DCIT, New Delhi V. M/s Rahul Cargo Pvt. Ltd., New Delhi

ITA 3468/DEL/2011

• Counselvise Citation: 346820114 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 07-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Bad and doubtful debts; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI G.D. AGRAWAL, HONBLE VICE-PRESIDENT AND SHRI RAJPAL YADAV, HONBLE JUDICIAL MEMBER ITA NO. 3468/DEL/2011 ASSESSMENT YEAR: 2008-09 DEPUTY CIT, VS. RAHUL CARGO PVT. LTD., CIRCLE 15(1), A-282, OKHLA IND. AREA, NEW DELHI. PHASE-I, NEW DELHI. (PAN: AAACR6342M) (APPELLANT) (RESPONDENT) REVENUE BY: SHRI SHASHI BHUSHA N SHUKLA, SR. DR ASSESSEE BY: SHRI AJAY TULS IYAN, ADV. ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT DATED 11.04.2011 PASSED FOR ASSESSMENT YEAR 2008-09 . GROUND NOS. 1 AND 2 TAKEN BY THE REVENUE ARE INTER-CONNECTED WITH EACH OTHER. IN THESE GROUNDS OF APPEAL, THE GRIEVANCE OF REVENUE IS THAT LEARNED CI T(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.4,11,740 AND RS.71,876 WHICH WERE ADDED BY THE ASSESSING OFFICER BY MAKING A DISALLOWANCE OUT OF R EPAIR AND MAINTENANCE OF BUILDING AND MAINTENANCE OTHER THAN BUILDING RES PECTIVELY. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF EXPRESS CARGO H ANDLING BY EXPRESS, AIR, TRAIN AND ROAD BUSINESS. IT HAS FILED ITS RETURN OF INCOME ON 3 RD APRIL 2009 2 DECLARING TOTAL INCOME OF RS.113,40,770. THE CASE O F THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE INCOME-TAX ACT, 1961 WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFIC ER THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS.3,73,547 AND RS.3,13,041 UNDER THE HEAD REPAIR & MAINTENANCE OF OFFICE AND OTHERS-RESPECTIVELY. LEA RNED ASSESSING OFFICER HAS REPRODUCED THE DETAILS IN RESPECT OF THESE EXPE NSES IN TABULAR FORM, WHEREIN HE NOTICED THE DATE, AMOUNT, PURPOSE, BILL NUMBER AND THE PAYMENTS ETC. THROUGH ACCOUNT PAYEE CHEQUE OR OTHERWISE. HE OBSERVED THAT A TOTAL SUM OF RS.4,11,740 WAS INCURRED FOR REPAIR AND MAIN TENANCE OF THE OFFICE, WHICH ACCORDING TO HIM CANNOT BE ALLOWED AS A DEDUC TION BECAUSE THE NATURE OF EXPENDITURE IS OF CAPITAL. WITH REGARD TO THE RE PAIR AND MAINTENANCE INCURRED ON OTHER ITEMS I.E. ON UPS, ELECTRICAL WIR E ETC., LEARNED ASSESSING OFFICER HAS OBSERVED THAT A SUM OF RS.71,876 IS TO BE TREATED AS INCURRED IN THE CAPITAL FIELD. HE MADE THE DISALLOWANCE OF BOTH THE AMOUNTS. 3. ON APPEAL BEFORE THE LEARNED CIT(APPEALS), IT WA S CONTENDED BY THE ASSESSEE THAT UNDER THE HEAD REPAIR AND MAINTENANC E OF THE OFFICE, ASSESSEE HAS DEBITED TOTAL AMOUNT OF RS.3,73,547. LEARNED A SSESSING OFFICER HAS DISALLOWED A SUM OF RS.4,11,740. IT SUGGESTS THAT L EARNED ASSESSING OFFICER 3 DID NOT APPLY HIS MIND ON THE DETAILS OF EXPENSES. OUT OF THIS TOTAL AMOUNT, THE ONE BILL DATED 24.5.2007 OF RS.74,219 WAS CANCE LLED. IT WAS AN ITEM RELATING TO GUPTA STEEL. APART FROM THIS ONE ITEM, THERE ARE TWO MORE BILLS WHICH WERE