The DCIT(OSD)Circle-8, Ahmedabad V. SCI International Securities Ltd, Ahmedabad

ITA 313/AHD/2010

• Counselvise Citation: 31320514 RSA 2010
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: URVASHI SHODHAN A R
• Keywords: Bad and doubtful debts
• Section: 43B

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , .'.#$%, '& ' ' BEFORE SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ./ I.T.A. NO.313/AHD/2010 ( ) * ) * ) * ) * / / / / ASSESSMENT YEAR : 2006-07) THE DICT (OSD) CIRCLE-8 AHMEDABAD ) ) ) ) / VS. M/S.SCI INTERNATIONAL PVT.LTD. 206, SHITAL PLAZA, MANINAGAR, AHMEDABAD + '& ./,- ./ PAN/GIR NO. : AAGCS 2303 F ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ' / APPELLANT BY : SHRI B.L.YADAV, D.R. /0+. 2 1 ' / RESPONDENT BY : MS.URVASHI SHODHAN, A.R. )3 2 & / / / / DATE OF HEARING : 09/11/11 4$* 2 & / DATE OF PRONOUNCEMENT : 18.11.11 '5 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE REVENUE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-XIV , AHMEDABAD DATED 09/11/2009 PASSED FOR ASSESSMENT YEAR 2006-07 . 2. GROUND NO.1 READS AS FOLLOWS:- 1) THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE A.O. TO DELETE DISALLOWANCE OF PROVIDENT FUND OF EMPLOYEES CONTRIBUTION OF RS.666293/- ON ACCOUNT OF DELAYED PAYMENT. ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 2 - 2.1. THE IDENTICAL ISSUE HAD COME UP IN ASSESSEES OWN CASE FOR A.Y. 2007-08, WHEREIN ITAT D BENCH AHMEDABAD IN ITA NO.1847/AHD/2010 VIDE ORDER DATED 24/09/2010 HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISSED THE GROUND OF THE REVENUE AS PER THE FOLLOWING OBSERVATION:- 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE ISSUE IS NOW COVERED IN FAVOUR OF ASSESSEE BY THE DECISION OF HO N.SUPREME COURT IN CIT VS. ALOM EXTRUSION LTD. (2009) 319 ITR 306 (SC) WHEREIN IT IS HELD THAT CONTRIBUTION TO PF MADE BEF ORE DUE DATE OF FILING OF RETURN IS ALLOWABLE AS DEDUCTION. THE DE LETION OF THE SECOND PROVISO TO SECTION 43B AND THE AMENDMENT TO THE FIRST PROVISO BY THE FINANCE ACT 2002 WAS TO OVERCOME IMP LEMENTATION OF THE PROVISION AND, THEREFORE, ITS AMENDMENTS ARE CURATIVE IN NATURE AND WOULD APPLY RETROSPECTIVELY WITH EFFECT FROM 1.4.1998. SIMILAR VIEW WAS FURTHER TAKEN BY HON.DELHI HIGH CO URT IN CIT VS. AIMIL LTD. & SONS (2010) 229 CTR (DEL) 418. ACCORD INGLY THIS GROUND OF REVENUE IS REJECTED. 4. THE SECOND GROUND RELATES TO CLAIM OF BAD DEBT. THE AO FOUND THAT ASSESSEE HAS CLAIMED BAD DEBT AMOUNTING TO RS. 1,90,990/-. THE ASSESSEE FURNISHED THE DETAILS OF THE PARTIES A ND THE RELEVANT AMOUNTS WHICH WERE WRITTEN OFF DURING THE YEAR. TH E AO, HOWEVER, DISALLOWED THE CLAIM ON THE GROUND THAT AS SESSEE HAS NOT PROVED THAT DEBT HAS BECOME BAD. 5. THE LD. CIT(A) ALLOWED THE CLAIM BY HOLDING THA T ONCE AMOUNTS ARE WRITTEN OFF THE CLAIM OF THE ASSESSEE IS ALLOWA BLE. LD. CIT(A) FURTHER OBSERVED THAT ASSESSEE IS