ACIT, CHENNAI V. Hariharan Foundations Pvt. Ltd., CHENNAI

ITA 2945/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90582 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 05-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN IRS
• Assessee Lawyers: N R SURESH
• Keywords: Bad and doubtful debts; Competent authority

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2945/MDS/2014 ( / ASSESSMENT YEAR : 2011-2012) THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -2(2) CHENNAI 600 034 ( &' /APPELLANT) VS M/S. HARIHARAN FOUNDATIONS PVT. LTD, 19/9, CHANDRA VILAS, 8 TH STREET, RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. [PAN: AAACH 9715N] ( '(&' /RESPONDENT) / APPELLANT BY : SHRI. N. MADHAVAN, IRS, JCIT. / RESPONDENT BY : SHRI. N.R. SURESH, C.A., /DATE OF HEARING : 24.06.2015 /DATE OF PRONOUNCEMENT : 30.06.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNAI, D ATED 09.07.2014. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IN ITS PROFIT AND LOSS ACCOUNT, DEBITED BAD DEBTS OF C1,05,78,6 56/-. THE I.T.A.NO.2945/MDS/2014. :- 2 -: ASSESSING OFFICER OPINED THAT SINCE THE ASSESSEE CO MPANY HAD NOT PROVED THAT IT HAD TAKEN SUFFICIENT STEPS TO RECOVE R THE DEBTS, THE CLAIM OF BAD DEBTS WERE NOT ALLOWABLE. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE ASSESSEES CLAIM OF BAD DEBTS OF C1, 05,78,656/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). 3. ON APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (A PPEALS), THE ASSESSEE SUBMITTED THAT WITH THE CHANGE IN THE PROVISIONS OF THE ACT, ONCE THE DEBTS ARE WRITTEN OFF AS BAD DEBTS IN THE BOOKS, THE SAME HAD TO BE ALLOWED AS BAD DEBTS. THE ASSESSEE F URTHER EXPLAINED THAT THERE WAS NO NEED TO PROVE THAT THE DEBTS HAD BECOME BAD AND RECOVERY COULD NOT BE MADE. FOR THIS PURPOSE, THE A SSESSEE RELIED ON SEVERAL CASE LAWS. THE COMMISSIONER OF INCOME TAX ( APPEALS) OBSERVED THAT WITH EFFECT FROM 01.04.1989, THE PROV ISIONS OF SEC 36(1)(VII) OF THE ACT READ AS UNDER:- SUBJECT TO THE PROVISIONS OF SUB-SECTION (2), THE AMOUNT OF ANY BAD DEBT OR PART THEREOF WHICH IS WRITTEN OFF A S IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR T HE PREVIOUS YEAR . ACCORDING TO THE COMMISSIONER OF INCOME TAX (APPEA LS) THE ASSESSEE HAS ACTUALLY WRITTEN OFF THE AMOUNT IN ITS BOO KS OF ACCOUNTS AS BAD DEBTS AND CLAIMED THE SAME AS DEDUCTION U/S.36(1)( VII) OF THE ACT. IN I.T.A.NO.2945/MDS/2014. :- 3 -: VIEW OF THE JUDGMENT OF SUPREME COURT IN THE CASE O F T.R.F LTD VS. CIT 323 ITR 397, THE COMMISSIONER OF INCOME TAX (APPEALS) ALLOWED THE DEDUCTION. AGAINST THIS, THE REVENUE IS IN AP PEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MAT ERIAL ON RECORD. WITH EFFECT FROM 01.04.1989, THE ASSESSEE IS NOT REQUIRED TO ESTABLISH THAT THE DEBTS HAD BECOME BAD. ONCE THE D EBTS OCCURRED IN THE ORDINARY COURSE OF BUSINESS AND THE ASSESSEE WR ITTEN OFF THE SAME IN THE BOOKS OF ACCOUNTS AS IRRECOVERABLE, THEN IT IS ALLOWED AS BAD DEBTS. IN THE PRESENT CASE, THERE IS NO DISPUTE TO THE FACT THAT DEBTS OCCURRED IN THE ORDINARY COURSE OF BUSINESS AND THE ASSESSEE CONSIDERED THE SAME WHILE DETERMINING INCOME. SINC E THE ASSESSEE COULD NOT RECOVER THE DEBTS, THE SAME WAS WRITTEN O FF IN ITS BOOKS OF ACCOUNTS. BEING SO, IN OUR OPINION IT IS TO BE ALL OWED AS BAD DEBTS. THIS VIEW OF OURS IS FORTIFIED BY THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CITI FINANCIAL RETAIL SERVICES INDIA LTD VS ACIT 2 28 TAXMAN 258 , WHEREIN IT WAS HELD THAT THE DECISION IN T.R.F LTD VS CIT 323 ITR 397 (SC) RELATABLE TO ASSESSMENT YEARS 1990-91 AND 1993-94 AND THE SUPREME COURT HELD THAT PRIOR TO 01.04.1989 , THE ASSESSEE HAS TO ESTABLISH AS A MATTER OF FACT, THAT THE DEBT ADV ANCED BY THE ASSESSEE HAD, IN FACT, BECOME IRRECOVERABLE. BUT A FTER 01.04.1989, IT I.T.A.NO.2945/MDS/2014. :- 4 -: HELD THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO E STABLISH THAT THE DEBT, IN FACT HAS BECOME IRRECOVERABLE. 5. IN VIEW OF THE LAW LAID DOWN IN THE CASE OF TRF LTD (SUPRA ) THERE IS NO HESITATION TO HOLD THAT BAD DEBTS IF WRITTE N OFF, ON THE ACCOUNTS OF THE ASSESSEE AND APPROPRIATELY CLAIMED BEFORE TH E COMPETENT AUTHORITY, THE AUTHORITIES ARE BOUND TO CONSIDER TH E SAME IN THE LIGHT OF THE DECISION OF THE SUPREME COURT. 6. ACCORDINGLY, WE HAVE NO HESITATION TO CONFIRM THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) ON THIS IS SUE AND DISMISS THE GROUND RAISED BY THE REVENUE. 7. IN RESULT, THE APPEAL OF THE REVENUE IN ITA NO.2 945/MDS/2014 IS DISMISSED. ORDER PRONOUNCED ON TUESDAY, THE 30TH DAY OF JUNE, 2015, AT CHENNAI. SD/- SD/- ( ! ' ) (CHALLA NAGENDRA PRASAD) # / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:30.06.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF. I.T.A.NO.2945/MDS/2014. :- 5 -: