DCIT, Coimbatore V. M/s. Expo Freight Pvt. Ltd., CHENNAI

ITA 2729/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7494 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: A S SRIRAMAN
• Keywords: Bad and doubtful debts; Revised return
• Section: 143(3); 194C; 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! . , % !& BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER, AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO.2729/MDS/2016 / ASSESSMENT YEAR : 2009-10 THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE RANGE 2(1), CHENNAI 34 V. M/S. EXPO FREIGHT PVT. LTD., NO.26, JOSIER STREET, NUNGAMBAKKAM, CHENNAI - 34 PAN: AAACE2126J ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI SHIVA SRINIVAS, JCIT /RESPONDENT BY : SHRI A.S. SRIRAMAN, ADVOCATE /DATE OF HEARING : 07.03.2017 /DATE OF PRONOUNCEMENT : 20.03.2017 / O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE AGGRIEVED BY TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN ITA NO. 173/CIT(A)-6/2015-16 DATED 18.07.2016 PASSED U/S. 2 50(6) R.W.S. 143(3) OF THE ACT. 2. THE REVENUE HAS RAISED SEVERAL GROUNDS, HOWEVER THE CRUX OF THE ISSUE IS THAT THE LD. CIT(A) HAS ERRED IN AL LOWING THE CLAIM OF 2 I.T.A. NO.2729/MDS/2016 BAD DEBTS AND THEREBY DELETED THE DISALLOWANCE OF R S.66,43,419/- MADE BY THE LD. AO. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL ENGAGED IN THE BUSINESS OF FREIGHT FORWA RDING AND ASSOCIATED LOGISTICS SERVICES, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 26.09.2009, DECLARING IN COME OF RS.9,23,96,780/-. SUBSEQUENTLY THE ASSESSEE FILED SEVERAL REVISED RETURNS AND THE FINAL REVISED RETURN WAS FILED ON 2 1.02.2011 DECLARING INCOME OF RS.12,00,02,320/- THEREAFTER THE RETURN WAS PROCESSED U/S.143(3) OF THE ACT AND ASSESSMENT WAS COMPLETED ON 30.11.2011, HOWEVER THE CASE WAS REOPENED BY ISSUAN CE OF NOTICE U/S.148 OF THE ACT AND FINALLY THE ASSESSMENT WAS C OMPLETED ON 31.03.2015 WHEREIN THE LD. AO DISALLOWED THE CLAIM OF BAD DEBTS WRITTEN OFF TO THE EXTENT OF RS.66,43,419/- ON THE GROUND THAT INCOME-TAX REFUND CANNOT BE CONSIDERED AS DEBT TO B E WRITTEN OFF. 4. IT WAS EXPLAINED BY THE LD. AR BEFORE THE LD. AO THAT THE ASSESSEE CARRIES ON THE BUSINESS OF HANDLING AIR CA RGO AND SEA CARGO (BOTH INWARD AND OUTWARD) AND OFTEN RECEIVES FREIGHT CHARGES IN ADVANCE OR RECEIVES THEM SUBSEQUENTLY AFTER THE SERVICES BEING CARRIED OUT. IN COMPLIANCE OF SECTION 194H OF THE ACT, THE CARRIERS 3 I.T.A. NO.2729/MDS/2016 OF THE FREIGHT DEDUCT TAX AT SOURCE ON THE COMMISSI ON PAID / PAYABLE TO THE ASSESSEE. SIMILARLY THE CUSTOMERS OF THE ASS ESSEE ALSO DEDUCT TAX AT SOURCE ON THE GROSS AMOUNT PAID / PAY ABLE TO THE ASSESSEE TOWARDS FREIGHT HANDLING CHARGES IN COMPLI ANCE WITH SECTION 194C OF THE ACT. THE TAXES DEDUCTED FROM T HE AMOUNT RECEIVABLE BY THE ASSESSEE ARE ALSO BOOKED AS INCOM E IN THE HANDS OF THE ASSESSEE WHILE DECLARING THE RETURN OF INCOM E. HOWEVER, IN MANY INSTANCES THE ASSESSEES CUSTOMERS DO NOT REMI T THE TAX DEDUCTED AT SOURCE AND ALSO FAIL TO ISSUE THE RELEV ANT TDS CERTIFICATES TO THE ASSESSEE AND ACCORDINGLY THE CR EDIT WAS NOT AVAILABLE IN THE RECORDS MAINTAINED BY THE INCOME T AX DEPARTMENT IN THEIR COMPUTERS. ON SUCH OCCASIONS THE REVENUE AUTHORITIES DO NOT TREAT THE TAX DEDUCTED AT SOURCE AS TAX PAID, T HOUGH THEY WERE TREATED AS REVENUE RECEIPTS DURING THE RELEVANT RES PECTIVE ASSESSMENT YEARS. FOR THESE REASONS THE ASSESSEE HA D CLAIMED IT AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS. 5. HOWEVER, THE LD. AO REJECTED THE CLAIM OF BAD DE BTS OF THE ASSESSEE BY OBSERVING AS UNDER:- THE SUBMISSION OF THE AR IS CONSIDERED AND THE SAM E IS NOT ACCEPTABLE. IN THE REPLY, THE AR STATED THA T THE AMOUNT OF RS.66,43,419/- WAS INADVERTENTLY CLASSIFIED AS INC OME TAX REFUND WRITTEN OFF IN THE STATEMENT OF BAD DEBTS W RITTEN OFF 4 I.T.A. NO.2729/MDS/2016 SUBMITTED TO THE I.T. DEPARTMENT, DURING THE ORIGIN AL ASSESSMENT PROCEEDINGS FOR THE A.Y. 2009-10. THE ASSESSEE CAN NOT WRITE OFF THE INCOME TAX REFUND AS BAD DEBTS SINCE THE TDS CE RTIFICATES WERE NOT RECEIVED BY IT. THE VIEW IS SUPPORTED BY THE DECISION OF THE ITAT, MUMBAI IN THE CASE OF RICOH INDIA LTD (20 13-TIOL- 937-ITAT-MUM) DATED 13.09.2013 WHERE THE ASSESSEE R ECEIVES CERTAIN PAYMENTS AFTER TDS, THE ASSESSEE CANNOT WRI TE OFF SUCH SUM AS SHORT RECEIPT MERELY BECAUSE IT DID NOT RECE IVE TDS CERTIFICATES FROM THE DEDUCTORS. THIS AMOUNT IS TH EREFORE ADDED BACK TO THE TOTAL INCOME. 6. ON APPEAL, THE LD. CIT(A) RELIED ON THE DECISION OF THE FOLLOWING CASES AND HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. I. INDIAN PRODUCTS TRADING COMPANY PVT. LTD. DECIDED B Y THE MUMBAI TRIBUNAL IN ITA NO.4509/MUM/2009 II. KELLY SERVICES INDIA (P) LTD. DECIDED BY THE DELHI TRIBUNAL IN ITA NO.5435/DEL/2011 DATED 16.09.2011 III. CIT V SHREYANS INDUSTRIES LTD. DECIDED BY THE HONB LE PUNJAB & HARYANA HIGH COURT DATED 08.11.2006 REPORTED IN 303 ITR 393 IV. TRF LIMITED BY THE HONBLE APEX COURT REPORTED IN 3 23 ITR 297 WHILE DOING SO, THE LD. CIT(A) OBSERVED AS UNDER :- 6.4 THE AO IN HIS ORDER HAS PLACED RELIANCE ON THE DECISION OF LD. MUMBAI TRIBUNAL IN THE CASE OF M/S. RICOH IN DIA LTD. (SUPRA). ON CAREFUL READING OF THE ORDER, I FIND T HAT THE FACTS EMERGING IN THE CASE BEFORE THE LD. MUMBAI TRIBUNAL ARE DISTINCT FROM THE APPELLANTS CASE. IN THE MATTER BEFORE TH E LD. TRIBUNAL IN THE RICOH CASE, THE PARTIES AFTER DEDUCTION OF T AX AT SOURCE, 5 I.T.A. NO.2729/MDS/2016 MADE THE PAYMENT TO THE ASSESSEE FOR THE REMAINING AMOUNT AND DULY DEPOSITED TAX AT SOURCE IN THE GOVERNMENT ACCO UNT. ONCE THE ASSESSEE RECEIVED THE NET AMOUNT AND FURTHER AM OUNT OF TDS CERTIFICATES ALSO STOOD DEPOSITED IN THE GOVERNMENT EXCHEQUER, THE TRIBUNAL HELD THAT THE POSITION OF THE ASSESSEE VIS--VIS THE PARTIES STOOD NEUTRALIZED AS NOTHING REMAINED DUE F ROM THEM. IN STARK DISTINCTION, IN THE APPELLANTS CASE, IT IS U NDISPUTED THAT THE IMPUGNED TDS CLAIMED AS WRITE OFF WERE NEVER DEPOSI TED IN THE GOVERNMENT ACCOUNT. HENCE THE RELIANCE OF AO ON RI COHS RATIO IS NOT VALID. THE AO SEEMS TO HAVE BEEN INFLUENCED BY THE NOMENCLATURE TO THE WRITE OFF MENTIONED IN THE DETA ILS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS AS INCOME-TAX RE FUND WRITTEN OFF. REGARDLESS OF THE NOMENCLATURE, THE REAL NATURE OF THE TRANSACTION NEEDS TO BE ANALYSED AND APPRECIATE D IN ORDER TO ARRIVE AT A FINDING. IN MY CONSIDERED VIEW, THE AP PELLANT COMPANY IS AT A CLEAR MONETARY LOSS DUE TO THE NON- PAYMENT OF WITHHELD TAX IN THE GOVERNMENT ACCOUNT. IT IS NOT A MATTER OF DEBATE THAT THE APPELLANT RECEIVED THE NET AMOUNT F ROM THE DEDUCTORS AFTER DEDUCTION OF TAX FROM THE TOTAL PAY MENT DUE TO HIM. IT IS ALSO UNDISPUTED THAT THE APPELLANT COMP ANY HAD DISCLOSED THE GROSS RECEIPTS IN ITS RETURN OF INCOM E FOR THE RESPECTIVE YEARS. HENCE, APPLYING THE RATIO OF JUD ICIAL DECISIONS AS DISCUSSED ABOVE, I AM OF THE VIEW THAT THE WRITE OFF CLAIMED BY THE APPELLANT DESERVES TO BE ALLOWED. THE DISALLOW ANCE OF RS.66,43,419/- MADE IN THIS REGARD BY THIS AO STAND S DELETED. THE GROUNDS OF APPEAL SUCCEED. 7. THE LD. DR REITERATED THE REASONING ADVANCED BY THE LD. AO IN HIS ORDER AND ARGUED IN SUPPORT OF THE SAME, WHI LES THE LD. AR ARGUED IN SUPPORT OF THE LD. CIT(A) AND PLEADED THA T THE SAME MAY BE SUSTAINED. 6 I.T.A. NO.2729/MDS/2016 8. WE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY PER USED THE MATERIALS ON RECORD. FROM THE FACTS OF THE CASE IT IS APPARENT THAT THE TAX DEDUCTED BY THE CUSTOMERS OF THE ASSESSEE F ROM THE AMOUNT DUE TO THE ASSESSEE HAS NOT BEEN FINALLY REM ITTED IN THE GOVERNMENT TREASURY AND ALSO THE REQUISITE TDS CERT IFICATES WERE NOT ISSUED TO THE ASSESSEE. BUT SINCE THE CUSTOMERS OF THE ASSESSEE HAD INTIMATED THE ASSESSEE THAT TAX HAD BE EN DEDUCTED AT SOURCE FROM THE AMOUNT PAID/PAYABLE TO THE ASSES SEE, THE ASSESSEE HAD TREATED THE TAX DEDUCTED AT SOURCE ALS O AS ITS INCOME FOR THAT RELEVANT ASSESSMENT YEAR. SUBSEQUEN TLY IT WAS REVEALED THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM THE CREDIT ON ACCOUNT OF TAX DEDUCTED AT SOURCE BECAUSE THE SAME WAS NOT REMITTED IN THE GOVERNMENT TREASURY. NOW SINCE THE SCOPE OF RECOVERING THIS AMOUNT FROM THE CUSTOMERS OF THE AS SESSEE IS BLEAK THE ASSESSEE DECIDED TO WRITE OFF IN ITS BOOK S OF ACCOUNTS DUE TO COMMERCIAL PRUDENCE. SINCE THE CUSTOMERS OF THE ASSESSEE HAD FAILED TO REMIT THE TDS IN THE GOVERNM ENT TREASURY THIS AMOUNT IS SHOULD BE TREATED AS THE AMOUNT RECE IVABLE FROM THE CUSTOMERS OF THE ASSESSEE AS DEBTORS IF THERE WERE ANY PROSPECTS OF RECOVERING THE AMOUNT FROM THEM. SINCE THE DEBT WAS NOT RECOVERABLE FROM THE CUSTOMERS OF THE ASSESSEE THE LD. CIT(A) 7 I.T.A. NO.2729/MDS/2016 HAD RIGHTLY HELD THAT WRITING OFF THE TDS AMOUNT WHICH WAS NOT REMITTED IN THE GOVERNMENT TREASURY WOULD AMOUNT TO WRITING OFF OF DEBTS CONSIDERING IT TO BE BAD AND ACCORDINGLY THE ASSESSEE WILL BE ENTITLED TO GET DEDUCTION U/S. OF SECTION 36(1)(VII ) OF THE ACT. THEREFORE WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE LD. CIT(A) WHO HAS RIGHTLY ARRIVED AT THE DECIS ION ON THE ISSUE BY FOLLOWING THE DECISIONS OF THE TRIBUNAL AND THE HONBLE APEX COURT CITED SUPRA. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED ON 20 TH MARCH, 2017 AT CHENNAI. SD/- SD/- ( . ) )) ) (G. PAVAN KUMAR) /JUDICIAL MEMBER ( . ) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER /CHENNAI, /DATED, THE 20 TH MARCH, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT, 5. /DR 6. /GF.