PROVIDING SERVICE S OF GUARDS TO VARIOUS CLIENTS AND BILLS ARE RAISED AGAINST THEM A S PER TERMS AND CONDITIONS OF PROVIDING SERVICES. DEDUCTION OF TAX AT SOURCE IS MADE. THE ASSESSEE CREDITED ITS PROFIT AND LOSS AC COUNT WITH FULL VALUE OF BILLS BUT THE ASSESSEE RECEIVED THE PAYMEN T FROM THE CLIENTS AFTER DEDUCTION OF TDS AND OTHER DEDUCTIONS . THE SAME IS ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 3 - TREATED AS AMOUNT NOT RECOVERABLE FROM THESE PARTIE S AND WERE WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT. ONCE A MOUNT IS NOT FOUND RECOVERABLE AND WRITTEN OFF THEY ARE ALLOWABL E DEDUCTION. 6. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED V IEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). ONCE BAD DEBTS ARE WRITTEN OFF THEN THEY ARE ALLOWABLE AS DEDUCTIO N IN VIEW OF THE DECISION OF HON.SUPREME COURT IN THE CASE OF CIT VS . M/S.HCL COMNET SYSTEM & SERVICES LTD. IN CIVIL APPEAL NO.58 00 OF 2008 [ARISING OUT OF SLP(C) NO.4575 OF 2008]. THE AO, HOWEVER, MAY LOOK WHETHER TDS ETC. DEDUCTED BY THE CLIENTS HAVE BEEN FURTHER RECOVERED BY THE ASSESSEE FROM THE IT DEPARTMENT. IF IT IS SO THEN SUCH RECOVERY WOULD BE TAXABLE AS SUCH AMOUNT HAS B EEN WRITTEN OFF IN THE CURRENT YEAR AS NOT RECOVERABLE. WITH T HE ABOVE OBSERVATIONS WE DISMISS THIS GROUND OF REVENUE. 3. RESPECTFULLY FOLLOWING THE ORDER OF THE CO-ORDIN ATE BENCH, FOR THIS YEAR AS WELL, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 4. GROUND NO.2 READS AS FOLLOWS:- 2) THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND O N FACTS IN DELETING THE ADDITION OF RS.166209/- ON ACCOUNT OF DIS- ALLOWANCE OF PENALTY CHARGES. 4.1. THE OBSERVATION OF THE ASSESSING OFFICER WAS T HAT THE SUMS OF RS.1,26,209/- AND RS. 40,000/- WERE DEBITED IN PROF IT & LOSS ACCOUNT UNDER THE HEAD PENALTY CHARGES. DUE TO THE SAID N OMENCLATURE, AS PER ASSESSING OFFICER, AN EXPENDITURE WHICH WAS TOWARDS INFRINGEMENT OF LAW COULD NOT BE CONSIDERED AS AN EXPENDITURE FOR T HE BUSINESS PURPOSE, THEREFORE DISALLOWED THE SAME. THE MATTER WAS CAR RIED BEFORE THE FIRST APPELLATE AUTHORITY. ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 4 - 5. BEFORE LEARNED CIT(APPEALS), AN EXACT NATURE OF EXPENDITURE WAS EXPLAINED TO LEARNED CIT(APPEALS) AND ON DUE CONSID ERATION THE SAME WAS DELETED WITH THE FOLLOWING OBSERVATION: 4.2. DURING THE COURSE OF APPELLATE PROCEEDINGS, T HE APPELLANT HAS SUBMITTED THAT THE EXPENDITURE ON THIS COUNT INCURR ED WAS NOT ON ACCOUNT OF PENALTY FOR INFRINGEMENT OF LAW, BUT BEC AUSE OF RECOVERY BY THE CLIENT ON ACCOUNT OF THEFT OF DIESEL BY THE EMP LOYEE OF THE APPELLANT IN THE CASE OF M/S.GUJARAT AMBUJA. DUE TO SHORTAGE /ABSENTISM OF GUARDS IN THE CASE OF M/S.GACL, THEFT OF ARTICLES/G OODS INSPITE OF GUARDS PROVIDED BY APPELLANT IN THE CASE OF MUNJAL AUTO LTD. I HAVE PERUSED THE DETAILS SO SUBMITTED BY THE APPELLANT F ROM VARIOUS SUCH PARTIES. I AM INCLINED TO ACCEPT THE CONTENTION O F THE APPELLANT THAT LOOKING TO FACTS RELATED TO SUCH PENALTIES, THE SAM E ARE INCIDENTAL TO THE BUSINESS OF THE APPELLANT OF PROVIDING GUARDS AND S AFETY SECURITIES. IT WAS ALSO OBSERVED THAT THE AMOUNTS ARE NET OF RECOV ERY FROM GUARDS ON DUTIES IN SOME CASES, I.E. CASE OF DIESEL THEFT AT M/S.GUJARAT AMBUJA CEMENT PREMISES. CONSIDERING THE TURNOVER AND NATU RE OF THE BUSINESS OF APPELLANT, SUCH DEDUCTION IN THE FORM OF PENALTI ES BY CLIENTS ARE INCIDENTAL TO APPELLANTS BUSINESS AND CANNOT BE EQ UATED WITH PENALTY FOR INFRINGEMENT OF LAW AND THEREFORE, FULLY ALLOWA BLE. THE ADDITION SO MADE IS DELETED. THE APPELLANT GETS A RELIEF OF RS .1,66,209/-. 6. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED T HE DETAILS FURNISHED AND HAVE NOTICED THAT THE ASSESSEE IS IN THE BUSINESS OF PROVIDING SECURITY SYSTEM TO VARIOUS PARTIES. THOS E PARTIES HAVE DEDUCTED THE PAYMENT BY PENALIZING THIS ASSESSEE S TATED TO BE DUE TO SOME LAPSES FOUND IN THE SERVICES PROVIDED. FOR EX AMPLE, ONE OF THE PARTY, VIZ. FRIENDS SALT WORKS HAS DEDUCTED A SUM OF RS.1,014/- FOR THE REASON ASSIGNED AS SLEEPING DURING THE PERFORMANCE OF THE DUTY. LIKEWISE, THE PARTIES; NAMELY, TRINITY SHIPPING, KO TESHWAR ENGG., SHAH ALLOYS STEEL LTD. AND SHRINIVAS COTTON MILLS LTD. H AVE DEDUCTED RS.211/- , RS.261/- , RS.1,324 AND RS.211/- RESPECTIVELY ON THE SAME REASON OF ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 5 - SLEEPING DURING THE PERFORMANCE OF DUTY. ONE OF THE PARTY; NAMELY, HANS INSPAT LTD. HAD DEDUCTED A SUM OF RS.3,483/- D UE TO THE THEFT OF SOME ARTICLE FROM COMPANYS PREMISES. THERE WAS A LONG LIST AS PER THE LEDGER ACCOUNT UNDER THE HEAD PENALTY CHARGES ACCO UNT WHICH WAS EXAMINED BY THE LEARNED CIT(APPEALS) AND THEREAFTER IT WAS HELD THAT THE NATURE OF EXPENDITURE WAS NOT TOWARDS INFRINGEMENT OF ANY LAW BUT IT WAS A SHORT RECOVERY OF OUTSTANDING DUES FROM THE CLIENTS OF THE ASSESSEE. ON HEARING THE SUBMISSIONS OF BOTH THE SIDES AND ON CAREFUL PERUSAL OF THE DETAILS FURNISHED, WE FIND NO FALLAC Y IN THE SAID DECISION OF LEARNED CIT(APPEALS) AND, THEREFORE CONFIRM THE SAM E. THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 7. GROUND NO.3 READS AS UNDER: 3) THE LD. CIT(A)-XIV, AHMEDABAD ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF BAD DEBTS U/S.36(2) OF RS.2,23,727/-. 7.1. THE APPELLANT HAD CLAIMED BAD DEBT OF RS.2,23, 727/- FOUND TO BE WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT. THE ASSE SSEE HAS FURNISHED THE DETAILS OF THE VARIOUS PERSONS BEFORE THE ASSESSING OFFICER. AS PER THE ASSESSING OFFICER, SINCE THE DEBTS HAVE BEEN WRITTE N OFF DURING THE CURRENT YEAR ITSELF, THEREFORE NOT BE ALLOWED BEIN G HELD AS PRE-MATURE CLAIM. THE MATTER WAS CARRIED BEFORE THE FIRST APP ELLATE AUTHORITY. 8. AFTER CONSIDERING THE FACTS OF THE CASE, LEARNED CIT(APPEALS) HAS DELETED THE ADDITION AS PER THE FOLLOWING OBSERVATI ON: ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 6 - 5.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. THE DETAILS SO FILED SHOWS THAT AFTER PROVIDING THE SERVICES OF GUARD FOR SECURITIES TO VARIOUS CLIENTS , THE APPELLANT RAISES A BILL AS PER TERMS AND CONDITIONS OF PROVID ING SUCH SERVICES. THE CLIENT DEDUCT THE TDS AS WELL AS OTH ER DEDUCTION ON ACCOUNT OF RATE DIFFERENCE OR ABSENTISM OF DUTY OF GUARD. HOWEVER THE APPELLANT CREDIT ITS PROFIT & LOSS ACCOUNT WITH FULL VALUE OF BILLS SO RAISED. HOWEVER, WHEN APPELLANT RECEIVED THE PA YMENT FROM THE CLIENT AFTER DEDUCTION OF TDS AND OTHER DEDUCTI ON, THE SAME OTHER DEDUCTION IS CLAIMED AS AMOUNT NOT RECOVERABL E FROM THESE PARTIES AND WRITTEN OF IN THE P&L A/C. THE AMOUNT MAINLY RELATED TO CURRENT YEAR BILLING AND THEREFORE, THE APPELLAN T HAS IN APPROPRIATELY TERMED AS BAD DEBT AT THE PLACE OF K ASAR. SINCE THESE FACTS ARE VERIFIABLE FROM BOOKS OF ACCOUNT AN D DETAILS SO FURNISHED, THE SAME ARE ALLOWABLE EXPENDITURE THOUG H THE SAME IS TREATED BY APPELLANT AS BAD DEBT WRITTEN OFF. THE ADDITION SO MADE IS DELETED AND APPELLANT GETS A RELIEF OF RS.2,23,7 27/-. 9. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES. IT WAS NOTICED THAT THE TRIBUNAL VIDE AN ORDER DATED 24/09/2010 (ALREADY CI TED- SUPRA) HAS ALSO DECIDED THIS ISSUE REJECTING THE GROUND O F THE REVENUE, AS PER THE FOLLOWING OBSERVATIONS: 5. THE LD. CIT(A) ALLOWED THE CLAIM BY HOLDING TH AT ONCE AMOUNTS ARE WRITTEN OFF THE CLAIM OF THE ASSESSEE I S ALLOWABLE. LD. CIT(A) FURTHER OBSERVED THAT ASSESSEE IS PROVIDING SERVICES OF GUARDS TO VARIOUS CLIENTS AND BILLS ARE RAISED AGAI NST THEM AS PER TERMS AND CONDITIONS OF PROVIDING SERVICES. DEDUCT ION OF TAX AT SOURCE IS MADE. THE ASSESSEE CREDITED ITS PROFIT A ND LOSS ACCOUNT WITH FULL VALUE OF BILLS BUT THE ASSESSEE RECEIVED THE PAYMENT FROM THE CLIENTS AFTER DEDUCTION OF TDS AND OTHER DEDUCT IONS. THE SAME IS TREATED AS AMOUNT NOT RECOVERABLE FROM THESE PAR TIES AND WERE WRITTEN OFF IN THE PROFIT AND LOSS ACCOUNT. ONCE A MOUNT IS NOT FOUND RECOVERABLE AND WRITTEN OFF THEY ARE ALLOWABL E DEDUCTION. ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 7 - 6. WE HAVE HEARD THE PARTIES. IN OUR CONSIDERED V IEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF LD. CIT(A). ONCE BAD DEBTS ARE WRITTEN OFF THEN THEY ARE ALLOWABLE AS DEDUCTIO N IN VIEW OF THE DECISION OF HON.SUPREME COURT IN THE CASE OF CIT VS . M/S.HCL COMNET SYSTEM & SERVICES LTD. IN CIVIL APPEAL NO.58 00 OF 2008 [ARISING OUT OF SLP(C) NO.4575 OF 2008]. THE AO, HOWEVER, MAY LOOK WHETHER TDS ETC. DEDUCTED BY THE CLIENTS HAVE BEEN FURTHER RECOVERED BY THE ASSESSEE FROM THE IT DEPARTMENT. IF IT IS SO THEN SUCH RECOVERY WOULD BE TAXABLE AS SUCH AMOUNT HAS B EEN WRITTEN OFF IN THE CURRENT YEAR AS NOT RECOVERABLE. WITH T HE ABOVE OBSERVATIONS WE DISMISS THIS GROUND OF REVENUE. 10. AS FAR AS THE ISSUE OF CLAIM OF BAD DEBT WRITTE N OFF IN THE ACCOUNTS FOR THE YEAR UNDER CONSIDERATION IS CONCERNED, THE SAME IS NOW DIRECTLY COVERED BY A LATEST DECISION OF HON'BLE APEX COURT PRONOUNCED IN THE CASE OF T.R. F. LTD. VS. CIT REPORTED AS (2010) 32 3 ITR 397 (SC), WHEREIN THE HON'BLE APEX COURT HAS TAKEN INTO CON SIDERATION THE POSITION OF LAW, AFTER 01/04/1989 AND HELD AS UNDER :- THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRI L 1, 1989, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT, IN FACT, HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRI TTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOW EVER, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETHE R THE DEBT HAS, IN FACT, BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSES SEE. WHEN A BAD DEBT OCCURS, THE BAD DEBT ACCOUNT IS DEBITED AND THE CUS TOMERS ACCOUNT IS CREDITED, THUS, CLOSING THE ACCOUNT OF THE CUSTOMER . IN THE CASE OF COMPANIES, THE PROVISION IS DEDUCTED FROM SUNDRY DE BTORS. AS STATED ABOVE, THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER, IN FACT, THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING O FFICER. HENCE, THE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 10.1. ONCE THE HON'BLE APEX COURT HAS HELD THAT IT IS ENOUGH IF THE BAD DEBT IS WRITTEN-OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE, THEN IT ITA NO.313/AHD/ 2010 DCIT VS. M/S.SCI INTERNAIT6ONAL PVT.LTD. ASST.YEAR 2006-07 - 8 - IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT, IN FACT, HAD BECOME IRRECOVERABLE. THEREFORE, RESPECTFULLY FOLL OWING THE ABOVE DECISION, THIS GROUND OF THE REVENUE IS HEREBY DISM ISSED. 10.2. HOWEVER, THE RESPECTED CO-ORDINATE BENCH HA S NOTED THAT THE ASSESSING OFFICER IS REQUIRED TO LOOK INTO THE POSI TION OF TDS DEDUCTED FROM THOSE CLIENTS, HOWEVER, IT WAS ALSO WRITTEN OF F IN THE CURRENT ACCOUNT AS NOT RECOVERABLE. NATURALLY, THE ASSESSING OFFIC ER IS TO BIFURCATE THE SAID TWO AMOUNTS AND THEN FOLLOW THE POSITION OF TH E HONBLE APEX COURT IN RESPECT OF THE DISALLOWANCE OF BAD DEBT. WITH T HESE DIRECTIONS, THIS GROUND OF THE REVENUE ON THE LEGAL ISSUE OF BAD DEB T U/S.36(2) OF THE I.T.ACT IS HEREBY DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED PROTANTO . SD/- SD/- ( A.K. GARODIA ) ( MUKUL KR. SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEM BER AHMEDABAD; DATED 18 / 11 /2011 6..), .)../ T.C. NAIR, SR. PS '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7* '5 2 /7 8'7*/ COPY OF THE ORDER FORWARDED TO : 1. +. / THE APPELLANT 2. /0+. / THE RESPONDENT. 3. 9 / CONCERNED CIT 4. 9() / THE CIT(A)-XIV, AHMEDABAD 5. 7<# /) , , / DR, ITAT, AHMEDABAD 6. # =3 / GUARD FILE. '5) '5) '5) '5) / BY ORDER, 07 / //TRUE COPY// > >> >/ // / , , , , ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD