M/s VRL Logistics Ltd, Hubli V. Joint Commissioner of Income tax, Range-1, Hubli

ITA 2782/BANG/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3531 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 13-10-2021
• Assessment Year: 2012-2013
• Appeal Filed On: 20-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SOUMYA VIRUPAKSHAIAH
• Keywords: Depreciation; Opportunity of being heard; Bad and doubtful debts
• Section: 143(3); 37(1); 207; 28

Judgement Text

ITA NO.2782/BANG/2017 M/S. VRL LOGISTICS LIMITED, VARUR IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.2782/BANG/2017 ASSESSMENTYEAR:2012-13 M/S. VRL LOGISTICS LIMITED VARUR POST CHABBI HUBBALLI TALUKA 581 207 PAN NO :AABCV3609C VS. JCIT RANGE-1 HUBBALI APPELLANT RESPONDENT APPELLANT BY : SHRI HIMANSHU GANDHI, A.R. RESPONDENT BY : SMT. SOUMYA VIRUPAKSHAIAH, D.R. DATE OF HEARING : 13.10.2021 DATE OF PRONOUNCEMENT : 14.10.2021 O R D E R PERB.R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 4.9.2017 PASSED BY LD. CIT(A) HUBLI AND IT RE LATES TO THE ASSESSMENT YEAR 2011-12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE FOLLOWING DISALLOWANCES. A) DISALLOWANCE OF BAD DEBTS CLAIM B) DISALLOWANCE OF PART OF AIRCRAFT EXPENSES 2. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRANSPOR TATION OF GOODS, PROVIDING COURIER SERVICES, PASSENGER TRAVELS AND W IND POWER ITA NO.2782/BANG/2017 M/S. VRL LOGISTICS LIMITED, VARUR PAGE 2 OF 6 GENERATION. THE ASSESSMENT FOR THE YEAR UNDER CONS IDERATION WAS COMPLETED BY THE A.O. U/S 143(3) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT] ON 19.3.2015. 3. THE FIRST ISSUE RELATES TO DISALLOWANCE OF BAD D EBTS CLAIMED BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE CLAIMED FOLLOWING AMOUNTS AS BAD DEBTS. SL.NO. PARTICULARS AMOUNT (RS.)_ 1 BAD DEBTS ADVANCES 17,11,490 2 BAD DEBTS AGENTS DEBIT BALANCE 10,227 3 BAD DEBTS DEBTORS 2,56,082 4 BAD DEBTS DRIVERS SHORT 23,19,533 5 BAD DEBTS RENT DEPOSIT 32,34,880 TOTAL 75,32,212 4. THE A.O. NOTICED THAT THE ABOVE SAID AMOUNTS REP RESENTED WRITING OF ADVANCE AMOUNTS EXCEPT ONE ITEMS OF WR ITING OFF OF DEBTORS ACCOUNT IN ONE CASE. THE A.O. REFERRED TO THE CONDITION PRESCRIBED U/S 36(2) OF THE ACT, WHEREIN IT IS STAT ED THAT THE AMOUNT WRITTEN OFF AS BAD DEBT SHALL BE ALLOWED AS DEDUCTI ON ONLY WHEN SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOU NT IN COMPUTING THE INCOME OF THE ASSESSEE, ETC. SINCE THE ADVANCE AMOUNTS WRITTEN OFF BY THE ASSESSEE WERE NOT DECLARED AS INCOME IN ANY OF THE YEARS, THE A.O. ALLOWED DEDUCTION TO THE EXTENT OF RS.2,56 ,082/- ONLY, BEING THE AMOUNT RELATING TO WRITING OFF OF DEBTORS BALANCE AND ACCORDINGLY, DISALLOWED THE BALANCE AMOUNT OF RS.72 ,76,130/-. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 5. THE LD. A.R. SUBMITTED THAT THE ABOVE SAID ADVAN CES HAVE BEEN GIVEN DURING THE COURSE OF CARRYING ON OF BUSI NESS ON REVENUE ACCOUNT. ACCORDINGLY, HE SUBMITTED THAT THE WRITIN G OFF OF ITA NO.2782/BANG/2017 M/S. VRL LOGISTICS LIMITED, VARUR PAGE 3 OF 6 IMPUGNED ADVANCES IS ALTERNATIVELY ALLOWABLE AS DED UCTION EITHER U/S 28 OR U/S 37(1) OF THE ACT. 6. THE LD. D.R. ON THE CONTRARY SUBMITTED THAT THE ASSESSEE IS MAKING A NEW CLAIM AND THE SAME REQUIRES EXAMINATIO N AT THE END OF THE A.O. 7. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE ARE OF THE VIEW THAT ALTERNATIVE CLAIM OF THE ASSESSEE REQUIRES EXA MINATION AT THE END OF THE A.O, SINCE THE ALTERNATIVE CLAIMS WERE N OT RAISED BEFORE THE TAX AUTHORITIES. ACCORDINGLY, WHILE CONFIRMING THE ORDER PASSED BY LD. CIT(A) ON THE ISSUE OF BAD DEBTS, WE REMIT T HIS ISSUE TO THE FILE OF THE A.O. FOR EXAMINING THE ALTERNATIVE CONT ENTIONS OF THE ASSESSEE I.E. WHETHER THIS CLAIM CAN BE ALLOWED AS DEDUCTION EITHER U/S 28 OR U/S 37(1) OF THE ACT. THE A.O. MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW ON THIS ISSUE, AFTER AFFORDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 8. THE NEXT ISSUE RELATES TO DISALLOWANCE OF PART O F AIRCRAFT EXPENSES BY THE A.O. HOLDING THE SAME AS NOT RELATE D TO BUSINESS. 9. THE A.O. NOTICED THAT THE ASSESSEE HAS DECLARED AIR CHARTER REVENUE OF RS.5,79,08,954/-, WHICH CONSISTED OF AMO UNT COLLECTED FROM PRIVATE PARTIES OF RS.4,77,32,454/- AND AMOUNT RELATED TO USE BY THE MANAGEMENT OF ASSESSEE COMPANY AMOUNTING TO RS.1,01,76,500/-. WHILE COMPUTING THE PROFIT FROM OPERATION OF AIRCRAFT THE ASSESSEE HAD CONSIDERED THE TAXABLE RE VENUE OF RS.4,77,32,454/-, BEING THE AMOUNT RECEIVED FROM OT HER PRIVATE PARTIES. FURTHER, THE ASSESSEE HAD ALSO CLAIMED DE PRECIATION OF RS.1,75,98,638/-. THE ASSESSEE DID NOT DECLARE THE AIRCRAFT REVENUE RELATED TO USE BY THE MANAGEMENT ON THE GROUND THAT THE SAME WAS ITA NO.2782/BANG/2017 M/S. VRL LOGISTICS LIMITED, VARUR PAGE 4 OF 6 USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. THE A.O. EXAMINED THE LOG BOOK RELATING TO USE OF AIRCRAFT B Y THE MANAGEMENT AND NOTICED THAT ON TWO OCCASIONS, THE DIRECTORS OF THE COMPANY HAS USED THE AIRCRAFT FOR PERSONAL PURPOSES: SL.NO. NAME OF THE DIRECTOR DATE OF JOURNEY ORIGIN DESTINATION CHARTER AMOUNT (RS.) 1 SRI ANAND SANKESHWAR 26.4.2011 BANGALORE TIRUPATI 2,70,000 2 SRI VIJAY SANKESHWAR 10.5.2011 BANGALORE BANGALORE VIA HUBLI, TIRUPATI 5,02,500 TOTAL 7,72,500 ACCORDINGLY, HE DISALLOWED THE ABOVE SAID SAME OF R S.7,72,500/- AND ALSO THE PROPORTIONATE DEPRECIATION OF RS.2,34, 764/-, BOTH AGGREGATING TO RS.10,07,264/-. THE LD. CIT(A) ALSO CONFIRMED THE SAME. 10. WE HEARD THE PARTIES AND PERUSED THE RECORD. A T THE TIME OF HEARING, THE LD. A.R. DID NOT PRESS DISALLOWANCE OF RS.2,70,000/- BEING THE FIRST AMOUNT MENTIONED IN THE TABLE ABOVE . ACCORDINGLY, THE DISALLOWANCE OF RS.2,70,000/- IS CONFIRMED. WIT H REGARD TO THE SECOND AMOUNT OF RS.5,02,500/-. IT IS THE CONTENTIO N OF THE LD. A.R. THAT THE SAME HAS BEEN USED BY THE DIRECTORS AS WEL L AS FINANCE OFFICER OF THE COMPANY. HE SUBMITTED THAT THIS TRI P WAS FOR OFFICIAL PURPOSES SINCE THE ASSESSEE IS HAVING BRANCHES IN B ENGALURU, HUBLI AND TIRUPATHI. ACCORDINGLY, HE SUBMITTED THAT THIS AMOUNT SHOULD BE CONSIDERED AS RELATING TO OFFICIAL PURPOSES ONLY . HE FURTHER SUBMITTED THAT THE DISALLOWANCE OF PROPORTIONATE AM OUNT OF DEPRECIATION IS NOT CALLED FOR SINCE THE IDENTITY O F THE ASSET IS LOST, ONCE THE ASSET ENTERS THE BLOCK UNDER THE BLOCK CON CEPT OF ALLOWING DEPRECIATION. ITA NO.2782/BANG/2017 M/S. VRL LOGISTICS LIMITED, VARUR PAGE 5 OF 6 11. WE HEARD LD. D.R. AND PERUSED THE RECORD. WE N OTICE THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE TO SUBS TANTIATE ITS CLAIM THAT THE SECOND TRIP, WHICH IS HAVING CHARTER AMOUNT OF RS.5,02,500/-, WAS FOR OFFICIAL PURPOSES ONLY. IN OUR VIEW, MERE EXISTENCE OF BRANCHES IN BENGALURU, HUBLI OR TIRUPA TI WOULD NOT SUPPORT THE CASE OF THE ASSESSEE, SINCE THE ASSESSE E IS OTHERWISE HAVING BRANCHES ALL OVER THE COUNTRY. THERE SHOULD NOT BE ANY DISPUTE THAT THE RESPONSIBILITY TO SHOW THAT THE AB OVE SAID TRIP WAS FOR OFFICIAL PURPOSES ONLY WOULD LIE UPON THE SHOUL DERS OF THE ASSESSEE. IN THIS CASE, THE ASSESSEE HAS MADE ONLY ORAL SUBMISSIONS WITHOUT FURNISHING ANY MATERIAL TO SUPP ORT ITS CLAIM, MEANING THEREBY, THE ASSESSEE HAS FAILED TO PROVE T HAT THE TRIP WAS UNDERTAKEN FOR OFFICIAL PURPOSE. ACCORDINGLY, WE H AVE NO OTHER OPTION, BUT TO CONFIRM THE ORDER PASSED BY LD. CIT( A) ON THE ADDITION OF RS.5,03,500/-. THUS THE ADDITION OF BO TH ITEMS AGGREGATING TO RS.7,72,500/- IS CONFIRMED. 12. WITH REGARD TO THE DISALLOWANCE OF PROPORTIONAT E DEPRECIATION OF RS.2,34,764/-, WE NOTICE THAT THE ASSESSEE HAS N OT FURNISHED COPY OF DEPRECIATION SCHEDULE RELATING TO CLAIM OF DEPRECIATION UNDER THE INCOME TAX ACT. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE IDENTITY OF THE ASSET WOULD BE LOST O NCE IT ENTERS THE BLOCK. IN THE INSTANT CASE, IT IS NOT CLEAR AS TO WHETHER THE IDENTITY OF THE HELICOPTER HAS BEEN LOST OR NOT. ACCORDINGL Y, WE ARE UNABLE TO DECIDE ON THESE CONTENTIONS OF THE ASSESSEE. ACCOR DINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH A D IRECTION TO EXAMINE THE ALTERNATIVE CLAIM OF THE ASSESSEE AFRESH BY DUL Y CONSIDERING THE RELEVANT DOCUMENTS. THE A.O. MAY TAKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW AFTER AFFORDING ADEQUATE OPPORT UNITY OF BEING HEARD TO THE ASSESSEE. ITA NO.2782/BANG/2017 M/S. VRL LOGISTICS LIMITED, VARUR PAGE 6 OF 6 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH OCT, 2021 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 14 TH OCT, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.