BHARAT INSULATION COMPANY (I) LTD, MUMBAI V. ASST CIT CEN CIR 31, MUMBAI

ITA 33/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2329 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-03-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 02-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANDHIV GUPTA
• Assessee Lawyers: M SUBRASMINI YAM

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI JOGINDER SINGH, JM AND SHRI RAJESH KUMA R, AM ./ I.T.A. NO.33/MUM/2013 ( / ASSESSMENT YEAR: 2009-10) BHARAT INSULATION COMPANY (I) LTD. B-32 , WAGLE INDUSTRIAL ESTATE, ROAD NO.18, THANE (W):400 604 / VS. ASST. COMMISSSIONER OF INCOME TAX, CENTRAL CIRCLE 31, ROOM NO. 409 AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI:400020 ./ ./PAN/GIR NO. AAACJ1709J ( /APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI M.SUBRASMINI YAM / RESPONDENT BY : SHRI RANDHIV GUPTA (DR) / DATE OF HEARING : 19/10/2015 !'#$ / DATE OF PRONOUNCEMENT : 20 /11/2015 / O R D E R PER RAJESH KUMAR, A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 16.10.2012 OF COMMISSIONER OF INCOME TAX (APPEALS) 40, MUMBAI (HE REINAFTER CALLED AS THE CIT(A) ) FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 2 ITA NO. 33/MUM/2013 (A.Y. 2009-10) BHARAT INSULATION COMPANY (I) LTD. VS. ASST. CIT 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.I.T. (A) ERRED IN PARTLY DISMISSING THE APPEAL. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.I.T. (A) ERRED IN PARTLY DISMISSING THE APPEAL WITHOUT A PPRECIATING FULLY AND PROPERLY THE FACTS OF THE CASE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED C.I.T. ERRED IN UPHOLDING PARTLY DISALLOWANCE OF EXPENSES PERTAINING TO PRIOR PERIODS AMOUNTING TO RS.6,18,324/- 2. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROD UCTION OF WINDING WIRE AND ENAMELED WIRE. DURING THE YEAR THE ASSESSEE FILED I TS RETURN OF INCOME AT RS.23,165/- THROUGH E-FILING. 3. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUT INY AND THE LD. ASSESSING OFFICER (A.O.) ASSESSED INCOME AT RS.12,38,870/-BY DISALL OWING , INTER ALIA, SERVICE TAX OF RS.2,05,177/- AND INSURANCE CLAIM OF RS.4,13,147 T O THE INCOME OF THE ASSESSEE AS PRIOR EXPENSES ON THE BASIS OF TAX AUDIT REPORT C LAUSE 22(B)(I) FILED BY THE ASSESSEE BY REJECTING THE PLEA OF THE ASSESSEE THAT THE WRITE O FFS RELATES TO THE INSTANT YEAR. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WROTE OFF SERVICE TAX OF RS.2,05,177/-- AND INSURANCE CLAIM NOT PAID BY THE INSURANCE COMPANIES OF RS.4,13,147/- AGAINST INCOME DURING THE YEAR ON THE GROUND THAT THESE RELATES TO THE CURRENT YEAR AS THE SAME WERE CRYSTALLIZED DURING THE YEAR THOUGH THESE PERTAIN I NTO EARLIER YEARS. 4. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE ON ACC OUNT OF SERVICE TAX AND INSURANCE CLAIM BY HOLDING THAT THE ASSESEE COULD N OT OFFER ANY VALID EXPLANATION FOR SUCH WRITING OFF DURING THE YEAR. THE LD AR VEHEME NTLY SUBMITTED THAT THE SERVICE TAX OF RS.2,05,177/- WAS WRITTEN OFF, AS CREDIT OF SERV ICE TAX WAS NOT AVAILABLE AGAINST SUCH PAYMENT TO THE APPELLANT. THE LD. COUNSEL, HOWEVER , SUBMITTED THAT THE VARIOUS 3 ITA NO. 33/MUM/2013 (A.Y. 2009-10) BHARAT INSULATION COMPANY (I) LTD. VS. ASST. CIT EXPENDITURE WERE INCURRED BY THE ASESEEE WHICH WERE LIABLE FOR SERVICE TAX. HE, HOWEVER, SUBMITTED THAT THE ASSESSEE WAS ELIGIBLE FOR SETTING OFF SUCH SERVICE TAX AGAINST THE AMOUNT PAYABLE BY THE ASSESSEE ON ACCO UNT OF CENTRAL EXCISE DUTY. IT WAS ALSO STATED THAT THE AMOUNT OF SERVICE TAX AVAILABL E FOR SET OFF AGAINST THE CENTRAL EXCISE DUTY WERE SHOWN AS SERVICE TAX CREDIT RECEIVABLE A CCOUNT IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. 5. THE LD. COUNSEL ALSO POINTED OUT THAT THE ASSESS EE IS REQUIRED TO INCUR MANY EXPENSES WHICH WERE LIABLE FOR SERVICE TAX AND WHIC H ARE NOT DIRECTLY CONNECTED TO THE MANUFACTURER ACTIVITY AND THEREFORE NOT ALLOWED TO BE SET OFF AGAINST THE CENTRAL EXCISE DUTY AND, THUS, THE SAME WAS WRITTEN OFF DUR ING THE PREVIOUS YEAR UNDER CONSIDERATION. IN OTHER WORDS THE AS PER THE CENVAT INPUT CREDIT RULES LAYS DOWN AS TO WHEN THE CREDIT OF SERVICE TAX CAN BE AVAILED A ND ALSO THE WHERE THE SET OFF IS NOT AVAILABLE . THE LD COUNSEL FURTHER SUBMITTED THAT SERVICE TAX CREDIT IS ONLY ALLOWED WHEN THE EXPENSES WERE INCURRED WHICH ARE DIRECTLY CONNECTED TO MANUFACTURING AND NOT OTHERWISE. AS AGAINST THE SHORT INSURANCE CLAIM OF RS.4,13,147/-, THE LEARNED OFFICER SUBMITTED THAT OUT OF TOTAL CLAIM OF RS.40, 97,649/- MADE ON 31 ST MAY, 2006, ONLY RS.36,84,503 WAS EITHER RECEIVED FROM INSURANC E COMPANY OR WRITTEN OFF IN THE EARLIER YEARS WHICH MEANS THAT RS.4,13,147/- WAS ALSO CLAIMED FROM THE INSURANCE COMPANY BUT NOT ADMITTED AND THEREFORE WAS ULTIMA TELY WRITTEN OFF IN THE INSTANT YEAR. IT WAS ALSO ARGUED THAT THE SERVICE TAX OF RS .2,05,177/- AND INSURANCE CLAIM OF RS.4,13,147/- WERE RIGHTLY CLAIMED BY THE ASSESSEE AS WRITTEN OFF AGAINST THE PROFIT. THE LD. COUNSEL PLACED RELIANCE ON THE DECISIONS OF DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS M/S. EXCEL FASHION PV T LTD (2007) 201 TAXMAN 216(DEL) AND FINALLY PRAYED THE ADDITIONS SUSTAINE D BY CIT (A) MAY PLEASED TO BE DELETED. 6. THE LD. DR HEAVILY RELIED ON THE ORDER OF THE AU THORITIES BELOW. 4 ITA NO. 33/MUM/2013 (A.Y. 2009-10) BHARAT INSULATION COMPANY (I) LTD. VS. ASST. CIT 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. THE FACTS OF THE CASE ARE THAT ASSESSEE HAD WRITTEN OFF RS.2,05,177/- AS SERVICE TAX WHICH IS NOT AVAILABLE FOR SET OFF AGAINST THE CENV AT PAYABLE BY THE ASSESSEE AND RS. 4,13,147/- ON ACCOUNT OF SHORT INSURANCE CLAI M I.E CLAIM NOT ADMITTED AND PAID BY THE INSURANCE COMPANY. IN THE CASE OF SERVICE TA X, WE NOTE THAT RS.2,05,177/- WERE WRITTEN OFF BY THE ASSESSEE BECAUSE THE SET OFF OF SUCH SERVICE TAX WAS NOT AVAILABLE AGAINST THE CENTRAL EXCISE DUTY. IN OUR OPINION, TH E AMOUNT OF SERVICE TAX WHICH IS PAID BY THE ASSESSEE ON THE EXPENDITURE INCURRED AN D FOR WHICH NO SET OF WAS AVAILABLE WAS RIGHTLY WRITTEN OFF AND THE ORDER OF THE LD. CI T (A) CANNOT BE SUSTAINED ON THIS POINT. SO FAR AS THE DISALLOWANCE OF RS.4,13,147/- IS CONCERNED, AGAIN WE ARE OF THE VIEW THAT THE ASSESSEE HAS RIGHTLY WRITTEN OFF THE UN-RECEIVABLE INSURANCE CLAIM DURING THE YEAR WHICH WERE EITHER REJECTED OR SHORT ACCEPT ED BY THE INSURANCE COMPANY. MORE SO WHEN THESE EXPENSES ARE NOT RELATED TO THE PRIO R PERIOD AS THE CIRCUMSTANCES AND FACTS UNDER WHICH THESE AMOUNTS WERE WRITTEN OFF C AME TO BE FINALIZED DURING THE YEAR. THE LD. COUNSEL OF THE ASSESSEE FURTHER POIN TED OUT THAT THE SIMILAR EXPENDITURE WERE ALLOWED BY THE DEPARTMENT IN THE EARLIER YEARS . ALL THESE WRITE OFFS ARE NECESSITATED WHEN THEIR ADJUSTMENTS OR RECOVERY IS NOT POSSIBLE TO BE MADE IN THE IN THE NORMAL COURSE OF BUSINESS . IN THE CASE OF CIT VS EXCEL FASHION PVT LTD (SUPRA), THE HONBLE HIGH COURT OF DELHI HAS UPHELD THE ORD ER OF TRIBUNAL IN WHICH THE TRIBUNAL ALLOWED THE IRRECOVERABLE EXPORT INCENTIVE S AS BAD DEBT. UNDER THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE DECISION IN T HE CASE OF CIT VS EXCEL FASHION PVT LTD (SUPRA), THE ORDER PASSED BY CIT(A) CAN NOT BE SUSTAINED ON THESE POINTS AND, THEREFORE, THE DISALLOWANCE OF SERVICE TAX OF RS.2, 05,177/- AND THE INSURANCE CLAIM OF RS. 4,13,147/-ARE ORDERED TO BE DELETED. 5 ITA NO. 33/MUM/2013 (A.Y. 2009-10) BHARAT INSULATION COMPANY (I) LTD. VS. ASST. CIT IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON NOVEMBER 20 TH , 2015 SD/- SD/- (JOGINDER SINGH) (RAJESH KUMAR) '( / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; * DATED :20.11.2015 ASHWINI GAJAKOSH !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT - CONCERNED 5. ./0 ((12 , 12$ , / DR, ITAT, MUMBAI 6. 045 6 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI