NEXT MEDIA WORKS LTD (FORMERLY KNWON MIDDAY MULTIMEDIA LTD), MUMBAI V. DCIT 5(2), MUMBAI

ITA 2738/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2615 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 08-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Keywords: Earning of tax free income; Additional evidence; Cost of acquisition; Non-deduction of tax; Bad and doubtful debts
• Section: 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , ,, , !'# , ,, , $ BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & SAKTIJIT DEY,JUDICIAL MEMBER /.ITA NO.2738/MUM/2013, % & /ASSESSMENT YEAR-2009-10 M/S. NEXT MEDIA WORKS LTD. (FORMERLY KNOWN AS MIDDAY MULTIMEDIA LTD.) C.O. INQUILAB OFFSET PRINTERS LTD. 156, D.J. DADAJEE ROAD, BEHIND EVEREST BUILDING, TARDEO MUMBAI-400 020. PAN: AAACM 7512 L VS THE DCIT-5(2) ROOM NO.571 AAYAKAR BHAVAN, M.K. MARG NEW MARINE LINES MUMBAI-400 020. ( / APPELLANT) ( / RESPONDENT) %' /ASSESSEE BY : SHRI YOGESH THAR / REVENUE BY : SHRI M. RAJAN / DATE OF HEARING : 30-09 -2015 / DATE OF PRONOUNCEMENT : 30 -10-2015 , 1961 1961 1961 1961 254 254 254 254( (( (1 11 1) )) ) )*# ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DT.24.01.2013 OF CIT(A)-9,MUM BAI,THE ASSESSEE,HAS FILED THE PRESENT APPEAL.DURING THE COURSE OF HEARING BEFORE US,THE A SSESSEE DID NOT PRESS GROUND J, DEALING WITH DISALLOWANCE OF LEGAL AND PROFESSIONAL FEE,AMO UNTING TO RS.21.59 LACS.HENCE, SAME STANDS DISMISSED AS NOT PRESSED. ASSESSEE COMPANY,ENGAGED IN THE BUSINESS OF PRINTIN G,PUBLISHING AND OUTDOOR ADVERTISING ETC.FILED ITS RETURN OF INCOME ON 25.9.2009 DECLARI NG INCOME OF RS.1.13,12,537/-.THE ASSESSING OFFICER(AO)COMPLETED THE ASSESSMENT ON 30 .3.2011,DETERMINING THE INCOME OF THE ASSESSEE AT RS.5.67 CRORES. 2. FIRST GROUND OF APPEAL [GROUND NO.(A)] IS ABOUT DI SALLOWANCE U/S. 14A R.W.RULE 8D OF THE ACT AMOUNTING TO RS.1.02 CRORES.DURING THE ASSESSME NT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEES INVESTMENT IN SHARES AND SECURITIES AS O N THE BALANCE SHEET DATE WAS AT RS.9631.12 LACS AS AGAINST THE PREVIOUS YEARS CLOSING BALANCE OF RS.7,433.93 LACS, THAT IT HAD RECEIVED DIVIDEND INCOME OF RS.1.06 LACS.HE HELD THAT THE AS SESSEE HAD EARNED EXEMPT INCOME,THAT IT HAD INCURRED EXPENSES AND SAME WERE RELATED TO EARN ING OF EXEMPT INCOME,THAT THEY WERE NOT ALLOWABLE WITHIN THE MEANING OF PROVISIONS OF SECTI ON 14A OF THE ACT.HE FURTHER NOTED THAT THE ASSESSEE HAD DISALLOWED RS.63,523/- PAID AS STT IN ITS RETURN OF INCOME.HE HELD THAT THE DISALLOWANCE MADE BY THE ASSESSEE WAS NOT SATISFACT ORY IF QUANTUM OF INVESTMENT MADE AND THE DIVIDEND RECEIVED WERE CONSIDERED.DURING THE AS SESSMENT PROCEEDINGS,HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALLOWANCE U/S. 14A R.W. RULE 8D OF THE INCOME TAX RULES, 1962(RULES)SHOULD NOT BE MADE. IT WAS ARGUED THAT N O EXPENSES WERE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME,THAT THE DIVI DEND RECEIVED WERE TAXABLE IN THE HANDS OF SHARE HOLDERS,THAT THE COMPANY DISTRIBUTING DIVIDEN D HAD TO PAY DIVIDEND DISTRIBUTION TAX U/S. 115-O OF THE ACT, THAT IT HAD INVESTED IN SHARES OU T OF THE NON-INTEREST BEARING FUNDS,THAT NO EXPENDITURE CAN BE NOTIONALLY ASSIGNED FOR WORKING DISALLOWANCE U/S. 14A. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE THE AO MADE DISALLOW ANCE OF RS.1,02,31, 580/- . 2738/13-NXT MEDIA 2 2.1. THE FIRST APPELLATE AUTHORITY (FAA),AFTER CONSIDERI NG THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER,HELD THAT THE MANDATE OF SECTI ON 14A OF THE ACT WAS TO PREVENT CLAIM OF DEDUCTION OF EXPENDITURE INCURRED IN RELATION TO TH E INCOME WHICH DID NOT FORM PART OF THE TOTAL INCOME OF THE ASSESSEE ,THAT IT COULD NOT EST ABLISH THE NEXUS BETWEEN THE ENTIRE CAPITAL BEING INVESTED IN SECURITIES, THAT IT WAS IMPOSSIBL E TO BELIEVE THAT OUT OF THE COMMON HOTCH- POTCH OF FUNDS THE ENTIRE CAPITAL HAD GONE INTO THE INVESTMENT IN SHARES WITHOUT A PART OF THE SAME GOING TO THE BUSINESS, THAT THE ASSESSEE WAS N OT CATEGORICAL AS TO HOW MUCH OIF THE SUM HAD TO BE INVESTED IN THE BUSINESS.HE REFERRED TO T HE CASE OF DHAPA & SONS (54 DTR 345) AND SMT. LEENA RAMACHANDRAN (45 DTR 372) AND HELD THAT THE CASE OF THE ASSESSEE WAS COVERED BY THE PROVISIONS OF SECTION 14A(3) OF THE ACT,THAT THE CASE WAS ALSO COVERED BY SUB-SECTION (2) OF SECTION 14A,AS THE AO WAS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM MADE BY THE ASSESSEE IN RESPECT OF SUCH EXPENDITURE.FINALLY,HE UPHELD THE DISALLOWANCE MADE BY THE AO. 2.2. BEFORE US,THE AUTHORISED REPRESENTATIVE(AR)CONTENDE D THAT 99.97% OF TOTAL INVESTMENT WERE STRATEGIC INVESTMENT ON WHICH SECTION 14A OF T HE ACT R.W.RULE 8D DID NOT APPLY,THAT IF DISALLOWANCE U/S.14A WAS WARRANTED ONLY NET INTERES T WAS TO BE CONSIDERED,THAT ONLY THOSE INVESTMENT COULD BE TAKEN INTO CONSIDERATION FOR MA KING DISALLOWANCE FROM WHICH EXEMPT INCOME HAD BEEN ACTUALLY RECEIVED DURING THE YEAR,T HAT DISALLOWANCE U/S. 14 R.W.RULE 8D COULD NOT EXCEED THE TOTAL INCOME EARNED,THAT THE O WN FUND OF THE ASSESSEE WERE HIGHER THAN THE TOTAL INVESTMENT.HE REFERRED TO PAGE NO.32,44 A ND 35 OF THE PAPER BOOK AND STATED THAT SHARES WERE NOT ACQUIRED FROM BORROWED FUNDS, THAT THE ASSESSEE HAD SOLD PART OF SUBSIDIARY PUBLISHING BUSINESS.HE RELIED UPON THE CASES OF EXC EL INDUSTRIES LTD.(ITA8278/MUM/2011- 12);CROMPTON GREAVES LTD.(ITA/6277/MUM/2012),FOUR D IMENSIONS SECURITIES(INDIA)LTD. (ITA/6395/MUM/2011),PINNACLE BROCOM LTD.(ITA/6247/M UM/2012),HDFC BANK LTD.(366 ITR505).DEPARTMENTAL REPRESENTATIVE(DR)SUPPORTED TH E ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD RECEIVED DIVIDEND OF RS.1.06 LAKHS DUR ING THE YEAR,THAT THE AO AND FAA HAD APPLIED THE PROVISIONS OF SECTION 14A OF THE ACT R. W.RULE 8D,THAT THE ARGUMENTS OF STRATEGIC INVESTMENT AND AVAILABILITY OF FUNDS WERE NOT DEALT WITH.IF THE SHARES WERE NOT PURCHASED FROM THE BORROWED FUNDS THEN THERE WAS NO JUSTIFICA TION IN MAKING DISALLOWANCE OF INTEREST EXPENDITURE.THE PROVISIONS OF SECTION 14A WERE BROU GHT IN TO ACT TO PREVENT THE MISCHIEF OF CLAIMING EXPENSES AGAINST THE EXEMPT INCOME.BUT,THA T DOES NOT MEAN THAT WHENEVER AN ASSESSEE CLAIMS EXEMPT INCOME AUTOMATIC DISALLOWANC E HAS TO BE MADE.THE AO AND THE FAA HAVE WITHOUT CONSIDERING THE RELEVANT FACTS MADE TH E DISALLOWANCE.IN THE MATTER OF HDFC BANK LTD.(SUPRA)THE HONBLE JURISDICTIONAL HIGH COU RT HAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE POINT THAT THE ASSESSEE S SHARE CAPITAL, PROFIT RESERVES AND SURPLUS AS WELL AS THE BALANCE IN THE CURRENT ACCOUNT IS MO RE THAN THE INVESTMENT IN THE TAX-FREE SECURITIES. IT IS ALSO AN ACCEPTED NORMS AND BUSINE SS PRACTICE THAT A PRUDENT BUSINESSMAN WOULD MAKE THE INVESTMENT OUT OF HIS OWN FUNDS INST EAD OF BORROWED FUNDS AND THE BORROWED FUNDS ARE UTILIZED FOR BUSINESS/TRADING PURPOSES ; HOWEVER, EXCEPTION MAY BE THERE TO THIS GENERAL PRACTICE. AS PER THE PROVISIONS OF SECTION 14A, THE EXPENDITURE INCURRED TO EARN EXEMPT INCOME CANNOT BE ALLOWED AND THE EXPENDITURE SHALL BE ALLOWED ONLY TO THE EXTENT THAT THEY ARE RELATABLE TO THE EARNING OF TAXABLE INCOME . IN OTHER WORDS, ONLY THE NET INCOME IS SUBJECTED TAX AND SIMILARLY EXEMPTION IS ALSO ALLOW ED ON THE NET EXEMPTED INCOME. IF AN EXPENDITURE IS DIRECTLY OR INDIRECTLY INCURRED FOR EARNING THE EXEMPT INCOME, THEN THE SAME CANNOT BE CLAIMED AS AGAINST THE INCOME, WHICH IS T AXABLE. IN ORDER TO DISALLOW THE PROPORTIONATE EXPENDITURE UNDER SECTION 14A, THERE SHOULD BE SOME PROXIMATE COURSE AND THE NEXUS OF THE SAID EXPENDIT URE WITH THE TAX EXEMPT INCOME .(EMPHASIS BY US).WHEN IT HAS BEEN BROUGHT ON RECOR D THAT NO EXPENDITURE ACTUALLY 2738/13-NXT MEDIA 3 INCURRED FOR EARNING THE EXEMPT INCOME, THEN THE PR OVISIONS OF SECTION 14A CANNOT BE INVOKED. IN THE CASE IN HAND, UNDISPUTEDLY, THE ASSESSEES O WN FUNDS AND NONINTEREST BEARING FUNDS ARE MORE THAN THE INVESTMENT IN THE TAX-FREE SECURITIES THEN THERE IS NO BASIS FOR DEEMING THAT THE ASSESSEE HAS USED THE BORROWED FUNDS FOR INVESTMENT IN TAX-FREE SECURITIES. ACCORDINGLY, ON THIS FACTUAL ASPECT, WE DO NOT FIND ANY MERIT IN TH E CONTENTION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE. FURTHER, IT IS TO BE NOTED THAT IT IS NOT THE CASE OF INVESTMENT IN TAX-FREE SECURITIES EVERY YEAR ; BUT THE INVESTMENT IN THE E ARLIER YEARS HAS BEEN CARRIED FORWARD AS IT IS EVIDENT FROM THE PARTICULARS WHERE THE BALANCE AT T HE END OF THE YEAR SHOWS THAT THE INVESTMENT IS APPEARING IN ALL THE EARLIER YEARS. T HEREFORE, WE DO NOT FIND ANY ERROR OR ILLEGIBILITY IN THE ORDER OF THE COMMISSIONER OF IN COME-TAX (APPEALS), QUA, THE ISSUE OF DISALLOWANCE OF INTEREST UNDER SECTION 14A. RESPECTFULLY,FOLLOWING THE PRINCIPLES ENUMERATED IN THE ABOVE MENTIONED JUDGMENT,WE DECIDE GROUND A IN FAVOUR OF THE ASSESSEE. 3. NEXT GROUND OF APPEAL DEALS WITH DISALLOWANCE MADE U/S. 40(A)(IA) OF THE ACT, AMOUNTING TO RS.2.70 LACS.DURING THE COURSE OF ASSESSMENT PRO CEEDINGS,THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHETHER TAX HAD BEEN DEDUCTED ON THE FEE PAID TO THE DIRECTORS.AFTER CONSIDERING THE REPLY OF THE ASSESSEE,DTD.16.11.2011,THE AO HEL D THAT THE DIRECTORS SITTING FEE WAS IN THE NATURE OF PROFESSIONAL FEE PAID, THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE IN ACCORDANCE WITH THE PROVISION OF SECTION 194J OF TH EACT, THAT IT HAD FAILED TO COMPLY WITH THE PROVISIONS OF CHAPTER XVII-B OF THE ACT.FINALLY,HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE. 3.1. DURING THE APPELLATE PROCEEDINGS,THE ASSESSEE ARGUE D THAT SECTION 194J HAD BEEN AMENDED BY THE FINANCE BILL 2012,THAT THE AMENDMENT WAS EFF ECTIVE FROM 1.5.2012 AND THAT IT WAS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION.THE FAA HELD THAT PAYMENTS MADE AS DIRECTORS SITTING-FEE FELL WITHIN THE DEFINITION OF PROFESSIO NAL FEE,THAT THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE.HE CONFIRMED THE ORDER OF THE AO. 3.2 .BEFORE US THE AUTHORISED REPRESENTATIVE (AR) ARGUE D THAT PROVISIONS OF SECTION 194J WERE NOT APPLICABLE TO SITTING FEE PAID TO DIRECTOR S, THAT THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE FAA WAS UNWARRANTED.HE RELIED UPON THE CASES OF GLAXOSMITHKLINE PHARMACEUTICALS LTD.(ITA.7069-72/MUM/2012)AND BHARA T FORGE LIMITED(154TTJ649).THE DR SUPPORTED THE ORDER OF THE FAA. 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT IN THE CASE OF BHARAT FORGE LTD.(SUPRA),THE TRIBUNAL H AS HELD AS UNDER:- 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE. THE ONLY DISPUTE IN THIS GROUND IS REGARDING DEDUCTION OF TAX AT SOURCE FROM THE SITTING FEES PAID TO THE DIRECTORS. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE PROVISIONS OF SECTION 194J IS NOT APPLICABLE FROM SUCH SITTING FEES SINCE FEES DOES NOT FALL IN ANY OF THE CATEGORIES OF PROFESSIONAL SERVICE AS PER EXPLANATION TO SECTION 194J. FURTHER, NO SUCH OBJECTION WAS TAKEN IN THE PAST BY THE DEPARTMENT FOR SUCH NON DEDUCTIO N AND IN VIEW OF INSERTION OF SUB SECTION (BA) TO SECTION 194J(1) TDS IS REQUIRED TO BE MADE OUT OF SUCH DIRECTOR SITTING FEES W.E.F., 01- 07-2012. THEREFORE, FOR NON-DEDUCTION OF TAX AT SOU RCE FROM THE SITTING FEES FOR THE IMPUGNED ASSESSMENT YEAR THERE IS NO DEFAULT ON THE PART OF THE ASSESSEE. ACCORDING TO THE REVENUE THE DIRECTOR IS ALSO A MANGER UNDER THE PROVISIONS OF T HE COMPANIES ACT AND THEREFORE A TECHNICAL PERSONNEL AND THEREFORE THE COMPANY IS LIABLE TO DE DUCT TAX AT SOURCE UNDER THE PROVISIONS OF SECTION 194J. 8.1 AS PER THE EXPLANATION TO PROVISIONS OF SECTION 194J PROFESSIONAL SERVICE MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON L EGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECH NICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIF IED BY THE BOARD. WE, THEREFORE, FIND FORCE IN 2738/13-NXT MEDIA 4 THE SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSES SEE THAT SITTING FEES PAID TO THE DIRECTORS DOES NOT AMOUNT TO FEES PAID FOR ANY PROFESSIONAL S ERVICES AS HAS BEEN MENTIONED IN THE EXPLANATION TO SECTION 194J(1). WE FURTHER FIND FRO M THE MEMORANDUM EXPLAINING TO PROVISIONS OF THE FINANCE BILL 2012 THAT AS PER CLA USE NO.71 IT WAS SPECIFICALLY MENTIONED THAT THERE WAS NO SPECIFIC PROVISION FOR DEDUCTION OF TAX ON THE REMUNERATION PAID TO A DIRECTOR WHICH IS NOT IN THE NATURE OF SALARY. WE F IND THE PROVISIONS OF SECTION 194J(1)(BA) SPEAKS OF ANY REMUNERATION OR FEES OR COMMISSION BY WHATEVER NAME CALLED OTHER THAN THOSE ON WHICH TAX IS DEDUCTIBLE U/S.192 TO A DIRECTOR OF A COMPANY ON WHICH TAX HAS TO BE DEDUCTED AT THE APPLICABLE RATE AND THE ABOVE PROVISION HAS BEEN INSERTED BY THE FINANCE ACT, 2012 W.E.F., 01-07-2012. WE, THEREFORE, FIND FORCE IN TH E SUBMISSION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT NO TAX IS REQUIRED TO BE DEDUCTED U/S .194J OUT OF SUCH DIRECTOR'S SITTING FEES FOR THE A.Y. 2007-08. IN THIS VIEW OF THE MATTER, THE O RDER OF THE CIT(A) IS SET-ASIDE AND THE GROUND RAISED BY THE ASSESSEE ON THE ISSUE OF TDS O N SITTING FEES PAID TO DIRECTORS IS ALLOWED. RESPECTFULLY FOLLOWING THE ABOVE,WE DECIDE GROUND N O.B IN FAVOUR OF THE ASSESSEE. 4. NEXT EFFECTIVE GROUND OF APPEAL (GROUND OF APPEAL C TO E) DEALS WITH BAD DEBTS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD WRITTEN OFF BAD DEBTS OF RS.57.73 LACS.HE DIRECTED IT TO JUSTIFY THE CLAIM MADE BY IT .AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,DATED 2.12.2011 AND 13.12.2011,THE AO HELD THAT THE CLAIM OF BAD DEBTS WRITTEN OFF COMPRISED OF DEPOSITS GIVEN TO MSRTC, BEST UNDERTAK ING, NEW DELHI MUNICIPAL COUNCIL AND ADVANCE TO ONE OF ITS SUBSIDIARY, THAT WHAT WAS RECEIVABLE FROM THOSE PARTIES AGAINST THE DEPOSIT GIVEN WHICH WAS IN THE NATURE OF CAPITAL RE CEIPT AND WHAT WAS PAYABLE TO THOSE PARTIES WAS REVENUE IN NATURE, THAT THE AMOUNT PAYABLE WAS RELATED TO ADVERTISEMENT, THAT THE RECEIVABLES AND PAYABLES WERE NOT ON THE SAME ACCOU NT OF REVENUE, THAT THEY COULD NOT BE SET OFF AGAINST EACH OTHER.INVOKING THE PROVISIONS OF S ECTION 36(2) OF THE ACT,HE DISALLOWED AN AMOUNT OF RS.2,88,20,474/-. 4.1. BEFORE THE FAA,THE ASSESSEE ARGUED THAT IT HAD CLAI MED BAD DEBTS OF RS.57,73,415/- ONLY, THAT THE AO HAD DISALLOWED MORE THAN THE CLAIM MAD E BY THE ASSESSEE UNDER THE HEAD BAD DEBTS WRITTEN OFF.BEFORE HIM,THE ASSESSEE FILED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCES UNDER RULE 46A.HE CALLED FOR A REMAND REP ORT FROM THE AO AND FORWARDED A COPY OF THE SAME TO THE ASSESSEE FOR FURNISHING REBUTTAL AND COUNTER COMMENTS. AFTER CONSIDERING THE MATERIAL AVAILABLE,HE HELD TH AT THE ASSESSEE HAD NOT DEBITED BAD DEBT TO P&L ACCOUNT AS AN EXPENSE AND AS SUCH BAD DEBTS WER E NOT WRITTEN OFF, THAT DEBITS DUE FROM GOVERNMENT INSTITUTIONS/ORGANIZATION COULD NOT BE S UMMARILY WRITTEN OFF AS BAD DEBTS AS THEY WERE NOT BAD DEBTORS.REFERRING TO THE REMAND REPORT ,THE FAA OBSERVED THAT SUBMISSIONS MADE BEFORE THE AO WERE AMBIGUOUS.CONSIDERING THE P ECULIAR FACTS AND CIRCUMSTANCES OF THE CASE,HE DIRECTED THE AO TO RE-CHECK IF HE HAD ADDED CERTAIN AMOUNTS WHICH HAD ALREADY BEEN ADDED BY THE ASSESSEE BY CREDITING THEM TO THE BAD DEBTS OF ACCOUNTS.HE HELD THAT THERE SHOULD NOT BE DOUBLE TAXATION.SUBJECT TO SUCH VERIF ICATION,HE CONFIRMED THE DISALLOWANCE IN PRINCIPLE. 4.2. BEFORE US,THE AR ARGUED THAT THE ASSESSEE HAD FULFI LLED THE CONDITIONS STIPULATED U/S.36(2) OF THE ACT,THAT THE FAA SHOULD HAVE ALLOWED THE BAD DEBTS AS BUSINESS LOSS,THAT THE AO HAD MADE THE ADDITION OF RS.2.80 CRORES WITH REGARD TO AMOUNT PAYABLE TO BEST UNDERTAKING, THAT ASSESSEE HAD DEBITED AND CREDITED THE BAD DEBT S ACCOUNT ALL RECEIVABLES AND PAYABLES IN CONNECTION WITH BEST UNDERTAKING,THAT IT HAD WRITTE N OFF ONLY NET AMOUNT RECEIVABLE FROM BEST UNDERTAKING AMOUNTING TO RS.54.66 LACS.THE AR REFERRED TO PAGE NO.32,52, AND 61 OF THE PAPER BOOK AND STATED THAT ASSESSEE HAD ADDED B ACK RS.6.23 CRORES AND HAD CLAIMED BAD DEBTS OF RS.57.73 LACS ONLY,THAT RS.57.53 LACS WAS PART OF RS.86.00 LACS OF OUTDOOR AND TV DIVISION.HE REFERRED TO THE CASE OF UNITED VANDER ( ITA/68/MUM/2010-LEGAL PAPER BOOK 162) AND STATED THAT CASE OF THE ASSESSEE WAS COVERED BY THE DECISION OF HONBLE SUPREME COURT DELIVERED IN THE CASE OF TRF LTD.(323ITR397).DR SUP PORTED THE ORDER OF THE FAA. 2738/13-NXT MEDIA 5 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL.WE FIND THAT THE ASSESSEE HAD CLAIMED BAD DEBTS OF RS.57.73 LACS ONLY IN THE BOOKS OF ACCOUNTS AND THE AO AND THE FAA HAD NOT CONSIDERED THE AMOUNTS ADDED BACK BY IT ,THAT IT HAD WRITTEN OFF ONLY NET AMOUNT RECEIVABLE FROM BEST UNDERTAKING.IN OUR OPINION,THE ASSESSEE IS THE RIGHT PERSON TO DECIDE AS TO WHETHER A PARTICULAR AMOUNT HAS BECOME BAD OR NOT.THE AO/FAA CANNOT DECIDE THE ISSUE REFERRING TO THE ENTITY FROM WHOM MONEY IS TO BE RECIVED.IF THE ASSESSEE HAD,IN ITS BOOKS OF ACCOUNTS WRITTEN OFF AN AMOUNT,THE REVENUE AUTHO RITIES CANNOT DISALLOW IN LIGHT OF THE JUDGMENT OF THE HONBLE APEX COURT DELIVERED IN THE CASE OF TFR LTD.(SUPRA).THE HONBLE COURT HAS HELD AS UNDER: 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 DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAS B ECOME IRRECOVERABLE : IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT S OF THE ASSESSEE. THERE IS NO DOUBT ABOUT THE WRITING OFF THE AMOUNT IN QUESTION IN THE BOOKS OF ACCOUNTS.SO, REVERSING THE ORDER OF THE FAA,WE DECIDE C-E IN FAV OUR OF THE ASSESSEE. 5. NEXT EFFECTIVE GROUND PERTAINS TO TAXING PROVISION FOR DOUBTFUL DEBTS WRITTEN BACK AMOUNT - ING TO RS.7.17 LACS AND RS.5.91 LACS RESPECTIVELY.D URING THE COURSE OF HEARING BEFORE US,THE AR STATED THAT THE FAA HAD NOT APPRECIATED THE FACT THAT PROVISIONS FOR DOUBTFUL DEBTS (RS.7,71,244/-) WAS NOT ALLOWABLE AS DEDUCTION U/S. 36 (1)(VII), THAT SAME COULD NOT BE TAXED ON ITS BEING WRITTEN OFF, THAT THE PROVISION FOR DO UBTFUL DEBTS WRITTEN BACK WAS NOT LIABLE TO BE TAXED AS INCOME OF THE ASSESSEE, THAT THE FAA HAD N OT CONSIDERED THE FACT THAT THE SERVICE TAX PAYABLE WRITTEN BACK (RS.5.91 LACS) COULD NOT BE TA XED AS INCOME OF THE ASSESSEE FOR THE YEAR UNDER APPEAL, THAT NO DEDUCTION HAD BEEN ALLOWED TO THE ASSESSEE ON ACCOUNT OF SERVICE TAX PAYABLE.HE REFERRED TO THE PAGE NO.61 AND 69 OF THE PAPER BOOK.DR RELIED UPON THE ORDER OF THE FAA. 5.1.WE HAVE HEARD THE RIVAL SUBMISSIONS.WE HAVE PER USED THE PAGE NO.61 OF THE PAPER BOOK.IT GIVES DETAILS OF THE BAD DEBTS DURING THE Y EAR UNDER CONSIDERATION.WE FIND THAT THE ASSESSEE AHD ADDED BACK THE TWO SUMS I.E. RS.7.17 L ACS AND RS.5.91 LACS UNDER THE HEAD PROVISIONS FOR DOUBTFUL DEBTS AND SERVICE TAX PAYAB LE RESPECTIVELY. THEREFORE, WE ARE OF THE OPINION THAT THE ACTION OF THE AO/FAA HAS RESULTED IN TAXING THE SAME SUM TWICE.REVERSING THE ORDER OF THE FAA GROUND (H) AND (I) IS DECIDED IN FAVOUR OF THE ASSESSEE . 6. LAST GROUND OF APPEAL (GROUND K)IS ABOUT DISALLOWAN CE OF INTEREST OF RS.38.44 LACS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE AS SESSEE HAD ADVANCED LOAN TO M/S. FERRARI INVESTMENT AND TRADING CO.PVT. LTD.,THAT IT HAD NOT CHARGED INTEREST FOR THE AMOUNT ADVANCED, THAT IT HAD BORROWED FUNDS OF RS.995 LACS,THAT IT H AD PAID INTEREST OF RS.1,10,76,615/-.HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM O F INTEREST TO THE EXTENT CHARGEABLE ON LOAN AND ADVANCES SHOULD NOT BE DISALLOWED TREATING THE SAME AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS.VIDE ITS L ETTER,DTD.13.12.2011,THE ASSESSEE STATED THAT THE AMOUNT GIVEN TO FERARRI INVESTMENT WAS TOWARD T HE PURCHASE OF SHARES AND THAT IT WAS NOT FOR ANY LOAN OR ADVANCE,THAT THE ABOVE FACT WAS MEN TIONED IN THE NOTE TO ACCOUNTS AT PT.NO. 14B,THAT THE SOLE INTENTION OF THE ADVANCE WAS INVE STMENT PURPOSE AND BUSINESS EXPEDIENCY, THAT THE ADVANCES WERE NOT MADE FROM THE INTEREST B EARING FUNDS OF THE ASSESSEE.HOWEVER, THE AO WAS NOT CONVINCED AND CALCULATED THE DISALLOWANC E AS UNDER : DATE DEBIT CREDIT DAILY BALANCE INTEREST 01/04/2008 17,18,00,000 17,18,00,000 37,84,306 05/06/2008 91,00,000 18,09,00,000 59,474 30/06/2008 9,00,000 18,18,00,000 0.00 2738/13-NXT MEDIA 6 30/12/2008 30,00,000 30,00,000 986 21/01/2009 25,00,000 5,00,000 164 24/01/2009 5,00,000 0.00 TOTAL(RS.) 38,44,930 6.1. DURING THE APPELLATE PROCEEDINGS,THE FAA HELD THAT THE ASSESSEE HAD ADVANCED INTEREST BEARING LOAN TO FITPL FOR PURCHASE OF SHARES OF RAD IO-MIDDAY(WEST), THAT THE INTEREST COST HAD TO BE ADDED TO THE COST OF ACQUISITION OF SHARE S,THAT THE CORRESPONDING INTEREST EXPENDITURE OF RS.38,44,930/- WAS NOT A DEDUCTIBLE EXPENDITURE. BEFORE US,THE AR STATED THAT THE AO HAD IGNORED THE CREDIT ENTRY OF 30.6.2008,WHILE MAKING THE ADDITION,THAT THE SHARES OF RADIO-MIDDAY(WEST)W ERE BOUGHT FROM FERRARI, THAT THE MONEY WAS ADVANCED TO FITPL FOR THE PURPOSE OF BUYING TH E SHARES, THAT THE TRANSACTIONS WAS NOT IN THE NATURE OF INTEREST FREE LOAN,THAT DURING THE CO URSE OF ASSESSMENT PROCEEDING COPY OF LEDGER ACCOUNT OF FERRARI WAS PRESENTED BEFORE THE AO,THAT HE IGNORED THE SAME AND MADE THE ADDITION WITHOUT ANY BASIS.HE RELIED UPON THE CASE OF S.A. BUILDERS AND REFERRED TO PAGE NO.64 OF THE PAPER BOOK.DR SUPPORTED THE ORDER OF T HE FAA. 6.2.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL. WE FIND THAT ASSESSEE HAD ADVANCED MONEY TO FERRARI ON ACCOUNT OF PURCHASE OF SHARES OF RADIO MIDDAY, THAT IN THE DATE WISE SUMMARY A CREDIT ENTRY IS APPEARING ON 30 TH JUNE 2008, THAT FROM THE SAID ENTRY IT IS CLEAR THAT THE SHARES OF RADIO(WEST) WERE BOUGHT BY THE A SSESSEE FROM FERRARI. CONSIDERING THESE FACTS WE ARE OF THE OPINION THAT MONEY ADVANCED BY THE ASSESSEE TO M/S. FERRARI WAS SOLELY FOR THE PURPOSE OF BUYING THE SHARES AND THAT THE TRANS ACTIONS COULD NOT BE TERMED AS ADVANCE OF INTEREST FREE LOAN. THEREFORE, REVERSING THE ORDER OF THE FAA, WE DECIDE THE LAST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. AS A RESULT APPEAL FILED BY THE ASSESSEE STANDS PAR TLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH OCTOBER,2015. 30 TH '# ,2015 SD/- SD/- ( !'# / SAKTIJIT DEY) ( ( / RAJENDRA) ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI, /DATE: 30. 1 0. 2015 . . . .. . JV.SR.PS. +# ,&# / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ !$+ , , 4. THE CONCERNED CIT / !$+ , 5. DR A BENCH, ITAT, MUMBAI / . , , . . . 6. GUARD FILE/ %1 //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.