The ACIT,(OSD)-Range-1, Circle-4, Ahmedabad V. Medical Technologies Ltd., Ahmedabad

ITA 2985/AHD/2009

• Counselvise Citation: 298520514 RSA 2009
• Duration Of Justice: 1 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: S N SOPARKAR
• Keywords: Deemed dividend
• Section: 43B; 2(22)(e); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI T. K. SHARMA,JUDICIAL MEMBER AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO. 2985/ AHD/2009 (ASSESSMENT YEAR 2006-07) ACIT, RANGE 4, AHMEDABAD VS. MEDICAL TECHNOLOGIES PVT. LTD., 4 TH FLOOR, NOBLES, A WING, ASHRAM ROAD, AHMEDABAD C.O. NO.279/AHD/2009 IN I.T.A.NO. 2985/AHD/2009 (ASSESSMENT YEAR 2006-07) MEDICAL TECHNOLOGIES PVT. LTD., VS. ACIT, RANGE 4, 4 TH FLOOR, NOBLES, A WING, AHMEDABAD ASHRAM ROAD, AHMEDABAD PAN/GIR NO. : AABCM0639H (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S .P. TALATI, SR. D.R. RESPONDENT BY: SHRI S N SOPARKAR, AR DATE OF HEARING: 28.09.2011 DATE OF PRONOUNCEMENT: 20.10.2011 O R D E R PER SHRI A. K. GARODIA, AM:- THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD . CIT(A) VIII, AHM EDABAD DATED 01.07.2009 FOR THE ASSESSMENT YEAR 2006-07. THE AP PEAL OF THE REVENUE AND THE C.O. OF THE ASSESSEE WERE HEARD TOGETHER AN D FOR THE SAKE OF CONVENIENCE, BOTH ARE BEING DISPOSED OF BY THIS COM MON ORDER. 2. FIRST WE TAKE UP THE APPEAL FILED BY THE REVENUE . THE GROUND NO.1 RAISED BY THE REVENUE IS AS UNDER: I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 2 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF RS.1,26,34,049/- AS DEEMED DIVIDEND. 3. THE BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THAT DURING THIS YEAR, THE ASSESSE E COMPANY HAS RECEIVED PAYMENT FROM CLARIS LIFESCIENCES LTD. ON VARIOUS DA TES DURING 06.04.2005 TO 22.10.2005 AND THE TOTAL AMOUNT RECEI VED IS RS.1,26,34,049/-. THE A.O. FURTHER NOTED THAT THE SHAREHOLDING OF THE ASSESSEE COMPANY IN CLARIS LIFESCIENCES LTD. IS MOR E THAN 10% AND HENCE, AS PER THE PROVISIONS OF SECTION 2(22)(E), T HE SAME HAS TO BE ADDED AS DEEMED DIVIDEND. THE A.O. ASKED THE ASSESSEE TO FURNISH EXPLANATION IN THIS REGARD AND IN REPLY, IT WAS SUBMITTED BY TH E ASSESSEE BEFORE THE A.O. THAT TILL 03.03.2006, THE ASSESSEES SHAREHOLD ING IN CLARIS LIFESCIENCES LTD. WAS LESS THAN 10% AND, THEREFORE, THE AMOUNT RECEIVED FROM CLARIS LIFESCIENCES LTD. AS ADVANCE ON A DATE PRIOR TO 03.03.2006, DOES NOT ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. THE A.O. WAS NOT SATISFIED AND HE HELD THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE APPLICABLE IN THE P RESENT CASE AND BY INVOKING THE SAME, HE MADE ADDITION OF THIS AMOUNT OF RS.1,26,34,049/-. BIENG AGGSRIEVED, THE ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE CIT(A) WHO HAS DELETED THIS ADDITION AND NOW, THE REVENUE IS IN APPEAL BEFORE US. 4. LD. D.R. SUPPORTED THE ASSESSMENT ORDER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF LD. CIT(A). RELIANCE WAS PL ACED BY HIM ON VARIOUS JUDGMENTS AS UDDER: (A) CIT VS LATE C P DAS 57 DDTR 201 (DEL.) (B) VICTOR ALUMINIUM VS ACIT 9 SOT 197 (DEL.) (C) ITO VS SAGAR SAHIL INVESTMENT PVT. LTD. 37 SOT 01 (MUMBAI) (URO) 5. IT HAS ALSO BEEN SUBMITTED THAT CERTIFICATE OF M /S. CLARIS LIFESCIENCES LTD. REGARDING SHAREHOLDING OF THE ASS ESSEE AT THE BEGINNING OF THE PRESENT YEAR AND TILL THE DATE OF FURTHER AL LOTMENT OF SHARES IS I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 3 AVAILABLE ON PAGE 32 OF THE PAPER BOOK AS PER WHICH AS ON 01.04.2005, THE SHARES HELD BY THE ASSESSEE COMPANY OF CLARIS LIFE SCIENCES LT. WAS ONLY 28.60 LACS SHARES AND FURTHER ALLOTMENT OF 242080 S HARES WAS ON 03.03.2006. TOTAL SHARE CAPITAL OF THIS COMPANY AS ON 01.04.2005 WAS 291.14 LACS SHARES WHICH WENT UP TO 293.57 LACS SHA RES ON 03.03.2006 BECAUSE OF FURTHER ALLOTMENT OF 242080 SHARES TO TH E ASSESSEE COMPANY ON 03.03.2006 AND THEREFORE, BEFORE THIS DATE, THE SHA REHOLDING OF THE ASSESSEE COMPANY WAS LESS THAN 10% OF THE TOTAL SHA RES OF THIS COMPANY AND, THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE IN THE PRESENT CASE. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENTS CITED BY THE LD. A.R. OF THE ASSESSEE. NO CONTRARY JUDGMENT WAS BROUGHT TO OUR NOTICE BY THE LD. D.R. OF THE RE VENUE. IN THE CASE OF CIT VS LATE C.R. DAS (SUPRA), THE FACTS WERE SIMILA R TO THE FACTS OF THE PRESENT CASE. IN THAT CASE ALSO, ON 16.03.1998, WH EN THE TRANSACTION OF LEASE WAS ENTERED INTO BETWEEN THE ASSESSEE AND THE COMPANY FROM WHOM THE ADVANCE WAS RECEIVED, THE SHAREHOLDING OF THE A SSESSEE IN THE SAID COMPANY WAS LESS THAN 10%. UNDER THESE FACTS, IT W AS HELD BY HONBLE DELHI HIGH COURT IN THAT CASE THAT SINCE ON THE DAT E OF RECEIPT OF THE AMOUNT, THE ASSESSEE WAS HAVING LESS THAN 10% OF BE NEFICIAL INTEREST IN THAT COMPANY, BY NO STRETCH OF IMAGINATION THE AMOU NT OF RS.25 LACS RECEIVED BY THE ASSESSEE CAN QUALIFY AS DEEMED INCO ME UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. RESPECT FULLY FOLLOWING THIS JUDGEMENT OF HONBLE DELHI HIGH COURT, WE HOLD THAT IN THE PRESENT CASE ALSO, NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) BECAUSE ADMITTEDLY WHEN THE AMOUNT IN QUESTION WAS RECEIVED BY THE ASSESSEE TILL 22.10.2005, THE ASSESSEE WAS HOLDING LESS THAN 10% OF SHARES OF THE COMPANY M/S. CLARIS LIFESCIENCES LTD. AND IT HAS IN CREASED TO OVER 10% I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 4 OF THE SHARES OF THAT COMPANY ONLY ON 03.03.2006 WH EN FURTHER 242080 SHARES WERE ALLOTTED BY THIS COMPANY TO THE ASSESSE E COMPANY. HENCE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE N OT APPLICABLE IN THE PRESENT CASE UNDER THESE FACTS. HENCE, GROUND NO.1 OF THE REVENUE IS REJECTED. 7. GROUND NO.2 OF THE REVENUE IS AS UNDER: THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DE LETING THE ADDITION OF R.45,90,000/- MADE ON ACCOUNT OF SERVIC E TAX RECEIVABLE. 8. THE BRIEF FACTS REGARDING THIS ISSUE ARE NOTED B Y THE A.O. IN PARA 5 OF THE ASSESSMENT ORDER THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS COLLECTED SERVICE TAX OF RS.45.90 LACS ON CONSULTANCY SERVICES PROVIDED TO CLARIS LIFESCIENCES LTD. BUT THE ASSESSEE HAS NOT SHOWN THE SAME AS PART OF TOTAL RECEIPTS. THE A.O. ASKED THE ASSESSEE TO GIVE EXPLANATION IN THIS REGARD. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT OUT OF TOTAL AMOUNT OF OTHER L IABILITIES OF RS.31,98,435/-, AS SHOWN IN SCHEDULE 6, AN AMOUNT O F RS.10,93,542/- IS OF THE AMOUNT OF SERVICE TAX PAYABLE. IT WAS ALSO SUBM ITTED THAT THE SAME IS ON ACCOUNT OF SERVICE TAX COLLECTED OF RS.45.,90 LA CS ON CONSULTANCY SERVICES PROVIDED TO M/S. CLARIS LIFESCIENCES LTD. AFTER SET OFF OF SERVICE TAX RECEIVABLE ON INPUT SERVICE AGGREGATING TO RS.3 4,96,458/-. THE ASSESSEE ENCLOSED A COPY OF THE SERVICE TAX PAYABLE ACCOUNT AND SERVICE TAX RECEIVABLE ACCOUNT FOR THE FINANCIAL YEAR 2005- 06. IT WAS FURTHER SUBMITTED BY THE ASSESSEE BEFORE THE A.O. THAT THE AMOUNT OF CONSULTANCY FEE CREDITED TO P & L ACCOUNT DOES NOT INCLUDE SERV ICE TAX AND EXPENDITURE DEBITED TO P & L ACCOUNT ALSO DOES NOT INCLUDE SERVICES TAX AS THE COMPANY IS MERELY AN AGENT OR GOVERNMENT AND IS LIABLE TO COLLECT AND PAY SERVICE TAX IN ACCORDANCE WITH THE PROVISIO NS OF LAW. THE A.O. WAS NOT SATISFIED AND HE HELD THAT AS PER THE PROVI SIONS OF SECTION 145A, I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 5 SERVICE TAX COLLECTED SHOULD BE SHOWN AS PART OF GR OSS RECEIPT AND THE SAME CAN BE CLAIMED AS DEDUCTION U/S 43B ON PAYMENT BASIS. HE MADE ADDITION OF THE ENTIRE AMOUNT OF SERVICE TAX PAYABL E OF RS.45.90 LACS. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A). LD. CIT(A) HAS DELETED THIS ADDITION ON TH IS BASIS THAT SINCE THE ASSESSEE HAS NOT CLAIMED THE SERVICE TAX AS DEDUCT ION IN THE P & L ACCOUNT, THE PROVISIONS OF SECTION 43B ARE NOT ATTR ACTED. NOW, THE REVENUE IS IN APPEAL BEFORE US. 9. LD. D.R. OF THE REVENUE SUPPORTED THE ASSESSMENT ORDER WHEREAS LD. A.R. OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE DELHI HI GH COURT RENDERED IN THE CASE OF CIT VS NOBLES & HEWITT (I) PVT. LTD. AS REPORTED IN 305 ITR 304. HE ALSO PLACED RELIANCE ON THE TRIBUNAL DECIS ION RENDERED IN THE CASE OF ACIT VS REAL IMAGE MEDIA TECHNOLOGIES (P) L TD. AS REPORTED IN 114 ITD 573 ( CHENNAI). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF THE AUTH ORITIES BELOW AND THE JUDGEMENTS CITED BY THE LD. A.R. OF THE ASSESSEE. WE FIND THAT DETAILS OF SERVICE TAX PAYABLE AND SERVICE TAX RECEIVABLE IS O N PAGE 58-60 OF THE PAPER BOOK. WE FIND THAT IN THE SERVICE TAX PAYABL E ACCOUNT, THE DEBIT BALANCE OF SERVICE TAX RECEIVABLE ACCOUNT OF RS.34, 96,458/- HAD BEEN TRANSFERRED ON 31.03.2006 AND THE NET AMOUNT OF SER VICE TAX PAYABLE AS ON 31.03.2006 WAS AMOUNT OF RS.10.93,542/-. THIS GOES TO SHOW THAT EVEN IF SERVICE TAX ADDITION CAN BE MADE ON THIS AC COUNT, THE SAME CANNOT EXCEED THE AMOUNT OF RS.10.93,542/- WHICH REMAINED UNPAID AT THE END OF THE YEAR BECAUSE THE BALANCE AMOUNT OF RS.34,96,458 /-S WAS DULY PAID BY WAY OF ADJUSTING THE SAME AGAINST SERVICE TAX RECEI VABLE ACCOUNT. WE ALSO FIND THAT EVEN IF THIS BALANCE AMOUNT OF RS.10 .93,542/- WAS PAID BY THE ASSESSEE AFTER 31.03.2006 BUT BEFORE THE DATE O F FILING OF RETURN OF I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 6 INCOME OF THE PRESENT YEAR BEING 29.12.2006, ASSESS EE IS ELIGIBLE FOR DEDUCTION U/S 43B OF THE ACT IN RESPECT OF FUTURE P AYMENT WHETHER BY WAY OF CASH OR BY WAY OF ADJUSTMENT AGAINST SERVICE TAX RECEIVABLE ACCOUNT. MOREOVER, THIS ISSUE HAS BEEN DECIDED BY LD. CIT(A) IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE TRIBUNAL DECISION AND JUD GEMENT OF HONBLE DELHI HIGH COURT AS PER PARA 7.4 TO 7.6 OF HIS ORDE R, WHICH ARE REPRODUCED BELOW: 7.4 I HAVE CONSIDERED THE FACTS OF THE CASE A ND THE SUBMISSIONS OF THE LD. A.R. CAREFULLY. IT IS SEEN THAT THE A. O. HAS MADE THE IMPUGNED ADDITION HOLDING THAT THE COLLECTION OF SE RVICE TAX AND ITS PAYMENT WITH THE GOVERNMENT IS ATTRACTED BY THE PRO VISIONS OF SEC.43B OF INCOME-TAX ACT. THE CIRCUMSTANCES WHI CH HAVE BEEN EXPLAINED BY THE APPELLANT AND ALSO REPRODUCED BY T HE A.O. IN THE ASSESSMENT ORDER WITHOUT ANY CONTRADICTION, SHOW T HAT THE APPELLANT COLLECTED RS.45,90,000/- ON CONSULTANCY SERVICES PROVIDED TO M/S. CLARIS LIFESCIENCES LTD. THE APP ELLANT WHILE CREDITING THE CONSULTANCY FEES TO THE PROFIT & LOSS ACCOUNT DID NOT INCLUDE SERVICE TAX AND THE EXPENDITURE DEBITED TO PROFIT & LOSS ACCOUNT ALSO DID NOT INCLUDE SERVICE TAX AS AN EXPE NDITURE. IN OTHER WORDS THE SERVICE TAX NEITHER BEEN CLAIMED AS DEDUC TION NOT IT FORMS PART OF RECEIPT OF THE RELEVANT PERIOD. SINCE , THE APPELLANT HAS NOT CLAIMED THE SERVICE TAX AS DEDUCTION IN THE PRO FIT & LOSS ACCOUNT, THE PROVISIONS OF ARE NOT ATTRACTED. 7:5 FURTHER, HON'BLE ITAT, 'B' BENCH, CHENNAI I N THE CASE OF ACIT VS. REAL IMAGE MEDIA TECHNOLOGY PVT. LTD 114 I TD 573 HAS HELD THAT: 'SERVICE TAX THOUGH BILLED BUT NOT RECEIVED NOT HAV ING BECOME PAYABLE TO THE CREDIT OF CENTRAL GOVERNMENT BY VIRTUE OF SECTION 68 OF FINANCE ACT, 1994 READ WITH RULE 6 OF THE SERVICE TAX RULES, 1994, THE SAME COULD NOT BE DISALLOWED U/S. 43B THE ASSESSEE'S SERVICE PROVIDER IS MERELY ACTING AS AN AGENT OF THE GOVERNMENT AND IS NOT ENT ITLED TO CLAIM DEDUCTION-ON ACCOUNT OF SERVICE TAX AND THERE FORE NO DISALLOWANCE CAN BE MADE ON THE TECHNOLOGY OF SALES -TAX, EXCISE DUTY, ETC. ' 7.6 HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NOBLE & HEWITT PVT. LTD., 305 ITR 324 HAS HELD THAT ' THE A SSESSEE I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 7 FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING NOT PAYIN G GOVERNMENT PART OF SERVICE TAX COLLECTED BY IT, NOT DEBITING T HE SAME TO ITS PROFIT & LOSS ACCOUNT AS AN EXPENDITURE NOR CLAIMIN G ANY DEDUCTION IN RESPECT OF THE SAID AMOUNT, THE QUESTI ON OF DISALLOWING THE SAME U/S.43B DOES NOT ARISE.' IT MAY BE POINTED OUT THAT THE HON'BLE HIGH COURT WHILE DECIDING SO HAS ALSO OBSER VED THAT THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CHOWRINGHEE SALES BUREAU PVT. LTD VS. CIT 110 ITR 3 85 DOES NOT APPLY IN RESPECT OF SERVICE TAX. THE RELEVANT EXTRA CT OF THE JUDGEMENT ARE AS UNDER: 'LEARNED COUNSEL FOR THE REVENUE URGES THAT THE DEC ISION OF THE CALCUTTA HIGH COURT IN CHOWRINGHEE BALES BUREAU (SUPRA) COVERS THE POINT IN ITS FAVOUR. WE ARE UNAB LE TO AGREE. IN THAT CASE IT WAS HELD THAT THE LIABILITY TO PAY SALES- TAX AROSE THE MOMENT A SALE OR PURCHASE WAS EFFECTE D AND IF AN ASSESSEE WAS MAINTAINING ACCOUNTS ON THE MERCANT ILE SYSTEM IT WOULD BE ENTITLED TO DEDUCTION OF THE EST IMATED LIABILITY, OF SALES-TAX, EVEN THOUGH SUCH SALES-TAX HAD NOT BEEN PAID TO THE SALES-TAX AUTHORITIES. THE QUESTIO N THERE CONCERNED WAS THE ENTITLEMENT OF THE ASSESSEE TO DE DUCTION UNDER SS.10(1) AND 10(2)(XV) OF THE I.T. ACT, 1922. THE DECISION IS CLEARLY DISTINGUISHABLE IN ITS APPLICAT ION TO THE PRESENT CASE. HERE WE ARE CONCERNED WITH AN ASSESSE E WHO HAS NOT EVEN CLAIMED ANY DEDUCTION ON THE GROUND OF SERVICE-TAX AND HAS NOT DEBITED THE AMOUNT TO ITS P &L A/C. MOREOVER THE PROVISIONS OF S.438 OF THE ACT ARE QUI TE CLEAR IN THIS REGARD. THE DECISION OF THE CALCUTTA HIGH COUR T IN CHOWRINGHEE SALES BUREAU (SUPRA) WAS NOT IN THE CON TEXT OF THE APPLICABILITY OF S.43B OF THE ACT.' 11. FROM THE ABOVE PARAS OF THE ORDER OF LD. CIT(A) , WE FIND THAT THIS ISSUE HAS BEEN DECIDED BY HIM BY FOLLOWING THE JUDG EMENT OF TRIBUNAL RENDERED IN THE CASE OF IN THE CASE OF ACIT VS REAL IMAGE MEDIA TECHNOLOGIES (P) LTD. (SUPRA), AND ALSO THE JUDGMEN T OF HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS NOBLE & H EWITT (I) PVT. LTD. (SUPRA) AND NO CONTRARY DECISION OF THE TRIBUNAL OR OF ANY HIGH COURT HAD BEEN BROUGHT TO OUR NOTICE BY THE LD. D.R. OF THE R EVENUE. UNDER THESE FACTS, WE FEEL THAT NO INTERFERENCES IS CALLED FOR IN THE ORDER OF LD. CIT(A) I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 8 ON THIS ISSUE ALSO SINCE THE ISSUE WAS DECIDED BY C IT(A) BY FOLLOWING THE TRIBUNAL DECISION AND THE JUDGMENT OF HONBLE DELHI HIGH COURT. WE THEREFORE, DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. GROUND NO.2 OF THE REVENUE IS ALSO REJECTED. 12. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 13. NOW, WE TAKE UP THE CROSS OBJECTION FILED BY TH E ASSESSEE. THE GROUNDS RAISED BY THE ASSESSEE IN THE CROSS OBJECTI ON ARE AS UNDER: 1 . YOUR APPELLANT BEING DISSATISFIED WITH THE APP EAL FILED BY ACIT (OSD)-1, RANGE 4, AHMEDABAD AGAINST ORDER PASS ED BY THE CIT (APPEALS)-VIII, AHMEDABAD PR THIS CROSS OBJECTI ON AGAINST THE SAME ON THE FOLLOWING AMONGST OTHER GROUNDS 2. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LEARNED CIT(A) HAS RIGHTLY DELETED THE, ADDITIO N OF RS.1 ,26,34, 049/- MADE BY THE DEEMED DIVIDEND. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LEARNED CIT (APPEALS) HAS RIGHTLY DELETED THE A DDITION OF RS. 45,90,000/- MADE BY THE A.O. ON ACCOUNT OF SERVICE TAX RECEIVABLE. IT IS THEREFORE SUBMITTED THAT THE DECISION OF LEAR NED CIT (APPEALS) BEING C THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE SAME BE ACE 4. ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AS WELL AS IN LAW, THE LE (APPEALS) HAS GROSSLY ERRED IN CONFIRMING TH E ADDITION / DISALLOWANCE OF RS.4,15,798/- ON ACCOUNT OF SUN DRY BALANCES WRITTEN OFF. ON THE FACTS AND CIRCUMSTANCES O F THE CASE, THE LEARNED CIT (A) OUGHT TO HAVE DELETED THE UNJUSTIFI ED ADDITION / DISALLOWANCE MADE BY THE AO ON ACCOUNT OF SUNDRY BA LANCES WRITTEN OFF. IT IS THEREFORE PRAYED THAT THE ORDER OF THE LEARNE D CIT (A) ON THIS POINT BE REVERSED AND THE ADDITION / DISALLOWANCE M ADE BY THE AO BE DELETED. 14. IT WAS SUBMITTED BY THE LD. A.R. OF THE ASSESSE E THAT GROUND NO.1 OF THE C.O. IS GENERAL AND GROUNDS NOS. 2 & 3 OF TH E C.O. ARE MERELY IN I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 9 SUPPORT OF THE ORDER OF LD. CIT(A). HENCE, NO SEPA RATE ADJUDICATION IS CALLED FOR WITH REFERENCE TO THESE THREE GROUNDS OF THE C.O. 15. REGARDING GROUND NO.4 OF THE C.O., IT WAS SUBMI TTED BY THE LD. A.R. OF THE ASSESSEE THAT NOW, THIS ISSUE IS COVERE D IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF HONBLE APEX COURT REND ERED IN THE CASE OF TRF LTD., AS REPORTED IN 323 ITR 397 (S.C.). HE AL SO SUBMITTED THAT THE DETAILS OF SUNDRY DEBIT BALANCE IS AVAILABLE ON PAG E 35 OF THE PAPER BOOK. AN ALTERNATIVE CONTENTION WAS ALSO RAISED BY HIM TH AT EVEN IF IT IS HELD THAT DEDUCTION ON THIS ACCOUNT IS NOT ALLOWABLE U/S 36(1)(VII), THE SAME SHOULD BE ALLOWED AS BUSINESS LOSS AND IN SUPPORT O F THIS CONTENTION, RELIANCE WAS PLACED ON THE JUDGMENT OF HONBLE GUJA RAT HIGH COURT RENDERED IN THE CASE OF CIT VS ABDUL RAZAK & CO. 13 6 ITR 825. 16. AS AGAINST THIS, LD. D.R. OF THE REVENUE SUPPOR TED THE ORDERS OF AUTHORITIES BELOW. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY THE LD. A.R. OF THE ASSESSEE. WE FIND THAT DISALLOWANCE WAS MADE BY THE A.O. ON THIS BASIS THA T ASSESSEE HAS NOT COMPLIED WITH THE REQUIREMENT OF SECTION 36(2) OF T HE ACT. LD. CIT(A) HAS CONFIRMED THE ASSESSMENT ORDER ON THIS ISSUE ON THIS BASIS THAT THE ASSESSEE COULD NOT ESTABLISH THAT THE DEBIT BALANCE WRITTEN OFF HAVE BECOME BAD DURING THAT YEAR. NOW, AFTER THIS JUDGE MENT OF HONBLE APEX COURT RENDERED IN THE CASE OF TRF LTD. VS CIT (SUPR A), THERE IS NO REQUIREMENT ON THE PART OF THE ASSESSEE TO ESTABLIS H THAT THE DEBT IN QUESTION HAS BECOME BAD. BUT STILL, IT HAS TO BE S EEN AS TO WHETHER THE ASSESSEE IS FULFILLING THE REQUIREMENT OF SECTION 3 6(2) OF THE ACT OR NOT IN ORDER TO ALLOW DEDUCTION U/S 36(1)(VII). AS PER TH E DETAILS AVAILABLE ON PAGE 35 OF THE PAPER BOOK, IT IS NOT COMING OUT AS TO WHETHER THESE AMOUNTS ARE FULFILLING THE REQUIREMENT OF SECTION 3 6(2) OR NOT. BEFORE US I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 10 ALSO, NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO SHO W THAT THESE AMOUNTS WERE CONSIDERED BY THE ASSESSEE AS INCOME IN THE PR ESENT YEAR OR IN ANY EARLIER YEAR AND HENCE, REQUIREMENT OF SECTION 36(2 ) ARE NOT BEING COMPLIED WITH BY THE ASSESSEE AND, THEREFORE, EVEN AFTER CONSIDERING THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF TRF LTD. (SUPRA), THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION ON THIS ACCOUNT U/S 36(1)(VII) READ WITH SECTION 36(2) OF THE ACT. 18. REGARDING THE ALTERNATIVE CLAIM OF THE ASSESSEE THAT THE SAME MAY BE ALLOWED AS DEDUCTION AS BUSINESS LOSS, WE FIND T HAT ON THIS ASPECT ALSO, NO EVIDENCE HAS BEEN BROUGHT ON RECORD BEFORE US TO SHOW THAT THE AMOUNTS IN QUESTION WAS BUSINESS ADVANCES WHICH COU LD NOT BE RECOVERED. IN THE ABSENCE OF ANY EVIDENCE IN THIS REGARD, THE DEDUCTION CLAIMED BY THE ASSESSEE AS BUSINESS LOSS IS ALSO NO T ALLOWABLE. GROUND NO.4 OF THE C.O. IS REJECTED. 19. IN THE RESULT, C.O. OF THE ASSESSEE IS DISMISSE D. 20. IN THE COMBINED RESULT, APPEAL OF THE REVENUE A S WELL AS THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 21. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH OCT., 2011. SD./- SD./- (T. K. SHARMA) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED : 20.10. 2011 SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 2985 /AHD/2009 C.O. NO.279/AHD/2009 11 1. DATE OF DICTATION 17/10 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18/10 .OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.19/10 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 20/10 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.20/10 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 20/10/2011 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. ..