ACIT, CHENNAI V. M/s. Sri Muthukumaraswamy Permanent Fund Ltd., CHENNAI

ITA 376/CHNY/2011

• Counselvise Citation: 37621714 RSA 2011
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-08-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR I VIJAYAKUMAR
• Keywords: Opportunity of being heard; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO.376/MDS/2011 (ASSESSMENT YEAR : 2004-05) THE ACIT COMPANY CIRCLE VI(4) CHENNAI VS M/S SRI MUTHUKUMARASWAMY PERMANENT FUND LTD NO.288 PURASAWALKAM HIGH ROAD CHENNAI 600 007 [PAN AABCS5300D] (APPELLANT) (RESPONDENT) APPELLANT BY : DR.I.VIJAYAKUMAR, CIT/DR RESPONDENT BY : NONE DATE OF HEARING : 23-08-2011 DATE OF PRONOUNCEMENT : 23-08-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE, FOR ASSESSMENT YE AR 2004-05, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), DATED 15.11.2010. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE- COMPANY FILED ITS RETURN OF INCOME ON 31.10.2004 DE CLARING A LOSS OF ` ITA 376/11 :- 2 -: 72,33,320/-. ON A DETAILED ANALYSIS OF THE ACCOUNT S AS ON 31.3.2004, IT WAS SEEN THAT THE ASSESSEE HAD CLAIMED BAD DEBTS AM OUNTING TO ` 102,64,939.30, THE DETAILS OF WHICH ARE AS UNDER: HEAD OFFICE BRANCH OFFICE REFUND ON LOAN ` 10.980.00 44,000.00 INTEREST ON HOUSE LOAN ` 4,66,206.80 ` 56,73,356.85 DEFAULT INTEREST ` 4,47,657.45 ` 36,19,980.00 STAFF ADVANCE ` 1,750.00 PARTY TDS ` 1,008.00 RS TOTAL ` 9,25,852.25 ` 93,39,087.05 3. THESE BAD DEBTS INCLUDE LOAN AMOUNT, INTEREST AND D EFAULT INTEREST BUT THE ASSESSEE HAS NOT CLARIFIED IN WHIC H YEAR THE INTEREST AND THE DEFAULT INTEREST WERE ADMITTED AS INCOME. THE ASSESSING OFFICER DID NOT ALLOW THE SAME BECAUSE THE ASSESSEE HAD NOT EXPLAINED HOW THESE HAVE BECOME BAD. ON THE CONTRARY, THE LD. CIT(A) HAS ACCEPTED THIS CLAIM OF THE ASSESSEE AFTER MENTIONIN G THE MODUS OF THE ASSESSEE WHICH IS A NIDHI COMPANY WHO FOLLOWED A CCRUAL SYSTEM OF ACCOUNTING AS CONTEMPLATED BOTH UNDER THE COMPANIES ACT AND UNDER THE INCOME-TAX ACT. THE COMPANY HAD GIVEN HOUSING LOANS TO VARIOUS PARTIES AND EVERY YEAR INTEREST RECEIVABLE IS CREDI TED AND OFFERED AS INCOME. IN ADDITION TO THIS, THE ASSESSEE HAS ALSO CHARGED DEFAULT ITA 376/11 :- 3 -: INTEREST FOR THOSE WHO DID NOT MAKE THE PAYMENTS I N TIME AND THIS WAS ALSO ADDED TO THE INCOME RETURNED IN ALL THE YE ARS. ACCORDING TO THE ASSESSEE, THE NIDHI COMPANY IN TAMILNADU ESPECI ALLY IN THE CITY OF CHENNAI, HAD PROBLEMS BECAUSE OF CERTAIN COMPANIES WHICH DID NOT COMPLY WITH THE DEPOSITS REGULATION ACT. AS A RESU LT, A PANIC WAS CREATED IN THE MINDS OF THE PUBLIC WITH REGARD TO T HE INVESTMENT IN NIDHI COMPANIES. THE PERSONS, TO WHOM HOUSING LOAN S HAVE BEEN GRANTED, DID NOT PAY INTEREST AS WELL AS THE DEFAUL T INTEREST AND ACCORDINGLY, THE ASSESSEE-COMPANY HAD NO ALTERNATIV E BUT TO WRITE OFF THE INTEREST AND THE DEFAULT INTEREST. THE ASSESSE E GAVE COMPLETE DETAILS OF THE PERSONS WITH THEIR ACCOUNT NUMBERS A ND OTHER RELEVANT DETAILS OF INTEREST AND THE DEFAULT INTEREST WRITTE N OFF UNDER THE HEAD BAD DEBTS MEANING THEREBY THE ASSESSEE HAD WRITTE N OFF THE DEBTS AS BAD DEBTS IN THE BOOKS OF ACCOUNT. BUT THE ASSESSI NG OFFICER IGNORED THE ASSESSEES SUBMISSIONS AND DISALLOWED THIS CLAI M OF BAD DEBTS AS AGAINST WHICH THE LD. CIT(A) HAS AGREED AND HAS FOU ND THAT THE ASSESSEE HAS COMPLIED WITH THE REQUIREMENTS OF SECT ION 36(1)(VII) OF THE ACT AND THEREFORE, IS ENTITLED TO THIS CLAIM. NOW THE REVENUE IS AGGRIEVED AND HAS DISPUTED THAT THE LD. CIT(A) HAS NOT GIVEN A FINDING AS TO IN WHICH YEAR THE INTEREST AND DEFAULT INTERE ST WERE ADMITTED AS INCOME AS PER SECTION 36(2)(I) OF THE ACT. ITA 376/11 :- 4 -: 4. AT THE TIME OF HEARING, DESPITE BEING DULY SERVED W ITH THE NOTICE, NOBODY CAME TO REPRESENT THE ASSESSEE-RESPO NDENT AND NO APPLICATION FOR ADJOURNMENT WAS FILED, THEREFORE, A S PER LAW, WE HAVE TO PROCEED EX-PARTE AGAINST THE RESPONDENT. IT WAS ARGUED BY THE LD.DR THAT THERE ARE NUMEROUS DECISIONS WHICH REQUI RE THE ASSESSEE TO PROVE THAT THE DEBT HAS REALLY BECOME BAD AND UN RECOVERABLE, FOR CLAIMING DEDUCTION ON ACCOUNT OF BAD DEBTS. 5. AFTER CONSIDERING THE VIEW POINT OF THE LD.DR AND A PPLYING THE SAME TO THE FACTS OF THIS CASE AVAILABLE BEFORE US, WE ARE OF THE CONSIDERED OPINION THAT IN SO FAR AS THE ALLOWABILI TY OF CLAIM OF BAD DEBT IS CONCERNED, THE LAW IS SETTLED AND THIS ISSU E IS NO LONGER RES INTEGRA. IF THE DEBT IS WRITTEN OFF AS PER SECTION 36(1)(VII) OF THE ACT IN THE BOOKS OF ACCOUNT, IT IS ALLOWABLE, BUT STILL TH E ALLIED ISSUE AS TO IN WHICH YEAR THE ASSESSEE DID ADMIT THE INTEREST AND DEFAULT INTEREST AS ITS INCOME REMAINS TO BE ASCERTAINED. THEREFORE, W ITH THE ABOVE OBSERVATION, WE REMAND THIS ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION THAT HE WILL DECIDE THE EN TIRE ISSUE AFRESH AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ITA 376/11 :- 5 -: 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 23.08.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 23 RD AUGUST, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR