DCIT, Moradabad V. M/s HTE Enterprises (P) Ltd., Moradabad

ITA 2889/DEL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3052 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-05-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 09-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: PUNEET SACHDEV
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : C : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NO.2889/DEL/2013 ASSESSMENT YEAR : 2007-08 DCIT, CIRCLE II, MORADABAD. VS. HTE ENTERPRISES (P) LTD., H-26-27, LAJPAT NAGAR, MORADABAD. PAN: AAACH7414A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI PUNEET SACHDEV, CA DEPARTMENT BY : SHRI P. DAM KANUNJNA, SR. DR DATE OF HEARING : 24.05.2017 DATE OF PRONOUNCEMENT : 26.05.2017 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 13.03.2013 IN RELATION TO T HE ASSESSMENT YEAR 2007-08. ITA NO.2889/DEL/2013 2 2. FIRST ISSUE RAISED IN THIS APPEAL IS AGAINST ALL OWING `IMPAIRMENT LOSS OF RS.4,55,51,155/- IN VIEW OF ACCOUNTING STA NDARD-28. 3. SUCCINCTLY, THE FACTS OF THE CASE ARE THAT THE A SSESSEE CLAIMED DEDUCTION ON ACCOUNT OF IMPAIRMENT LOSS OF RS.4.55 CRORE FROM THE BLOCK OF FIXED ASSETS ON THE BASIS OF VALUATION OF ASSETS DONE BY IT. THE ASSESSING OFFICER REFUSED TO ALLOW SUCH LOSS. THE ASSESSEE CONTENDED THAT AS-28 RECOGNISES SUCH IMPAIRMENT LOSS. THE AS SESSING OFFICER OPINED THAT THE ACCOUNTING STANDARD COULD NOT AFFEC T THE TAXABILITY OF INCOME. THAT IS HOW HE DISALLOWED THE LOSS AFTER N OTICING IN PARA (C) ON PAGE 3 OF HIS ORDER THAT THE ASSESSEE HAD NOT CLAIM ED DEPRECIATION ON ASSETS WORTH RS.5.38 CRORE. THE LD. CIT(A) GOT CON VINCED WITH THE ASSESSEES SUBMISSION AND ALLOWED THE LOSS. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ACCOUNTING STA NDARD SIMPLY DEALS WITH ACCOUNTING TREATMENT AND CANNOT LAY DOWN THE T AXATION PRINCIPLES. THE HON'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALIES CHEMICALS & FERTILIZERS LTD. VS. CIT (1997) 227 ITR 172 (SC) HAS LAID DOWN TO THIS ITA NO.2889/DEL/2013 3 EXTENT. THE AMOUNT OF IMPAIRMENT LOSS OF RS.4.55 C RORE HAS RESULTED SIMPLY BECAUSE OF VALUATION OF THE FIXED ASSETS DON E BY THE ASSESSEE. BY NO STANDARD, SUCH AN IMPAIRMENT LOSS, BEING THE SUO MOTU LOWER VALUATION OF THE FIXED ASSETS CAN BE ALLOWED AS DED UCTION IN THE COMPUTATION OF TOTAL INCOME. WE CANNOT APPROVE THE VIEW TAKEN IN THE IMPUGNED ORDER. HOWEVER, WE FIND THAT THE ASSESSEE DID NOT CLAIM DEPRECIATION BECAUSE OF CLAIMING THE IMPAIRMENT LOS S. AS DEPRECIATION IS MANDATORY AND HAS TO BE ALLOWED, WE DIRECT THE A SSESSING OFFICER TO ALLOW DEPRECIATION AT THE RELEVANT RATES. 5. THE SECOND ISSUE RAISED IN THIS APPEAL IS AGAINS T THE DELETION OF ADDITION OF RS.1,65,17,610/-, BEING THE AMOUNT OF U NSECURED LOANS WAIVED BY THE CREDITORS. THE ASSESSING OFFICER TRE ATED SUCH AMOUNT OF UNSECURED LOANS TAKEN BY THE ASSESSEE IN EARLIER YE ARS AND WRITTEN OFF IN THIS YEAR, AS INCOME. THE LD. CIT(A) DELETED THE ADDITION ON THE PREMISE THAT THIS DID NOT CONSTITUTE TRADING RECEIP T. 6. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEE TOOK LOANS IN EARLIER YEARS ITA NO.2889/DEL/2013 4 AND REFLECTED THE SAME AS ITS LIABILITY IN THE BALA NCE SHEETS. THESE UNSECURED LOANS WERE WAIVED IN THE CURRENT YEAR. S INCE THE RAISING OF LOANS DID NOT CONSTITUTE ANY DEDUCTION IN THE YEAR WHEN THESE WERE RAISED, THEIR WRITE OFF CANNOT EQUALLY RESULT IN A TAXABLE EVENT. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS SCORE IN DELETING THE ADDITION OF RS.1.65 CRORE. 7. THE LAST ISSUE RAISED IN THIS APPEAL IS AGAINST THE DELETION OF ADDITION OF RS.2,91,92,240/-. THE FACTS APROPOS TH IS ISSUE ARE THAT THE ASSESSEE CREDITED INTEREST OF RS.2.91 CRORE TO ITS PROFIT AND LOSS ACCOUNT, WHICH WAS WAIVED BY ORIENTAL BANK OF COMMERCE OUT O F MONIES DUE TO IT AS PART OF SETTLEMENT OF ITS DUES AND OTHER ITEM S OF INTEREST. THE ASSESSING OFFICER TREATED THE ENTIRE SUM OF RS.2.91 CRORE AS INCOME. THE LD. CIT(A) DELETED THE ADDITION. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED FROM THE IMPUGNE D ORDER THAT INTEREST OF RS.1,42,36,124/- WAS NOT ALLOWED AS DEDUCTION IN THE ASSESSMENT OF THE ASSESSEE IN THE EARLIER YEARS BECAUSE OF NON-PA YMENT AND THE SAME ITA NO.2889/DEL/2013 5 WAS DISALLOWED U/S 43B. IN VIEW OF THE FACT THAT TH E ASSESSEE DID NOT GET BENEFIT OF DEDUCTION OF INTEREST WHEN SUCH LIABILIT Y WAS INCURRED, THE SAME AMOUNT WHEN WRITTEN OFF CANNOT BE TREATED AS I NCOME. ANOTHER AMOUNT OF RS.16,98,114/- WAS FOUND BY THE LD. CIT(A ) TO BE CAPITALIZED BY THE ASSESSEE AS ATTRIBUTABLE TO PRE-PRODUCTION E XPENSES AND THE SAME WAS NOT CLAIMED AS DEDUCTION. THE REVERSAL OF SUCH INTEREST IN THE YEAR UNDER CONSIDERATION WOULD NOT ATTRACT TAXABILITY. THE FACTUAL POSITION AS RECORDED IN THE IMPUGNED ORDER ON THIS SCORE HAS NO T BEEN DISPUTED BY THE LD. DR. THE REMAINING AMOUNT OF RS.1,31,78,008/ - (RS.2,91,12,246/- (-) RS.1,42,36,124/- (-) RS.16,98,114/-), WHICH HAS BEEN WRITTEN BACK IS LIABLE TO TAX BECAUSE SUCH AMOUNT WAS ALLOWED AS DE DUCTION IN EARLIER YEARS. 9. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 26.05.201 7. SD/- SD/- [K. NARASIMHA CHARY] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 26 TH MAY, 2017. ITA NO.2889/DEL/2013 6 DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.