TEXEL INDUSTRIES LTD, MUMBAI V. DCIT CC-2, MUMBAI

ITA 3005/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8457 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 22-10-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: KIRIT MEHTA
• Keywords: Bad and doubtful debts

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI .. , ! ' # , $ ' , % BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ./ ITA NO.3005/MUM/2010 ( $' ( $' ( $' ( $' ( / / / / ASSESSMENT YEAR : 2006-2007) M/S.TEXEL INDUSTRIES LIMITED 61-A, MITTAL TOWER NARIMAN POINT MUMBAI 400 021. PAN : AAACT7085R THE DY.COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 2 MUMBAI. ( )* / // / APPELLANT) ' ' ' ' / VS. ( +,)*/ RESPONDENT) )* - -- - . . . . / APPELLANT BY : SHRI KIRIT MEHTA +,)* - . - . - . - . / RESPONDENT BY : SHRI A.B.KOLI ' - /! / / / / DATE OF HEARING : 22.10.2012 01( - /! / DATE OF PRONOUNCEMENT : 23.10.2012 '2 '2 '2 '2 / / / / O R D E R PER R.S.SYAL (AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) ON 03.02.2010 IN RELATION TO THE ASSESSMENT YEAR 2006-2007. 2. THE ONLY EFFECTIVE GROUND RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF ` 37,49,973 ON ACCOUNT OF BAD DEBTS. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE A SSESSEE CLAIMED DEDUCTION OF ` 37.49 LAKH TOWARDS BAD DEBTS. THE ASSESSEE WAS CALL ED UPON TO FURNISH ALL THE DETAILS WITH REGARD TO SUCH BAD DEBTS. THE ASSESSEE FURNISHED A CHART REVEALING THE NAME OF CO NCERN AND THE ITA NO.3005/MUM/2010. M/S.TEXEL INDUSTRIES LIMITED. 2 AMOUNT OF BAD DEBT. NO FURTHER DETAILS WERE PROVIDE D. IN THE ABSENCE OF SUCH DETAILS, THE ASSESSING OFFICER MADE ADDITIO N ON THE GROUND THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS O F THE CLAIM OF BAD DEBT U/S 36(1)(VII). THE LEARNED CIT(A) UPHELD THE ADDITION ON THE GROUND THAT THE ASSESSEE COULD NOT PROVE BEFORE THE A.O. THAT IT WAS A BUSINESS AND COMMERCIAL DECISION TO TREAT THE AMOUN T AS BAD DEBT IN QUESTION. IN PARA 8.6 HE ALSO OBSERVED THAT THE ASS ESSEE FAILED TO LEAD ANY EVIDENCE TO SHOW THAT THE DEBTS WRITTEN OFF WER E OFFERED AS INCOME IN THIS YEAR OR ANY EARLIER YEAR. THE CLAIM OF THE ASSESSEE WAS REJECTED. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD WE FIND THAT INSOFAR AS THE CONTENTION OF THE REVENUE FOR NOT ACCEPTING THE BAD DEBT ON ACCOU NT OF ASSESSEES INABILITY TO PROVE THAT THE DEBT BECAME BAD IN THIS YEAR IS CONCERNED, THE SAME IS WITHOUT ANY FORCE. THE HONBLE SUPREME COURT IN T.R.F. LIMITED VS. CIT [(2010) 323 ITR 397 (SC)] HAS HELD THAT IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT HAS BECOME BAD IN THE PREVIOUS YEAR. DEDUCTION IS PERMISSIBLE ON A SI MPLE WRITE OFF. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDIC TIONAL HIGH COURT CIT VS. STAR CHEMICALS (BOMBAY) PVT. LTD. [(2009) 3 13 ITR 126 (BOM.)] . 4. HOWEVER IT IS RELEVANT TO NOTE THAT DEDUCTION U/ S 36(1)(VII) IS SUBJECT TO THE PROVISIONS OF SUB-SECTION (2) OF S ECTION 36. SECTION 36(2), IN TURN, PROVIDES THAT NO DEDUCTION FOR A B AD DEBT OR PART ITA NO.3005/MUM/2010. M/S.TEXEL INDUSTRIES LIMITED. 3 THEREOF SHALL BE ALLOWED AS DEDUCTION UNLESS SUCH D EBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DE BT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR. THUS IT BECOMES APPARENT THAT THE SATISFACTION OF CONDITION AS ENSHRINED UND ER SECTION 36(2) IS A PREREQUISITE FOR CLAIMING DEDUCTION U/S 36(1)(VII). THE LEARNED CIT(A) HAS RECORDED THAT THE ASSESSEE FAILED TO PRO VE ABOUT THE SATISFACTION OF CONDITIONS OF SECTION 36(2). ON THE OTHER HAND, THE LEARNED AR CONTENDED THAT THE ASSESSING OFFICER GAV E HIGHLY INADEQUATE TIME TO PROVE THAT THE REQUISITE CONDITI ON OF SECTION 36(2) WAS SATISFIED. IN OUR CONSIDERED OPINION THE ENDS O F JUSTICE WILL MEET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS S ET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF A.O. FOR CONSIDER ING THE SATISFACTION OR OTHERWISE OF CONDITION U/S 36(2). IN OTHER WORDS, IF THE CONDITION OF SECTION 36(2) IS FOUND TO BE SATISFIED, THEN THE A. O. WILL ALLOW DEDUCTION U/S 36(1)(VII). 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 23 RD DAY OF OCTOBER, 2012. '2 - 01( 3''4 1 - 5 SD/- SD/- (VIVEK VARMA) (R.S.SYAL) $ ' $ ' $ ' $ ' / JUDICIAL MEMBER ! ' ! ' ! ' ! ' / ACCOUNTANT MEMBER MUMBAI ; 3'' DATED : 23 RD OCTOBER, 2012. DEVDAS* ITA NO.3005/MUM/2010. M/S.TEXEL INDUSTRIES LIMITED. 4 '2 - +$/6# 7#(/ '2 - +$/6# 7#(/ '2 - +$/6# 7#(/ '2 - +$/6# 7#(// COPY OF THE ORDER FORWARDED TO : 1. )* / THE APPELLANT 2. +,)* / THE RESPONDENT. 3. 8 () / THE CIT(A)-XXXVI, MUMBAI. 4. 8 / CIT 5. #;5 +$/$' , , / DR, ITAT, MUMBAI 6. 5< = / GUARD FILE. '2' '2' '2' '2' / BY ORDER, ,#/ +$/ //TRUE COPY// > > > >/ // /? ? ? ? ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI