Unique Receivables Management Pvt Ltd., CHENNAI V. DCIT Corporate Circle 3(2), CHENNAI

ITA 2805/CHNY/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9313 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 27-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts; Set aside
• Section: 43B

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI Įी महावीर ͧसंह, उपाÚय¢ एवं Įी ͬगरȣश अĒवाल, लेखा सदèय के सम¢ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.: 2805 & 2806/CHNY/2018 िनधाᭅरण वषᭅ /Assessment Years: 2006-07 & 2007-08 M/s. Unique Receivables Management Pvt. Ltd., Dhun Building, 827, Anna Salai, Chennai – 600 002. PAN: AABCC 8603K v. The DCIT, Corporate Circle 3(2), Chennai – 34. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri R. Vijayaraghavan, Advocate ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri Chinthapalli Mehar Chand,JCIT स ु नवाई कȧ तारȣख/Date of Hearing : 24.05.2022 घोषणा कȧ तारȣख/Date of Pronouncement : 08.06.2022 आदेश /O R D E R PER MAHAVIR SINGH, VP: These appeals by the assessee are arising out of different orders of Commissioner of Income Tax (Appeals)-11, Chennai in ITA Nos. 498 & 229/13-14, both dated 31.07.2018. The assessments were framed by the ACIT, Company Circle III(3) for the assessment year 2006-07 u/s.143(3) r.w.s. 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’) vide order dated 26.12.2011 and by the Income Tax Officer (OSD), Company Circle III(3), Chennai for the 2 I.T.A. Nos.2805 & 2806/Chny/2018 assessment year 2007-08 u/s.143(3) of the Act vide order dated 12.10.2009. ITA No.2805/CHNY/2018 2. The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the disallowance of bank interest of Rs.1,31,60,648/- being bank interest charged and debited to assessee’s CC account and addition made on account of liability to service tax taken over from ICCFL amounting to Rs.63,19,927/- u/s.43B of the Act. For this assessee has raised following Ground Nos.2 to 5 as under:- 2. The Commissioner of Incometax (Appeals) erred in disallowing bank interest Rs. 1.31,60,648/- being Bank interest charged and debited to Appellant's CC account, u/s 43B. 3. The Commissioner of Incometax (Appeals) ought to have appreciated that the amount of interest debited to the CC account, which is a running account, represents interest recovered by the Bank and hence disallowance u/s 43B is not warranted. 4. The Commissioner of Incometax (Appeals) erred in confirming the addition of Rs. 63,19,927 /- being liability to service tax taken over from ICCFL. 5. The Commissioner of Incometax (Appeals) ought to have appreciated that the Assessee had not collected any amount towards service tax nor has the Appellant claimed the amount as a deduction. Any amount which has not be claimed as a deduction cannot be disallowed u/s 43B. 3. Brief facts are that the assessee is engaged in the business of receivable management & insurance auxillary services. The AO 3 I.T.A. Nos.2805 & 2806/Chny/2018 during the course of assessment proceedings made following additions:- i) Disallowance of unpaid interest Rs.1,31,60,648/- ii) Unpaid service tax u/s 43B Rs.63,19,927/- The CIT(A) confirmed the addition by stating that the interest claimed by the assessee is attracted for disallowance u/s.43B of the Act on account of the same not been paid to the bank by the due dates. Therefore, the CIT(A) confirmed the disallowance of interest u/s.43B of the Act, to the extent of Rs.1,31,60,648/- and similarly, the CIT(A) also confirmed the service tax liability u/s.43B of the Act. The CIT(A) noted that the amount is liable for taxation as benefit accrued by the assessee during business operations conducted and being taxes collected. Hence, he confirmed the disallowance u/s.43B of the Act and service tax liability to the extent of Rs.63,19,927/- 4. Now, before us the ld.counsel for the assessee filed copy of Tribunal order in the case of India Cements Capital Ltd., in ITA No.1932/CHNY/2018, wherein the Tribunal vide order dated 20.05.2022 has noted that in the case of India Cements Capital Ltd., the liability due to Bank of Ceylon stood transferred to SPV in assessment year 2006-07 as per Tripartite Agreement and there is 4 I.T.A. Nos.2805 & 2806/Chny/2018 no income shown in the books of accounts. The ld.counsel for the assessee before us stated during the assessment year 2006-07, India Cements Capital Ltd., transferred all the assets and liabilities of its hire purchase and leasing business to the present assessee. He stated the fact that the agreement for transfer of assets was entered into on 28.06.2006 but the transfer was made effective from 01.10.2005. He argued that there was earlier a dispute regarding the quantum of assets and liabilities transfer and the Department contested only part of the liabilities, which were transferred from India Cements Capital Ltd., to the assessee. He stated that now the Tribunal in the case of India Cements Capital Ltd., supra, held that all the assets and liabilities as appearing in the books of India Cements Capital Ltd., were transferred to the assessee. He explained that the actual transfer of assets and liabilities were effected from 01.10.2005 and the transferor India Cements Capital Ltd., was carrying on the business for on behalf of the assessee. Accordingly, the profits and expenditure for the period 01.10.2005 to 31.03.2006 was incorporated in the books of accounts of the assessee and interest on bank liability was transferred for the period 01.10.2005 to 31.03.2006 amounting to Rs.1,31,60,648/-. This amount was paid by India Cements Capital Ltd., but was not claimed in the return of income. The assessee in 5 I.T.A. Nos.2805 & 2806/Chny/2018 its return for assessment year 2006-07, claimed the interest on bank liability transferred only for the period 01.10.2005 to 31.03.2006 as interest on transferred bank loan accrued to the assessee. 4.1 Similarly in regard to the service tax collected by India Cement Capital Ltd., to the extent of Rs.63,19,927/-, the ld.counsel stated that during the earlier years this service tax was collected by India Cement Capital Ltd., but was not paid in view of pending writ petition filed by Traders Association regarding service tax on leased transactions. It was stated that the assessee had not claimed this amount as deduction in earlier years and hence, the same was claimed in this year, the same cannot be disallowed u/s.43B of the Act. This amount was not at all collected by the assessee and hence, this amount cannot be added as its income. When a query was put to ld.counsel for the assessee by the Bench that these facts are not coming out of the orders of lower authorities i.e., the order of AO and CIT(A), the ld.counsel stated that the Tribunal in ITA No.1932/Chny/2018 order dated 20.05.2022 in the case of India Cements Capital Ltd., has noted these facts, which can be verified. Even this claim on the liability of bank interest of Rs.1,31,60,648/- 6 I.T.A. Nos.2805 & 2806/Chny/2018 and service tax of Rs.63,19,927/-, the AO can verify the same and accordingly the matter can be set aside. 5. The ld. Senior DR has not objected to remand the matter back to the file of the AO for verification of fact stated by assessee’s counsel. 6. After hearing both the sides and going through facts, we direct the AO to verify whether the interest on bank liabilities claimed by assessee for the period 01.10.2005 to 31.03.2006 has not been claimed by India Cement Capital Ltd., and it pertains to the period 01.10.2005 to 31.03.2006. Similarly, the AO also can verify the service tax collected by India Cements Capital Ltd., on the assets transferred during the earlier years. In case, the assessee has not claimed this amount as deduction, the same can be disallowed u/s.43B of the Act. This can be verified by the AO. Accordingly both the disallowances u/.43B in regard to this common issue is remanded back to the file of the AO for verification. The appeal of the assessee is allowed for statistical purposes. 7. Coming to ITA No.2806/CHNY/2018, the only issue raised by assessee is that the CIT(A)’s order is ex-pare and another 7 I.T.A. Nos.2805 & 2806/Chny/2018 opportunity should have been given to the assessee to explain or prove the bad debts written off for an amount of Rs.13,14,72,102/-. For this, assessee has raised following 2 grounds:- 2. The Commissioner of Incometax (Appeals) erred in deciding the case exparte. He should have given another opportunity to the Appellant to explain the case. 3. The Commissioner of Incometax (Appeals) erred in confirming the disallowance of bad debts written off of Rs.13,14,72,102/-. 8. The ld.counsel for the assessee before us argued that the CIT(A) has decided the appeal ex-parte and confirmed the action of AO simpliciter by noting that the credit details of debts taken over as well as corresponding liabilities have not been given by the assessee and further the details whether the debts had not been claimed by India Cements Capital Ltd., or whether the debts taken over have been squared off in the books of the assessee are not provided. The ld.counsel stated that these details could not be provided as the CIT(A) decided ex-parte without providing opportunity to the assessee. On query from the Bench, the ld.counsel stated that out of the business receivables transferred by India Cement Capital Ltd., the assessee written off a sum of Rs.13,14,72,102/- as bad debts and this was disallowed on the ground that the same was claimed by India Cements Capital Ltd., as their bad debts. The assessee contended that entire details 8 I.T.A. Nos.2805 & 2806/Chny/2018 including the list of bad debts were given by the assessee during assessment proceedings in regard to these bad debts. He argued that when the receivables were transferred and reflected in the books of assessee, it could not have been written off and claimed by India Cements Capital Ltd. But this facts require verification. When a query was put to ld. Senior DR, he agreed that matter can be referred back to the file of the AO for verification of facts stated by ld. counsel. 9. After hearing both the sides, we noted that the CIT(A)’s order is ex-parte and the claim of assessee needs verification at the level of AO. Hence, the matter is remanded back to the file of the AO. 10. In the result, both the appeals filed by the assessee are allowed for statistical purposes. Order pronounced in the open court on 8 th June, 2022 at Chennai. Sd/- Sd/- (िगरीश अᮕवाल) (GIRISH AGRAWAL) लेखा सद᭭य /ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 8 th June, 2022 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ (अपील)/CIT(A) 4. आयकर आयुᲦ /CIT 5. िवभागीय ᮧितिनिध/DR 6. गाडᭅ फाईल/GF.