NEELKANT SYNTHETICS & CHEMICALS P. LTD, MUMBAI V. ITO 7(1)(1), MUMBAI

ITA 308/MUM/2009

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6256 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-11-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 14-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S RAWAL
• Assessee Lawyers: MOHAN P MAKHIJA
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 234B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) NEELKANT SYNTHETICS AND CHEMICALS P LTD, 303, ABHAY STEEL HOUSE, 22, BARODA ST. CARNAC BUNDER MUMBAI-400009 PAN: AABCN3375P . APPELLANT VS INCOME TAX OFFICER 7(1)(1) MUMBAI. .. RESPONDENT APPELLANT BY : SHRI MOHAN P MAKHIJA RESPONDENT BY : SHRI R S RAWAL O R D E R PER VIJAY PAL RAO,JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 17.11.2008 OF CIT(A) FOR THE ASSESSMEN T YEAR 2001-02.. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS IN THI S APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED 1. IN CONFIRMING THE ORDER OF THE AO IN REGARD TO THE VALIDITY OF REOPENING OF CASE U/S 147 OF THE IT ACT, 1961; ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 2 2. ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWANCE OF INTEREST OF RS.7,87,443; 3. ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWANCE OF BAD DEBTS OF RS.4,80,800/- AND REPAIRS AND MAINTENANCE OF RS.4,98,560/- 4. LEVY OF INTEREST U/S 234B AND 234 C ERRED IN CONFIRMING THE LEVY OF INTEREST U/S 234B AND 234C WHICH IS NOT IN ACCORDANCE WITH THE PROVISIONS OF L AW 3. AT THE TIME OF HEARING THE LEARNED AR HAS SUBMIT TED THAT THE ASSESSEE DOES NOT PRESS GROUND NO.1 AND ISSUE OF DISALLOWANCE OF REPAIRS AND MAINTENANCE OF RS.4,98 ,560/- AS PART OF THE GROUND NO.3 AND THE SAME NAY BE DISMIS SED AS NOT PRESSED. 4. THE LD. DR HAS NO OBJECTION, IF THESE TWO ISSUES ARE DISMISSED AS NOT PRESSED. 5. ACCORDINGLY, WE DISMISS THE GROUND NO.1 AND PART OF GROUND NO.3 BEING DISALLOWANCE OF REPAIRS AND MAINT ENANCE OF RS..4,98,560/- BEING NOT PRESSED. 6. GROUND NO.2, REGARDING IN DISALLOWANCE OF INTERE ST OF RS.7,87,443/-; 7. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED TH E RELEVANT RECORD. AT THE OUTSET, IT IS POINTED OU T THAT THE ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 3 SIMILAR ISSUE HAS BEEN CONSIDERED BY THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.6347/MUM/2003 FOR THE ASSESSMENT YEAR 1997-98. WE FURTHER NOTE THAT THE ORDER PASSED BY THIS TRIBUNAL HAS BEEN CONFIRMED BY THE HON. JURISDICTIONAL HIGH COURT VIDE DECISION DATED 09.0 2.2009 IN IT APPEAL NO.1359 OF 2008 WHICH IS FORMING THE PART OF THIS RECORD. THE FACTS AND ISSUES OF THE PRESENT CASE AND THE CASE RELIED UPON BY THE ASSESSEE ARE IDENTICAL AND THE INTEREST EXPENDITURE IS ON THE SAME LOAN AMOUNT WHI CH WAS USED FOR REPAYMENT OF THE LOAN BY THE SISTER CONCER N AGAINST THE COLLATERAL SECURITIES OF THE PREMISES. THE HON.JURISDICTIONAL HIGH COURT HAS DECIDED THE ISSUE IN PARAGRAPHS 4 AND 5 AS UNDER : 4 FROM THE REASONING GIVEN BY THE CIT(A) AND THE ITAT, WE FIND THAT BOTH THE AUTHORITIES HAVE CONCURRENTLY PROCEEDED ON THE FOOTING THAT ANY EXPENDITURE INCURRED FOR PROTECTING THE BUSINESS ASSET HELD BY AN ASSESSEE FOR ITS BUSINESS OR ANY EXPENSES INCURRED FOR THE PROTECTION AND MAINTENANC E OF THE BUSINESS PREMISES WOULD BE AN ALLOWABLE EXPENDITURE. RELIANCE HAS BEEN PLACED ON SEVERAL JUDGMENTS INCLUDING THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF CIT V/S FINLEY MILLS REPORTE D IN 20 ITR 475 SC, AS WELL AS THE JUDGMENT OF THIS COUR T IN THE CASE OF ADDL. CIT V/S PUTCO PVT LTD, REPOR TED IN 140 ITR 740 (BOM). IT IS SEEN THAT BUT FOR TH E BORROWING OF THE FUNDS, THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO RETAIN THE BUSINESS PREMISES WHICH WOULD HAVE BEEN SOLD BY THE BANK IN THE COURSE OF T HE RECOVERY OF IS LOAN FOR WHICH THE SAID PREMISES WER E GIVEN AS COLLATERAL SECURITY. IT WAS ONLY TO RETAI N THESE BUSINESS PREMISES THAT THE APPELLANT HAD TO BORROW THE FUNDS FROM THE BANK AND AS SUCH INTERES T ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 4 PAYABLE ON THE BORROWING FOR RETAINING THE PREMISES WOULD BE AN ALLOWABLE DEDUCTION UNDER SECTION 36(1)(II) BECAUSE THE SAID LOANS WERE USED FOR THE PURPOSE OF RETAINING THE BUSINESS PREMISES WHICH WAS NECESSARY TO CARRY ON THE BUSINESS ACTIVITIES O F THE APPELLANT. IT MAY BE NOTED THAT THE AO HAS ACCEPTED THE INCOME RECEIVED BY THE ASSESSEE FROM THE LEASED PREMISES AS RENTAL INCOME AND WAS ASSESSED AS INCOME FROM OTHER SOURCES. IN SUCH CIRCUMSTANCES, THE FINDING IS THAT IN ORDER TO SAFEGUARD INTEREST OF THE LEASE PREMISES AND ALSO T O BAIL OUT ITS SISTER CONCERN, THE LOAN WAS OBTAINED FROM THE BANK. IT IS A FINDING THAT THE INTENTION OF THE ASSESSEE WAS TO SAFEGUARD ITS LEASED PREMISES FOR T HE PURPOSE OF BUSINESS AND IT CANNOT BE SAID TO BE IN THE INTEREST OF ITS BUSINESS. 5. IN OUR VIEW, THE FINDINGS ARE REASONABLE AND CANNOT BE SAID TO BE PERVERSE AND THE QUESTIONS OF LAW AS FRAMED THEREFORE, DO NOT ARISE. APPEAL IS THEREFORE, SUMMARILY DISMISSED 8. ACCORDINGLY, RESPECTFULLY FOLLOWING THE ORDER O F THE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CA SE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND ACC ORDINGLY DELETE THE ADDITION. 9. GROUNDS OF APPEAL NO.3, REGARDING BAD DEBTS. TH E ASSESSEE DEBITED TO THE PROFIT AND LOSS ACCOUNT AN AMOUNT OF RS. 4,80,800 AS BAD DEBTS. THE AO FOUND THAT THESE EXPENDITURES ARE TOTALLY RELATED TO THE BUSINESS AC TIVITIES AND THE SAME ARE NOT INCURRED WHOLLY AND EXCLUSIVELY FO R EARNING OF THE INCOME TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES THEREFORE, THE SAID EXPENDITURE CAN NOT BE ALLOWED U/S 57 (III) OF THE ACT. ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 5 10. ON APPEAL, THE CIT(A) HAS CONFIRMED THE DISALL OWANCE MADE BY THE AO. 11. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS S UBMITTED THAT THE BAD DEBTS ARE REGARDING BUSINESS/TRADE RE CEIVABLE IN THE EARLIER YEARS AND THE ASSESSEE HAS WRITTEN OFF THE UNRECOVERED AMOUNT IN THE YEAR UNDER CONSIDERATION AND THEREFORE THE SAME IS BUSINESS EXPENDITURE/LOSS WHI CH IS PERMITTED TO BE SET OFF AGAINST THE INCOME FROM TH E OTHER SOURCES, IN VIEW OF THE PROVISIONS OF SECTION 71 O F THE ACT. 12. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UP ON THE ORDERS OF THE LOWER AUTHORITIES. 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RELEVANT RECORD. UNDISPUTEDLY, THERE WAS NO BUSINESS ACTIVI TIES IN THE YEAR UNDER CONSIDERATION. THE AO HAS NOT DISCUSSED ABOUT THIS FACTUAL ASPECT OF THE MATTER OF THE BAD DEBT W RITTEN OFF BY THE ASSESSEE PERTAINING TO WHICH YEAR AND WHETHER T HE SAME WERE TAKEN INTO ACCOUNT WHILE COMPUTING THE INCOME OF THE ASSESSEE OF THE EARLIER PREVIOUS YEAR. THEREFORE, IN OUR VIEW, THIS ISSUE IS REQUIRED TO BE RE-EXAMINED IN DETAIL. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE TH IS ISSUE TO THE RECORD OF THE AO FOR VERIFICATION AND EXAMINAT ION AND ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 6 DECIDE THE SAME AS PER THE PROVISIONS OF SECTION 71 AND 72 OF THE IT ACT, 1961. 14. GROUNDS OF APPEAL NO.4 PERTAINS TO THE LEVY OF INTEREST U/S 234B AND 234C. WE HAVE CONSIDERED THE RIVAL CO NTENTIONS AND RELEVANT RECORD. THIS ISSUE IS CONSEQUENTIAL AN D MANDATORY IN NATURE, THEREFORE NO SPECIFIC FINDINGS ARE REQUIRED. 15. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AND PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2010 SD SD (T.R.SOOD) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MUMBAI, DATED 30 TH NOV 2010 SRL:251110 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 7 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, B, MUMBAI BEFORE SHRI T.R.SOOD, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2000-01) NEELKANT SYNTHETICS AND CHEMICALS P LTD, 303, ABHAY STEEL HOUSE, 22, BARODA ST. CARNAC BUNDER MUMBAI-400009 PAN: AABCN3375P . APPELLANT VS INCOME TAX OFFICER 7(1)(1) MUMBAI. .. RESPONDENT CORRIGENDUM IN THIS APPEAL THE TRIBUNAL HAS PASSED ORDER ON 30.11.2010. INADVERTENTLY, IN THE TITLE OF THE APPE AL, THE ASSESSMENT YEAR HAS BEEN MENTIONED AS 2004-05 AND IN PARA NO.1 OF THE IMPUGNED ORDER THE AY IS MENTIONED AS 2001-02. BY WAY OF THIS CORRIGENDUM, THE ASSESSMENT YEAR IS REPLACED AS 2000-01. THE SAME MAY BE READ AS ASSESSMENT YEA R 2000- 01. S D SD (T.R.SOOD) (VIJAY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER ITA NO. 308/MUM/2009 (ASSESSMENT YEAR 2004-05) 8 MUMBAI, ON THIS 4 TH DAY OF MARCH, 2011 SRL:251110 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI