VALTEX SILK MILLS, MUMBAI V. ITO 23(1)(4), MUMBAI

ITA 3240/MUM/2012

• Counselvise Citation: 324019914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 05-08-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: A K LAL
• Keywords: Business expenditure; Bad and doubtful debts

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI . .. . . . . . ! ! ! ! , ,, , ' #$ ' #$ ' #$ ' #$ , , ,, , . .. . . . . . $ $ $ $ , % #$ % #$ % #$ % #$ & & & & BEFORE SHRI R.K.GUPTA JM AND SHRI R.S.SYAL, AM ITA NO. 3240 /MUM/2012 A.Y. 2007-08 M/S VALTEX SILK MILLS, LBS MARG, OPP. DREAMS MALL, BHANDUP (WEST), MUMBAI-400078 PAN-AACFV3425C ITO 23(1)(4), C-10, 1 ST FLOOR, BANDRA INCOME TAX, BANDRA KURLA COMPLEX, MUMBAI-400051 ( '( / // / ASSESSEE) * * * * / VS. ( +,'(/ RESPONDENT) '( - -- - . . . . / ASSESSEE BY : SHRI A.K.LAL +,'( - . - . - . - . / REVENUE BY : SHRI ANURAG SHRIVASTAVA * - /% / / / / DATE OF HEARING :05.08.2013 012 - /% / DATE OF PRONOUNCEMENT : 07.08.2013 #3 #3 #3 #3 / / / / O R D E R PER R.S.SYAL ( AM) : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE LD. CIT(A) ON 09.02.2012 IN RELATION TO THE ASSESSMENT YEAR 2007-08. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF RS.7,27,827/- WHICH W AS CLAIMED ITA NO. 3240/MUM/2012 M/S VALTEX SILK MILLS . 2 BY THE ASSESSEE AS A BUSINESS EXPENDITURE DEDUCTIBL E U/S 36(1)(VII). 3. BRIEFLY STATED THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE DEBITED A SUM OF RS.7.27 LAKHS AS BAD DEBTS. ON BEI NG CALLED UPON TO JUSTIFY THE AMOUNT OF DEDUCTION AND SATISFA CTION OF CONDITIONS LAID DOWN U/S 36(2), THE ASSESSEE SUBMIT TED A REPLY DATED 15.02.2009 STATING ; W E HAVE GIVEN A UNSECURED LOAN TO M/S SUMANGALA SPINNING MILLS RS.4725000/-. THE SUM ANGALA SPINNING MILLS HAVE RETURNED RS.39,97,173/- AS A FU LL AND FINAL SETTLEMENT. BALANCE OUTSTANDING AMOUNT OF RS.72782 7/- IS NOT RECEIVABLE. TILL TODAY WE HAVE NOT RECEIVED ANY BA LANCE AMOUNT. WE HAVE GIVEN THE UNSECURED LOAN DURING TH E ORDINARY COURSE OF BUSINESS. THE COMPANY HAS WIND UP AND CL OSED. THE ASSESSING OFFICER REFUSED DEDUCTION OF THE SAID AMOUNT ON ACCOUNT OF BAD DEBT BY OPINING THAT NEITHER SUCH AM OUNT WAS TAKEN INTO ACCOUNT IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE CURRENT OR THE EARLIER YEAR NOR THE ASSESSE E WAS ENGAGED IN MONEY LENDING BUSINESS. THE LD. CIT(A) UPHELD TH E ASSESSMENT ORDER ON THIS ISSUE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED FROM PA GE 3 OF THE PAPER-BOOK THAT A SUM OF RS.47.25 LAKHS WAS ADVANCE D BY THE ASSESSEE AS UNSECURED LOAN TO MS. SUMANGALA SPINNIN G MILLS IN ITA NO. 3240/MUM/2012 M/S VALTEX SILK MILLS . 3 TWO INSTALLMENTS ON 30.01.2004 AND 15.03.2004. THE REAFTER, NO TRANSACTION TOOK PLACE IN THIS ACCOUNT. IN THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , THE ASSESSEE RECEIVED A SUM OF RS.39.47 LAKHS AND THE REMAINING OF AMOUNT OF RS.7.27 LAKHS WAS WRITTEN OF AS BAD DEBT. THE A SSESSEE CLAIMED BEFORE THE ASSESSING OFFICER, AS HAS BEEN R EPRODUCED ABOVE, THAT AN UNSECURED LOAN WAS GIVEN TO M/S. SUM ANGALA SPINNING MILLS LTD. BEFORE THE FIRST APPELLATE AUT HORITY, IT WAS REITERATED THAT M/S. SUMANGALA SPINNING MILLS WAS T O PURCHASE PLANT FOR MANUFACTURING OF YARN WHICH THE ASSESSEE WAS EXPORTING AND SINCE M/S SUMANGALA SPINNING MILLS WA S SHORT OF FUNDS, THE AMOUNT IN QUESTION WAS GIVEN AS UNSECURE D LOAN. WE ARE UNABLE TO APPRECIATE AS TO HOW THE UNRECOVERED AMOUNT OF RS.7.27 LAKHS CAN BE CHARACTERIZED EITHER AS BAD DE BT OR A BUSINESS LOSS. OBVIOUSLY, THE PROPOSITION OF THIS AMOUNT BEING IN THE NATURE OF BAD DEBT AND HENCE DEDUCTIBLE U/S 36(1)(VII) IS RULED OUT BECAUSE THIS AMOUNT WAS NOT TAKEN INTO AC COUNT IN COMPUTING THE INCOME OF THE ASSESSEE AS PER SECTION 36(2) OF THE ACT. EQUALLY, THE AMOUNT CANNOT BE CONSIDERED AS BUSINESS LOSS BECAUSE THE AMOUNT WAS GIVEN TO M/S SUMANGALA SPINNING MILLS FOR FINANCING THEIR PURCHASE OF PLANT FOR MAN UFACTURING. IT CAN BE SEEN FROM THE ACCOUNT OF M/S SUMANGALA SPINN ING MILLS THAT THE AMOUNT GIVEN IN 2004 WAS RECEIVED IN PART IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-08 U NDER CONSIDERATION. THERE IS NO TRANSACTION OF ANY PURC HASE OR SALE ITA NO. 3240/MUM/2012 M/S VALTEX SILK MILLS . 4 HAVING BEEN MADE BY THE ASSESSEE FROM/TO M/S. SUMAN GALA SPINNING MILLS. THE ASSESSEE IS ADMITTEDLY NOT ENG AGED IN ANY BUSINESS OF FINANCING. THE IRRESISTIBLE CONCLUSION IS THAT A PART OF THE AMOUNT GIVEN ON CAPITAL ACCOUNT, WHICH TURNED O UT TO BE IRRECOVERABLE, CANNOT BE ALLOWED AS DEDUCTION. WE T HEREFORE, UPHOLD THE IMPUGNED ORDER ON THIS ISSUE. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH AUGUST 2013. #3 - 012 % 4 5#*6 07 TH AUGUST .2013 1 - SD/- SD/- (R.K.GUPTA) (R.S.SYAL) ' #$ ' #$ ' #$ ' #$ / JUDICIAL MEMBER % #$ % #$ % #$ % #$ / ACCOUNTANT MEMBER / MUMBAI ; 5#* / DATED : 7 TH AUGUST , 2013. SHEKHAR. P.S. #3 - +'/78 982/ #3 - +'/78 982/ #3 - +'/78 982/ #3 - +'/78 982// COPY OF THE ORDER FORWARDED TO : 1. '( / THE APPELLANT 2. +,'( / THE RESPONDENT. 3. : () / THE CIT , MUMBAI. 4. : / CIT(A)- , MUMBAI 5. 8= +'/'* , , / DR, ITAT, MUMBAI 6. > / GUARD FILE. #3* #3* #3* #3* / BY ORDER, ,8/ +'/ //TRUE COPY// ? ? ? ?/ // /@ A @ A @ A @ A ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI