Bhandari Hosiery Exports Ltd, Ludhiana V. Addl. CIT, Ludhiana

ITA 309/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9201 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSHIL KUMAR CIT II
• Keywords: Bad and doubtful debts

Judgement Text

BHANDARI HOSIERY EXPORTS LIMITED V ADDL CIT A Y 2008 - 09 ITA NO 309/CHD/2016 INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, CHANDIGARH BEFORE SHRI SANJAY GARG , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 309 /CHD/20 1 6 ASSESSMENT YEAR : 2008 - 09 BHANDARI EXPORTS LTD., LUDHIANA VS. ADLL. CIT, RANGE - III, LUDHIANA (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VIPIN KUMAR SH. PRAVEEN MALHOTRA REVENUE BY: SH. SUSHIL KUMAR CIT - II DATE OF HEARING 01 /0 8 /2016 DATE OF PRONOUNCEMENT 04 /0 8 /2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1 . THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT ( A) - I, LUDHIANA DATED 21.01.2016 FOR THE ASSESSMENT YEAR 2008 - 09 WHERE IN DISALLOWANCE OF RS. 560788/ - ON ACCOUNT OF REBATE AND DISCOUNT IS CONFIRMED. THE FOLLOWING GROUNDS OF APPEAL HAVE B EEN RAISED: - 1. THAT THE LD. CIT( APPEAL) - 1. L UDHIANA, IS NOT JUSTIFIED IN NOT ALLOWING REBATE AND DISCOUNT OF RS 5.60,788.00 2. THE FACTUAL CONTENTIONS RAISED ON BEHALF OF THE APPELLANT HAVE BEEN WRONGLY IGNORED. WHICH HAS RESULTED IN ERRONEOUS ORDER A ND UNTENABLE CONCLUSION. 3. THAT THE ORDER IS CONTRARY TO LAW AND FACTS OF THE CASE AS IT IS DEVOID OF JUDICIOUS AND RATIONAL APPROACH. 2 . TH E SOLITARY ISSUE INVOLVED IN THIS APPEAL IS THAT THE ASSESSEE HAS EXPORTED GOODS TO FOREIGN BUYER WHO ISSUED DEBI T NOTE TO THE ASSESSEE DATED 03.11.2006 OF RS. 560788/ - ON ACCOUNT OF QUALITY. THE LD AO DISALLOWED THIS SUM FOR THE REASON THAT ACCORDING TO HIM THE CLAIM HAS ARISEN IN THE ASSESSMENT YEAR 2007 - 08 AND NOT IN ASSESSMENT YEAR 2008 - 09 I.E. THE YEAR UNDER APPEAL. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD CIT(A), WHO IN TURN CONFIRMED THE DISALLOWANCE. THEREFORE, THE ASSESSEE IS IN APPEAL BEFORE US. 3 . THE LD AR SUBMITTED THAT THE GOODS HAVE BEEN EXPORTED TO THE FOREIGN BUYER AND WH O ISSUED A DEBIT NOTE OF RS. 560788/ - ON 03.11.2006, HOWEVER, THE SAME WAS FINALIZED AND ACCOUNTED FOR IN ASSESSMENT YEAR 2008 - 09. BHANDARI HOSIERY EXPORTS LIMITED V ADDL CIT A Y 2008 - 09 ITA NO 309/CHD/2016 THE EXPENDITURE HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT AND CREDIT TO THE ACCOUNT OF THE PARTY. THEREFORE, THIS CLA IM IS ALLOWABLE. 4 . THE LD DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 5 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. WE ARE OF THE OPINION THAT THE CLAIM OF THE ASSESSEE FALLS UNDER THE PROVISION OF SECTION 3 6(1)(VI) OF THE INCOME TAX ACT WHERE THE AMOUNT OF ANY DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNT OF THE ASSESSEE FOR THE PREVIOUS YEAR. THE ABOVE AMOUNT REPRESENT THE SALES ACCOUNTED BY THE ASSESSEE IN THE EARLIER YEAR AND BY WAY OF DEBIT THE S UM HAS BEEN DEBITED FROM PROFIT AND LOSS ACCOUNT BY CREDITING IT TO THE ACCOUNT OF T HE PARTY, THEREFORE, IN FACT THE CLAIM OF THE ASSESSEE IS OF WRITING OFF OF BAD DEBTS AND THE CLAIM IS SQUARELY ALLOWABLE U/S 36(1)(VI) READ WITH SECTION 2 OF THE ACT. W HILE CLAIMING THE BAD DEBT THE ISSUE THAT IN WHICH YEAR THE CLAIM HAS BECOME BAD IS NO LONGER REMAINS A CONTROVERSY AS IN THE YEAR OF WRITE OFF SAME IS ALLOWABLE AS DEDUCTION. CBDT HAS ALSO ACCEPTED THIS VIEW IN VIEW OF CIRCULAR DATED 30.05.2016 AS UNDER : - CIRCULAR NO. 12/2016 F.NO.279/MISC./140/2015 - ITJ GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NEW DELHI, DATED 30TH MAY, 2016 SUBJECT: ADMISSIBILITY OF CLAIM OF DEDUCTION OF BAD DEBT UNDER SECT ION 36(1) (VII) READ WITH SECTION 36(2) OF THE INCOME - TAX ACT, 1961 REG. PROPOSALS HAVE BEEN RECEIVED BY THE CENTRAL BOARD OF DIRECT TAXES REGARDING FILING OF APPEALS/PURSUING LITIGATION ON THE ISSUE OF ALLOWABILITY OF BAD DEBT THAT ARE WRITTEN OFF AS IRR ECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THE DISPUTE RELATES TO CASES INVOLVING FAILURE ON THE PART OF ASSESSEE TO ESTABLISH THAT THE DEBT IS IRRECOVERABLE. 2. DIRECT TAX LAWS (AMENDMENT) ACT, 1987 AMENDED THE PROVISIONS OF SECTIONS 36(1)(VII) AND 36(2) OF THE INCOME TAX ACT 1961, (HEREAFTER REFERRED TO AS THE ACT) TO RATIONALIZE THE PROVISIONS REGARDING ALLOWABILITY OF BAD DEBT WITH EFFECT FROM THE APRIL, 1989. 3. THE LEGISLATIVE INTENTION BEHIND THE AMENDMENT WAS TO ELIMINATE LITIGATION ON THE ISSUE OF THE ALLOWABILITY OF THE BAD DEBT BY DOING AWAY WITH THE REQUIREMENT FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, HAS IN FACT, BECOME IRRECOVERABLE. HOWEVER, DESPITE THE AMENDMENT, DISPUTES ON THE ISSUE OF ALLOWABILITY CONTINUE, MOSTLY FOR THE REASON THAT THE DEBT HAS NOT BEEN ESTABLISHED TO BE IRRECOVERABLE. THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. IN CA NOS. 5292 TO 5294 OF 2003 VIDE JUDGMENT DATED 9.2.2010, HAS STATED THAT THE POSITION OF LAW IS WELL SETTLED. AFTER 1.4.1989, FOR ALLOWING DEDUCT ION FOR THE AMOUNT OF ANY BAD DEBT OR PART THEREOF UNDER SECTION BHANDARI HOSIERY EXPORTS LIMITED V ADDL CIT A Y 2008 - 09 ITA NO 309/CHD/2016 36(1)(VII) OF THE ACT, IT IS NOT NECESSARY FOR ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT HAS BECOME IRRECOVERABLE; IT IS ENOUGH IF BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS OF ASSESSEE. 4. IN VIEW OF THE ABOVE, CLAIM FOR ANY DEBT OR PART THEREOF IN ANY PREVIOUS YEAR SHALL BE ADMISSIBLE UNDER SECTION 36(1)(VII) OF THE ACT, IF IT IS WRITTEN OFF AS IRRECOVERABLE IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE FOR THAT PREVIOUS YEAR AND IT FULFILLS THE CONDITIONS STIPULATED IN SUB SECTION (2) OF SUB - SECTION 36(2) OF THE ACT. 5. ACCORDINGLY, NO APPEALS MAY HENCEFORTH BE FILED ON THIS GROUND AND APPEALS ALREADY FILED, IF ANY, ON THIS ISSUE BEFORE VARIOUS COURTS/TRIBUNALS M AY BE WITHDRAWN/NOT PRESSED UPON. 6. THIS MAY BE BROUGHT TO THE NOTICE OF ALL CONCERNED. (SADHANA PANWAR) DCIT (OSD) (ITJ), CBDT, NEW DELHI. I N THE RESULT WE REVERSE THE FINDING OF THE LD CIT(A) IN DISALLOWING THE CLAIM OF RS. 560788/ - ON ACCOUNT OF REBA TE AND DISCOUNT. 6 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 / 08 /2016 . - SD/ - - SD/ - ( SANJAY GARG ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 04 / 08 / 2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, CHANDIGARH