TRANSFERRED TO FURNITURE AND FIXTURE ACC OUNT AND THE ASSESSEE DID NOT CLAIM DEDUCTION OF THESE AMOUNTS. SIMILARLY, TH E EXPENSES INCURRED ON REPAIR AND MAINTENANCE OF OTHER ITEMS, ONE BILL BEA RING NO. 497 DATED 06.09.2007 PERTAINING TO RAJDHANI TIMBER TRADING CO . FOR PURCHASE OF PLYWOOD HAS NOT BEEN CLAIMED BY THE ASSESSEE. IT HA S BEEN TRANSFERRED TO FURNITURE AND FIXTURE ACCOUNT. LEARNED ASSESSING O FFICER HAS INCLUDED THE AMOUNT OF RS.25,500 IN THE TOTAL AMOUNT DISALLOWED BY HIM UNDER THIS HEAD AT RS.71,876. LEARNED FIRST APPELLATE AUTHORITY HAS GONE THROUGH THE DETAILS AND SATISFIED THAT THESE EXPENSES WERE NOT CLAIMED BY THE ASSESSEE. LEARNED FIRST APPELLATE AUTHORITY ALSO SATISFIED THAT THE E XPENSES ARE OF REVENUE IN NATURE AND NO DISALLOWANCE DESERVES TO BE MADE. ACC ORDINGLY, LEARNED CIT(APPEALS) HAS DELETED THE DISALLOWANCE. 4. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVE, W E HAVE GONE THROUGH THE RECORD CAREFULLY. FROM PERUSAL OF DETAILS OF TH E EXPENSES NOTICED BY THE ASSESSING OFFICER ON PAGES 2 TO 5, IT REVEALS THAT ALL THESE DETAILS PERTAINED TO MINOR REPAIRS CARRIED OUT IN THE OFFICE. INCURRENCE OF THESE EXPENSES DID NOT 4 RESULT INTO ANY ASSET OF ENDURING NATURE. THEREFORE , LEARNED CIT(APPEALS) HAS RIGHTLY OBSERVED THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE OF REVENUE NATURE, WHICH WERE INCURRED IN ORDER TO CAR RY OUT CURRENT REPAIRS IN THE OFFICE AS WELL AS ON OTHER ITEMS SO THAT THE OF FICE PREMISES CAN BE USED MORE EFFECTIVELY FOR THE PURPOSE OF THE BUSINESS. A FTER GOING THROUGH THE ORDER OF THE LEARNED CIT(APPEALS), WE DO NOT FIND A NY ERROR IN THE ORDER OF THE LEARNED CIT(APPEALS) ON THIS ISSUE. 5. IN GROUND NO.3, THE GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.8,53,698 WHICH HAS BEEN ADDED BY THE ASSESSING OFFICER BY MAKING A DIS ALLOWANCE OUT OF BAD DEBTS. 6. THE BRIEF FACTS OF THE CASE ARE THAT ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS CLAIMED BAD DEBTS OF RS.8,53,698. IN THIS AMOUNT, THERE ARE TWO COMPONEN TS, ONE IS OF RS.7,17,121 WHICH IS AN AMOUNT DEPOSITED WITH THE L ANDLORD AS A SECURITY. THIS AMOUNT WAS FORFEITED BY THE LANDLORD, ON ACCOU NT OF NOTICE PERIOD RENT, OUTSTANDING RENT, WATER AND ELECTRICITY CHARGES. TH E ASSESSEE CLAIMED DEDUCTION OF THIS AMOUNT. THE SECOND COMPONENT IS A SUM OF RS.1,36,577. IT 5 WAS AN ADVANCE GIVEN TO LOCAL LORRY VENDOR. IT COUL D NOT BE RECOVERED BY THE ASSESSEE, THEREFORE, IT WAS WRITTEN OFF. LEARNED A SSESSING OFFICER CONFRONTED THE ASSESSEE THAT THESE AMOUNTS DO NOT FALL WITHIN THE PURVIEW OF BAD DEBTS AS ENVISAGED UNDER SEC. 36(1)(VII) OF THE ACT. IN R ESPONSE TO THE QUERY OF THE ASSESSING OFFICER, IT WAS CONTENDED BY THE ASSESSEE THAT BRANCH OFFICE WAS CLOSED BY THE ASSESSEE. THE LANDLORD HAS ADJUSTED T HE SECURITY DEPOSIT TOWARDS OUTSTANDING RENT, WATER AND ELECTRICITY CHA RGES. HENCE, IT IS AN ALLOWABLE DEDUCTION. SIMILARLY, WITH REGARD TO THE ADVANCE GIVEN TO LOCAL LORRY VENDOR, IT WAS CONTENDED THAT THE ADVANCE WAS MADE FOR TRANSPORTATION OF GOODS. HOWEVER, ASSESSEE COULD NOT RECOVER THE A MOUNT. THE ASSESSEE CONTENDED THAT THESE EXPENSES WERE INCURRED IN THE ORDINARY COURSE OF BUSINESS AND IF A LOSS THOUGH NOT ALLOWED AS BAD DE BTS THEN SUCH LOSS WAS ALLOWABLE AS BUSINESS LOSS. LEARNED ASSESSING OFFI CER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM . 7. DISSATISFIED WITH THE ASSESSMENT ORDER, ASSESSEE CARRIED THE MATTER IN APPEAL. IT SUBMITTED THAT IF A LOSS IS NOT ALLOWABL E AS A BAD DEBT BUT THERE IS NO DISPUTE WITH REGARD TO BONA FIDE LOSS ARISING IN ORDINARY COURSE OF CARRYING ON BUSINESS, WHICH IS OF A REVENUE IN NATU RE THEN SUCH A LOSS IS TO BE ALLOWED AS A BUSINESS LOSS. IN SUPPORT OF ITS CONTE NTION, THE ASSESSEE RELIED 6 UPON THE TWO ORDERS OF THE ITAT, NAMELY, JAL PRADEE P SECURITY LTD. VS. DCIT REPORTED IN 4 ITR (TRIB.) 491 AND INDIAN INFOL INES SECURITIES PVT. LTD. VS. ACIT REPORTED IN 25 SOT 123. IT ALSO RELIED UPO N THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF BADRIDASS DAGA VS. CIT REPORTED IN 34 ITR 10 AND IN THE CASE OF CIT VS. MYSORE SUGAR CO. LTD. REPORTED IN 46 ITR 649. LEARNED CIT(APPEALS) HAS REPRODUCED THE SUBMIS SIONS MADE BY THE ASSESSEE IN PARAGRAPH NO.5 OF THE IMPUGNED ORDER ON PAGE NOS. 6 TO 9. ON AN ANALYSIS OF THE SUBMISSIONS, LEARNED CIT(APPEALS ) OBSERVED THAT IT IS A GENUINE BUSINESS EXPENDITURE WHICH IS OTHERWISE ALL OWABLE TO THE ASSESSEE. ACCORDINGLY, LEARNED CIT(APPEALS) DELETED THE DISAL LOWANCE. 8. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVE, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS SUBMITTED TH AT SECURITY DEPOSIT FORFEITED BY THE LANDLORD REPRESENTS RENT PAYABLE T O THE LANDLORD AS WELL AS ELECTRICITY AND WATER CHARGES. ALL THESE ITEMS ARE OF REVENUE NATURE. HAD THE SECURITY WAS NOT ADJUSTED THEN EQUAL AMOUNT WOULD HAVE BEEN PAID BY THE ASSESSEE AND IT COULD GET REFUND OF SECURITY. THE S ITUATION WILL REMAIN THE SAME. AS FAR AS THE ADVANCE GIVEN TO THE LORRY VEND OR IS CONCERNED, THE ASSESSEE HAS SUBMITTED THE DETAILS BEFORE THE ASSES SING OFFICER AND THE ASSESSING OFFICER DID NOT INVESTIGATE THE ISSUE WIT H THE ANGLE WHETHER IT IS A 7 REVENUE EXPENDITURE OR NOT. HE SIMPLY DISALLOWED BE CAUSE IN HIS UNDERSTANDING, IT CANNOT BE TERMED AS A BAD DEBTS W ITHIN THE AMBIT OF SEC. 36(1)(VII) OF THE ACT. ON THE OTHER HAND, LEARNED F IRST APPELLATE AUTHORITY HAS CONSIDERED ALL OTHER DETAILS AND THEREAFTER DELETED THE DISALLOWANCE. AFTER TAKING INTO CONSIDERATION THE FINDINGS OF THE LEARN ED CIT(APPEALS), WE DO NOT FIND ANY FORCE IN THE GROUND OF APPEAL RAISED B Y THE REVENUE. NO OTHER GROUND WAS PRESSED. 9 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 12.10.201 2 SD/- SD/- ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE-PRESIDENT JUDICIAL MEMBER DATED: 12/10/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR