXPENDITURE, BY ALLOW ING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT GIVE A VERY DISTORTED PICTURE OF THE PROFIT AND LOSS OF A PARTICULAR YEAR AND THEREFORE IN TERMS OF AGREEMENT SPREAD OVE R ADVERTISEMENT IS CERTAINLY REVENUE IN NATURE. THE ENTIRE SPENT IS FOR PROMOTIN G 'NIRMA' AND FOR THAT FACILITIES AND PLATFORM MADE AVAILABLE BY NERF TO Y OUR ASSESSEE IN TERMS OF THE AGREEMENT. ACCORDINGLY, WE ARE OF THE VIEW THAT THE EXPENDITURE OF RS.1 CRORE HAS BEEN VERY WELL SPENT AND HELPED IN ENHANCING TH E BRAND VALUE OF NIRMA. ACCORDINGLY, THIS EXPENDITURE IS ALLOWABLE AND THE ORDERS OF THE LOWER AUTHORITIES ON THIS ISSUE ARE REVERSED. THIS COMMON ISSUE OF TH E ASSESSEE'S APPEALS IS ALLOWED. THE FACTS BEING IDENTICAL IN THE INSTANT CASE, WE R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, ALLOW THIS GROUND OF THE APP EAL OF ASSESSEE. 9. GROUND NO. 3 IS DIRECTED AGAINST THE ORDER OF TH E LD. CIT(A) TAXING RECOVERY OF BAD DEBTS OF RS 19,14,040/- IN RESPECT OF BAD DEBTS CLAIMED BUT DISALLOWED IN THE ASSESSMENT YEAR 2003-04 AND 2004- 05. 10. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT THE LD. CIT(A) HAS HELD AS UNDER : 5. THE FOURTH GROUND OF APPEAL READS AS UNDER; IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE, THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN TAXI NG RECOVERY OF BAD DEBT RS 19,14,040/- IN RESPECT OF BAD DEBT CLAIMED BUT DISALLOWED IN THE EARLIER ASSTT. YEARS 2003-04 AND 2004-05. 5.1 IN THE ASSESSMENT ORDER, THERE IS NO DISCUSSION ON THIS ISSUE. IN THE WRITTEN SUBMISSIONS APPELLANT STATED AS UNDER: DURING HE YEAR, RECOVERY OF BAD DEBTS FOR RS 30,18 ,940 IS MADE, WHICH IS OFFERED FOR TAXATION. DETAILS OF RECOVERY MADE DURING THE YEAR WITH CO-RELATION OF BAD DEBTS AND EXPENDITURE IN EA RLIER YEAR ARE ENCLOSED MARKED ANNEXURE-C. ON PERUSAL OF THE SA ID ANNEXURE IT WILL BE OBSERVED THAT RS 19,14,040 IS RECOVERY OF B AD DEBTS AGAINST DISALLOWANCE OF BAD DEBTS FOR EARLIER ASSTT. YEARS 2003-04 AND 2004- 05 HENCE INCOME OF RS 19,14,040 SHOULD NOT BE TAXED . ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 5 - 5.2 SINCE THIS ISSUE IS NOT ARISING FROM THE IMPUGN ED ASSESSMENT ORDER, I AM NOT INCLINED TO ENTERTAIN/ADJUDICATE ON THIS GROUND OF APPEAL. THIS GROUND OF APPEAL IS DISMISSED. 11. THE LD. AR OF THE ASSESSEE SUBMITTED THAT AS TH E BAD DEBTS CLAIMED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2003-04 AN 2004 -05 WAS DISALLOWED IN THE ASSESSMENT, THEREFORE RECOVERY OF BAD DEBT OF R S 19,14,040/- DURING THE YEAR UNDER CONSIDERATION CANNOT BE TAXED AS INCOME OF THE ASSESSEE. 12. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORD ER OF THE LD. CIT(A). 13. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, THE ASSESSEE OFFERED TO TAX RS 19,14,040/- AS INCOME OF THE YEAR BEING THE AMOUNT RECOVERED OUT OF DEBTS WHICH WERE WRITTEN OF F AS BAD DEBTS DURING THE ASSESSMENT YEARS 2003-04 AND 2004-05. THE ASSE SSEE CLAIMED BEFORE THE LD. CIT(A) THAT THESE AMOUNTS SHOULD BE EXCLUDE D FROM ITS INCOME AS THE CLAIM OF THE ASSESSEE FOR BAD DEBTS WAS DISALLO WED IN THE ASSESSMENT OF ASSESSMENT YEARS 2003-04 AND 2004-05. HOWEVER, THE LD. CIT(A) DISMISSED THE GROUND OF APPEAL OF THE ASSESSEE FOR THE REASON THAT IN HIS OPINION, THIS GROUND OF APPEAL DOES NOT ARISE OUT O F IMPUGNED ASSESSMENT ORDER. 14. BEFORE US, THE LD. AR OF THE ASSESSEE VERY FAIR LY CONCEDED THAT AS THE DISALLOWANCE OF BAD DEBTS FOR THE ASSESSMENT YEAR 2 004-05 HAS BEEN DELETED BY THE TRIBUNAL AND THE DISALLOWANCE OF BAD DEBTS FOR ASSESSMENT YEAR 2003-04 HAS BEEN DELETED BY THE LD. CIT(A), TH EREFORE, THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION CLAIMED IN THIS GROUND O F APPEAL UNLESS THE TRIBUNAL TAKES A CONTRARY VIEW IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2003-04. ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 6 - 15. WE FIND THAT REVENUES APPEAL FOR ASSESSMENT YE AR 2003-04 HAS BEEN DECIDED BY THE TRIBUNAL WHEREIN THE RELEVANT GROUND OF APPEAL OF THE REVENUE WAS DISMISSED. THEREFORE, IN THE ABOVE FAC TS, THERE REMAINS NO GRIEVANCE OF THE ASSESSEE IN PUTTING RS 19,14,040/- TO TAX AS INCOME OF THE YEAR. WE, THEREFORE, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. 16. GROUND NO. 4 OF THE APPEAL OF THE ASSESSEE IS D IRECTED AGAINST THE ORDER OF THE LD. CIT(A) CONFIRMING DISALLOWANCE OF BAD DEBTS OF RS 6,54,19,157/- WHICH WAS DISALLOWED IN EARLIER YEARS AND SHOULD BE ALLOWED ON AN ALTERNATE BASIS IN THE CURRENT ASSESSMENT YEA R. 17. THE LD. CIT(A) HAS DECIDED THIS ISSUE BY OBSERV ING AS UNDER: 6. THE 5 TH GROUND OF APPEAL READS AS UNDER:- IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPEL LANT'S CASE, THE LEARNED ASSESSING OFFICER HAS GROSSLY ERRED IN NOT ALLOWING BAD DEBTS RS.6,54,19,157/-WHICH WAS DISALLOWED IN E ARLIER YEARS. THE SAID CLAIM SHOULD BE ALLOWED, ON AN ALTE RNATE BASIS, IN THIS ASSESSMENT YEAR'. 6.1 IN THE ASSESSMENT ORDER THERE IS NO DISCUSSION ON THIS ISSUE. IN THE WRITTEN SUBMISSIONS FILED IT HAS BEEN STATED 'T HE SAID BAD DEBTS WAS DISALLOWED IN EARLIER ASSTT. YEARS 2002-03, 200 3-04, 2004-05 AND 2005-06. THE SAID CLAIM SHOULD BE ALLOWED ON AN ALT ERNATE BASIS, IN THIS ASSESSMENT YEAR'. 6.2 APPARENTLY, THE APPELLANT CLAIMED THAT THE CUMU LATIVE AMOUNT OF BAD DEBTS DISALLOWED IN EARLIER YEARS BE ALLOWED TH IS YEAR. THE SAID AMOUNT OF BAD DEBTS IS NOT WRITTEN OFF DURING THE Y EAR UNDER CONSIDERATION. THERE IS NO BASIS ON WHICH THIS GROU ND OF APPEAL IS TAKEN. THIS ISSUE IS NOT ARISING FROM THE IMPUGNED ASSESSMENT ORDER. HENCE THIS GROUND OF APPEAL IS DISMISSED. 18. BEFORE US, THE LD. AR OF THE ASSESSEE CONCEDED THAT THE ASSESSEE WAS ALLOWED DEDUCTION FOR BAD DEBT IN THE EARLIER YEARS AND THEREFORE, THIS GROUND OF THE ASSESSEES APPEAL IS LIABLE TO BE DIS MISSED. WE, THEREFORE, DISMISS THIS GROUND OF APPEAL OF THE ASSESSEE. ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 7 - 19. GROUND NO. 5 OF THE APPEAL READS AS UNDER: IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE AP PELLANTS CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THAT CHARGI NG OF INTEREST U/S 234B AND 234D IS CONSEQUENTIAL. GROUND NO. 6 OF THE APPEAL READS AS UNDER: IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELL ANTS CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN HOLDING THAT WITHDRAWAL OF INTEREST U/S 244A IS CONSEQUENTIAL. 20. AT THE TIME OF HEARING, THE LD. AR DID NOT MAKE ANY SUBMISSIONS ON THESE GROUNDS OF APPEAL, THEREFORE THEY ARE DISMISS ED FOR WANT OF PROSECUTION. 21. GROUND NO. 7 OF THE APPEAL IS GENERAL IN NATURE AND REQUIRES NO SEPARATE ADJUDICATION BY US. 22. IN REVENUES APPEAL, GROUND NO. 1 IS DIRECTED A GAINST THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION OF RS 1,00,00,000/ - MADE ON ACCOUNT OF ADVERTISEMENT EXPENSES. 23. WHILE DECIDING THE GROUND NO. 2 OF THE ASSESSEE S APPEAL FOR ASSESSMENT YEAR 2006-07 IN PARA NO. 3 TO 8 OF THIS ORDER, WHEREIN WE HAVE ALLOWED THE DEDUCTION FOR ADVERTISEMENT EXPENSES OF RS 1,00,00,000/- TO THE ASSESSEE. IN VIEW OF OUR FINDING IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEARS 2006-07 ABOVE, WE DISMISS THIS GRO UND OF APPEAL OF THE REVENUE. ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 8 - 24. GROUND NO. 2 OF THE REVENUES APPEAL IS DIRECTE D AGAINST THE ORDER OF THE LD. CIT(A) DELETING DISALLOWANCE OF RS 3,06,56, 382/- ON ACCOUNT OF BAD DEBTS. 25. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESS ING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED BAD DEBTS OF RS 5, 40,00,636/-. HE OBSERVED THAT THE ASSESSEE HAS CLAIMED BAD DEBTS OF 26 PARTIES OF RS 3,28,51,247/- AND IN THE NIRMA MARKETING ENTERPRISE BAD DEBTS OF 66 PARTIES OF RS 2,11,49,389/- HAS BEEN CLAIMED. THE ASSESSIN G OFFICER OBSERVED THAT FROM THE CAREFUL PERUSAL OF THE LEDGER ACCOUNTS OF THE PARTIES, IT IS FOUND THAT THE ASSESSEE HAS WRITTEN OFF THE RUNNING ACCOUNTS O F MANY OF THE CONCERNS. THE ASSESSING OFFICER OBSERVED THAT IT HAS BEEN CLA IMED THAT THE ONLY CONDITION OF GENUINENESS OF THE CLAIM OF THE ASSESS EE RELATING TO THE BAD DEBTS THAT THE DEBTS SHOULD HAVE BECOME BAD AND IF THE ACCOUNT IS RUNNING THAT DOES NOT MAKE ANY DIFFERENCE AS FAR AS THE ALL OWANCE OF THE CLAIM OF BAD DEBTS WAS CONCERNED. THE ASSESSEE HAS CLAIMED THE ACCOUNTS WHICH HAVE BEEN WRITTEN OFF HAVE ALSO BECOME PART OF INCO ME IN THE PAST, THEREFORE THE SAME SHOULD BE ALLOWED. THE ASSESSING OFFICER OBSERVED THAT THIS CLAIM AND CONTENTION OF THE ASSESSEE ARE NOT CORRECT AND HENCE, THE SAME ARE NOT ALLOWED. HE OBSERVED THAT IF THE ASSESSEE STARTS W RITING OFF THE RUNNING ACCOUNTS, THAT WILL CREATE HIGHLY STRAINED SITUATIO N AND THE ASSESSEE WILL BE IN A SITUATION TO WRITE OFF ANY AMOUNT OF ANY ACCOUNT AND IN FUTURE IF THE SAME IS RECOVERED, IT WILL SHOW THE SAME AS BAD DEBTS RE COVERED. THIS WILL CREATE A SITUATION IN WHICH THE RETURN OF INCOME WILL BE U NPREDICTABLE AND WOULD NOT REFLECT THE ACTUAL INCOME OF THE ASSESSEE WHICH CAN NEVER BE THE OBJECTIVE OF ANY ALLOWANCE GIVEN TO THE ASSESSEE BY THE LEGISLAT URE. HE, THEREFORE, DISALLOWED THE CLAIM FOR BAD DEBT TO THE ASSESSEE O F RS 3,06,56,382/-. 26. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWA NCE BY FOLLOWING THE ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 20 05-06 BY OBSERVING AS UNDER : ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 9 - 4.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT, AND THE OBSERVATIONS OF THE ASSESSING OF FICER IN THE ASSESSMENT ORDER. SIMILAR ISSUE AROSE IN THE APPELL ANT'S OWN CASE FOR A.Y, 2005-06, THE SAME HAS ALREADY BEEN DECIDED BY MY PREDECESSOR VIDE HIS ORDER IN APPEAL NO. IT(A)-XI/754/2008-09 D ATED 06-07-2010, WHEREIN IT WAS HELD AS UNDER:- '4.2. IN THE IMMEDIATELY PRECEDING A.Y. 2005-06 THE DISALLOWANCE OF BAD DEBTS WAS UPHELD BY THE CIT(A) IN HIS ORDER DATED 22-01-2009. HOWEVER, IT IS CONTENDED BY THE A PPELLANT THAT THERE IS CHANGE IN THE LEGAL POSITION IN VIEW OF THE SUPREME COURT DECISION IN THE CASE OF TRF LTD. VS. CIT (230 CTR 14) (2010), WHEREIN IT WAS HELD THAT 'AFTER 1ST APRIL, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE.' THE ID. A.R. CONTENDED THAT IN VIEW OF THE SAID DECISION THE CLA IM OF THE APPELLANT IS ALLOWABLE. 4.3. AS STATED EARLIER THE GROUND ON WHICH THE DISA LLOWANCE WAS MADE WAS THAT THE APPELLANT FAILED TO ESTABLISH THA T THE DEBTS WRITTEN OFF ACTUALLY BECAME BAD. VIEWED IN THE LIGH T OF THE SUPREME COURT DECISION THIS CANNOT BE THE BASIS FOR MAKING THE DISALLOWANCE. RESPECTFULLY FOLLOWING THE SAID DECIS ION OF THE APEX COURT, THE DISALLOWANCE OF BAD DEBTS OF RS. 6,20,65 ,7487- IS DELETED. THIS GROUND OF APPEAL IS ALLOWED.' RESPECTFULLY FOLLOWING THE DECISION OF MY PREDECESS OR, REFERRED TO ABOVE, I AM INCLINED TO DIRECT THE ASSESSING OFFICE R TO DELETE THE DISALLOWANCE MADE BY HIM OF RS. 3,06,56,382/- ON AC COUNT OF BAD DEBTS. THUS, THIS GROUND OF APPEAL IS ALLOWED. 27. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIAL AVAILABLE ON RECORD. IN T HE INSTANT CASE, CLAIM FOR DEDUCTION OF BAD DEBTS OF RS 3,06,56,382/- WAS DISA LLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WERE SOME RECOVERI ES IN THE ACCOUNTS WHICH HAVE BEEN WRITTEN OFF AS BAD DEBTS BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER, THE RECOVERIES IN THESE ACCOUNTS DURING THE YEAR SHOW THAT THEY WERE RUNNING ACCOUNTS AND THE ASSESSEE COULD N OT PROVE THAT THE DEBTS IN THESE ACCOUNTS BECAME ACTUALLY BAD DURING THE YE AR UNDER CONSIDERATION. ACCORDING TO THE ASSESSING OFFICER, CHANCES OF RECO VERY WERE STILL THERE IN THESE ACCOUNTS. ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 10 - 28. ON APPEAL, THE LD. CIT(A) DELETED THE DISALLOWA NCE BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F TRF LIMITED VS. CIT (2010) 230 CTR 14 (SC). 29. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. AR SUPPORTED THE ORDER OF THE LD. C IT(A) AND ALSO RELIED ON PARA NO. 9 AT PAGE NOS. 13 TO 14 OF THE CONSOLIDATE D ORDER DATED 30.07.2010 OF THE TRIBUNAL PASSED IN THE CASE OF ASSESSEE IN I TA NO. 497/AHD/2005 FOR ASSESSMENT YEAR 2001-02, ITA NO. 2368/AHD/2005 FOR ASSESSMENT YEAR 2002-03, ITA NO. 1004/AHD/2006 FOR ASSESSMENT YEAR 2000-01, ITA NO. 3799/AHD/2007 FOR ASSESSMENT YEAR 2001-02, ITA NO. 3927/AHD/2008 FOR ASSESSMENT YEAR 2004-05, ITA NO. 422/AHD/2009 FOR A SSESSMENT YEAR 2000-01, ITA NO. 423/AHD/2009 FOR ASSESSMENT YEAR 2 002-03, ITA NO. 848/AHD/2009 FOR ASSESSMENT YEAR 2005-06. THE LD. A R OF THE ASSESSEE ALSO SUBMITTED THAT THE DEBTS WRITTEN OFF WERE QUIT E OLD DEBTS AND AFTER RECOVERY OF SOME PORTIONS DURING THE YEAR UNDER CON SIDERATION, THERE WAS NO CHANCE OF FURTHER RECOVERY IN THESE ACCOUNTS AND TH EREFORE, THEY WERE ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT. 30. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ACCO UNTS WERE ACTUALLY WRITTEN OFF AS BAD DEBTS BY THE ASSESSEE IN ITS BOOKS OF AC COUNT AND THE DEBTS SO WRITTEN OFF WERE TAKEN INTO CONSIDERATION IN EARLIE R YEARS IN COMPUTING INCOME OF THE ASSESSEE. THE REVENUE HAS BROUGHT NO MATERIAL TO SHOW THAT SALES WERE MADE TO THE ABOVE PARTIES DURING THE YEA R UNDER CONSIDERATION ALSO SO AS TO SHOW THAT THE PARTIES WERE ACTUALLY R UNNING PARTIES AND RECOVERIES FROM THEM WERE CONTINUOUSLY MADE BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AS WELL AS IN SUBSEQUENT Y EARS. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY ERROR IN THE ORDE R OF THE LD. CIT(A) WHICH WAS PASSED FOLLOWING THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE ITA NO.2699/AHD/2010 & 2370/AHD/2011 NIRMA CONSUMER CARE LTD. VS. DCIT, CIRCLE-5, AHD. FOR A.Y. 2003-04 & 2006-07 - 11 - OF TRF LIMITED (SUPRA). THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 31. GROUND NO. 3 AND 4 OF REVENUES APPEAL ARE GENE RAL IN NATURE AND REQUIRE NO SEPARATE ADJUDICATION FOR US. 32. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON WEDNESDAY THE 26 TH OF FEBRUARY, 2014 AT AHMEDABAD. SD/- SD/- (MUKUL KR. SHRAWAT) JUDICIAL MEMBER ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 26/02/2014 GHANSHYAM MAURYA, SR. P.S. TRUE COPY '1 - *2 3'2' '1 - *2 3'2' '1 - *2 3'2' '1 - *2 3'2'/ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. 4 / CONCERNED CIT 4. 4() / THE CIT(A)-III, AHMEDABAD 5. 278 * , , / DR, ITAT, AHMEDABAD 6. 89& :, / GUARD FILE. '1 '1 '1 '1 / BY ORDER, ; ;; ;/ // / < < < < ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD