ACIT, CHENNAI V. M/s. Barclays Investments and Loans (India) Ltd., CHENNAI

ITA 392/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64476 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 02-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Keywords: Bad and doubtful debts; Competent authority
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.392/MDS/2011 (ASSESSMENT YEAR: 2006-07) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-1(2), AAYAKAR BHAVAN, NEW BLOCK VI FLOOR, CHENNAI-600 0034. VS. M/S. BARCLAYS INVESTMENTS & LOANS (INDIA) LTD., FORMERLY RANK INVESTMENTS & CREDITS (I) LTD., Y-49, 9 TH STREET, 2 ND FLOOR, ANNA NAGAR, CHENNAI-600 040. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. S.DASGUPTA, JCIT RESPONDENT BY : MR. PHILIP GEORGE, ADVOCATE DATE OF HEARING : 27 TH SEPTEMBER, 2012 DATE OF PRONOUNCEMENT : 31 ST OCTOBER, 2012 O R D E R PER VIKAS AWASTHY, JM: THE APPEAL HAS BEEN FILED BY THE REVENUE IMPUGNING THE ORDER OF THE CIT(A)V CHENNAI DATED 18 TH NOVEMBER, 2010. 2. THE FACTS IN BRIEF ARE, THAT THE ASSESSEE IS A N ON- BANKING FINANCIAL COMPANY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 17.11.200 6 ADMITTING NET TAXABLE INCOME OF ` 1,45,867/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICES UNDE R SECTION ITA NO.392/MDS/2011 2 143(2) AND 142(1) WERE ISSUED. DURING THE ASSESSMEN T PROCEEDINGS THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 17.11.2008 MADE CERTAIN ADDITIONS/DISALLOWANC ES ON ACCOUNT OF: I) LONG TERM CAPITAL GAINS ON SALE OF LAND ` 65,02,235/- II) BAD DEBTS WRITTEN OFF AMOUNTING TO ` 2,51,000/- III) OSR CHARGES AMOUNTING TO ` 14,42,532/- AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE A SSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE CIT(A) V IDE ORDER DATED 18.11.2010 ALLOWED THE APPEAL OF THE ASSESSEE . NOW, THE REVENUE HAS COME IN SECOND APPEAL BEFORE THE TR IBUNAL ASSAILING THE ORDER OF THE CIT(A) ON FOLLOWING COUN TS:- 1) THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER T O ADOPT THE GUIDELINE VALUE AT ` 584/- PER SQ.FT AS AGAINST ` 1,321/- PER SQ.FT. ADOPTED BY THE ASSESSING OFFICER ; 2) THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ACCEPT THE CLAIM OF ` 14,42,532/- PAID BY THE ASSESSEE TO M/S. NAVKAR FOUNDATION AS OPEN SPACE RESERVATION (OSR) CHARGES. ITA NO.392/MDS/2011 3 3) THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO ACCEPT THE BAD DEBTS AMOUNTING TO ` 2,51,000/-. 3. SHRI S.DASGUPTA APPEARING ON BEHALF OF THE REVEN UE SUBMITTED THAT THE ASSESSEE HAD SOLD THE LAND AT SY DENHAMS ROAD AND NOT DEPOT STREET AS HAS BEEN CLAIMED BY THE ASSESSEE. THE DR SUBMITTED THAT AGREEMENT OF SALE W HICH HAS BEEN PLACED ON RECORD AT PAGE 4 TO 9 OF THE PAP ER BOOK FILED BY THE ASSESSEE, THE DESCRIPTION OF THE LAND CLEARLY SHOWS THE LOCATION OF THE LAND AT SYDENHAMS ROAD AN D THERE IS NO MENTION OF DEPOT STREET EITHER IN THE AGREEME NT OR IN THE SCHEDULE FORMING PART OF THE SAID AGREEMENT. THE LE ARNED DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGHTLY AD OPTED THE GUIDELINE VALUE AS APPLICABLE TO THE PROPERTY SITUA TED AT SYDENHAMS ROAD I.E. ` 1321/- PER SQ.FT INSTEAD OF DEPOT STREET HAVING VALUE OF ` 584/- PER SQ.FT ONLY. THE CIT(A) HAS ERRED IN COMING TO THE CONCLUSION THAT PROPERTY IN QUESTION IS ON DEPOT STREET AND THEREFORE THE GUIDELINE VALUE O F THE PROPERTY SHOULD BE AT ` 584/- PER SQ.FT AND NOT ` 1321/-. THE D.R. SUBMITTED THAT THE ASSESSING OFFICER IN H IS ASSESSMENT ORDER HAS SPECIFICALLY MENTIONED THAT OP EN SPACE ITA NO.392/MDS/2011 4 RESERVATION CHARGES (HEREINAFTER REFERRED TO AS O SR CHARGES ) ARE SUPPOSED TO BE PAID BY THE BUYER AND NOT THE ASSESSEE. THE LIABILITY TO PAY SUCH CHARGES HAD NOT CRYSTALIZED. THEREFORE, THE ASSESSEE WAS NOT LIABL E TO PAY SAID CHARGES TO M/S. NAVKAR FOUNDATION PVT.LTD.AS REIMBURSEMENT FOR THE COST OF IMPROVEMENT FINALLY T O BE PAID TO CMDA. THE DR REFERRED TO PARA 6 OF THE AGREEMEN T DATED 20.10.2004 AT PAGE 7 OF THE PAPER BOOK. ACCORDING T O WHICH PURCHASER WAS LIABLE TO MAKE ALL SUCH EXPENSES. 4. AS REGARDS BAD DEBTS, THE DR SUBMITTED THAT THE CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE ON ACCOUNT OF BAD DEBTS. HE SUBMITTED THAT THE TRANSACTIONS ON WH ICH THE ASSESSEE HAS CLAIMED BAD DEBT WERE NOT PART OF THE BUSINESS OF THE ASSESSEE, THEREFORE, THE ASSESSEE IS NOT EN TITLED TO CLAIM BAD DEBTS ON THE SAME . 5. ON THE OTHER HAND, MR. PHILIP GEORGE APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE LAND IN Q UESTION IS NOT ON SYDENHAMS ROAD, BUT IS ON THE DEPOT STREET. THE A.R. PLACED ON RECORD SITE PLAN OF THE PROPERTY AT PAGE 19 TO 22 OF THE PAPER BOOK TO SHOW THAT THE PROPERTY IN Q UESTION IS ITA NO.392/MDS/2011 5 ON DEPOT STREET AND NOT SYDENHAMS ROAD. THE A.R. A LSO REFERRED TO SCHEDULE WHICH IS PART OF THE AGREEMENT AT PAGE 8 AND 9 OF THE AGREEMENT GIVING DESCRIPTION/BOUNDARIE S OF THE TWO PROPERTIES IN QUESTION IN SUPPORT OF HIS CONTEN TIONS. THE LEARNED AR SUBMITTED THAT THE REFERENCE TO SYDENHAM S ROAD IS MADE AS THE LOCALITY IS VERY OLD AND FOR THE SAK E OF POSTAL CONVENIENCE. THE A.R. IN ORDER TO COUNTER THE ARGUMENTS OF THE D R WITH REGARD TO OSR CHARGES HAS PLACED ON RECORD A C ERTIFICATE FROM M/S. NAVKAR FOUNDATION PVT.LTD. WHICH IS AT P AGE 23 OF THE PAPER BOOK TO SHOW THAT AN AMOUNT OF ` 14,42,532/- IS PAYMENT TOWARDS ESTIMATED OSR CHARGES PAYABLE TO CM DA, CHENNAI AND THE SAID CHARGES HAD BEEN PAID FOR OBTA INING PLAN APPROVAL AS PER CMDA RULES. THE SAID CHARGES HAVE BEEN REIMBURSED BY THE SELLER I.E. THE ASSESSEE AS PER THE TERMS AND CONDITIONS OF THE AGREEMENT ENTERED INTO BETWEEN THE PARTIES. 6. AS REGARDS THE BAD DEBTS, THE A.R. SUBMITTED TH AT THE ASSESSEE IS A NON-BANKING FINANCIAL COMPANY AND IS ENGAGED IN THE BUSINESS OF INVESTMENT/LENDING. DUR ING THE ITA NO.392/MDS/2011 6 NORMAL COURSE OF BUSINESS, THE ASSESSEE HAD APPLIED FOR SHARES OF GUMMADI INDUSTRIES LTD.IN THE INITIAL PUB LIC OFFER. SUBSEQUENTLY THE SHARES OF THE SAID COMPANY WERE DE LISTED AND ITS NET WORTH WAS ERODED. SIMILARLY FOR OTHER C OMPANY I.E. PAL PEUGEOT VEHICLES THE AMOUNT INVESTED BY THE COM PANY IN ITS DEPOSIT HAS INCURRED LOSS. THEREFORE, THE AMOUN T OF LOSS WAS WRITTEN OFF AS BAD DEBTS AFTER THEY BECAME UNRECOVERABLE. 7. WE HAVE HEARD THE SUBMISSIONS MADE BY BOTH THE PARTIES AND HAVE PERUSED THE ORDERS PASSED BY THE L OWER AUTHORITIES AND THE DOCUMENTS ON RECORD. A PERUSAL OF THE AGREEMENT OF SALE DATED 20 TH OCTOBER, 2004 BETWEEN M/S. RANK INVESTMENTS AND CREDITS (INDIA) LTD. (NOW KNOW N AS M/S. BARCLAYS INVESTMENTS & LOANS (INDIA) LTD.) AND M/S. NAVKAR FOUNDATION PVT. LTD. SHOWS THAT THE ASSESSE E HAD SOLD TWO PIECES OF LAND TO M/S. NAVKAR FOUNDATION P VT. LTD. ONE MEASURING 12 GROUNDS 198 SQ.FT AND ANOTHER ME ASURING 2057 SQ.FT. THE DETAILS OF THE LAND ARE GIVEN AT PA GE 8 & 9 OF THE PAPER BOOK. AS PER SCHEDULE LAND MEASURING 12 G ROUNDS 198 SQ.FT IN PATTA NO.CA. NO.1052/94 COMPRISED IN ITA NO.392/MDS/2011 7 S.NO.1259/2 BEARING OLD DOOR NO.65 REVISED NO.157 A ND 158 NEW NO.239 AND 241, SYDENHAMS ROAD, PERIAMET, CHENN AI. THE SAID PROPERTY IS BOUNDED BY : NORTH - PLEASANT TRADING COMPANY, SOUTH- RAMAMURTHY & OTHERS EAST - SUPER PANEL WEST NATESAN NAGAR. 8. A PERUSAL OF THE ADDRESS AND BOUNDARIES CLEARLY SHOW THAT THERE IS NO REFERENCE OF DEPOT STREET EITHER I N THE POSTAL ADDRESS OR IN BOUNDARIES. WHEREAS THE SITE PLAN PLA CED ON RECORD AT PAGE 19 TO 22 OF THE PAPER BOOK FILED BY THE A.R., THE PROPERTY IS SHOWN TO BE ON DEPOT STREET. HOWEVE R, THE SAID SITE PLAN WAS MADE AS EARLY AS 1948. THEREAFT ER, LOT OF DEVELOPMENT IN THE AREA MUST HAVE BEEN TAKEN PLACE SINCE 1948 AND IT CANNOT BE CLEARLY MADE OUT WHETHER THE PROPERTY AS OF NOW IS SITUATED ON SYDENHAMS ROAD OR DEPOT ST REET. AS REGARDS THE SECOND PROPERTY MEASURING 2057 SQ.FT . IS CONCERNED IT IS IN PATTA NO.363 COMPRISED IN O.S NO .1159, R.S.NO.1255/11, BEARING OLD DOOR NO.66/67, NEW NO.1 60 & ITA NO.392/MDS/2011 8 161, SYDENHAMS ROAD, PERIAMET, CHENNAI, AND IS BOUN DED BY: NORTH : ETHIRAJ TIMBERS SOUTH : SYDENHAMS ROAD (DEPOT STREET ENTRANCE) EAST : SYDENHAMS ROAD WEST: DEPOT STREET ALTHOUGH THE POSTAL ADDRESS OF THE PROPERTY MAKES M ENTION OF SYDENHAMS ROAD , HOWEVER THE BOUNDARIES AS DETAILED IN THE SCHEDULE TO THE AGREEMENT OF SALE MENTIONS THAT ONE SIDE OF THE PROPERTY IS ON THE DEPOT STREET. IN OUR CONSIDERED OPINION, IN ALL FAIRNESS, IT WOULD BE APPROPRIATE IF THIS ISSUE IS REMITTED BACK TO THE ASSESSING OFFICER TO IDENTIFY THE LOCATION OF T HE PROPERTY NO.1. THE ASSESSEE HAS RELIED ON THE SITE MAP WHICH RELATES TO THE YEAR 1948. THE ASSESSING OFFICER IS DIRECTED TO COMPARE THE BOUNDARIES OF THE PROPERTIES AS MENTIONED IN SCHEDU LE TO THE AGREEMENT DATED 20 TH OCTOBER, 2004 BETWEEN THE PARTIES WITH THE LATEST AVAILABLE SITE MAP WITH CMDA TO COME TO A CONCLUSION ABOUT LOCATION OF THE PROPERTY AND THEN APPLY THE G UIDELINE VALUE OF THE RATES APPROVED BY THE APPROPRIATE AUTHORITY. AS REGARDS PROPERTY NO.2 MEASURING 2057 SQ.FT. IS CONCERNED, W E ACCEPT THE ITA NO.392/MDS/2011 9 SUBMISSIONS OF THE ASSESSEE. THIS GROUND OF APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. THE SECOND ISSUE RELATES TO OSR CHARGES. THE D.R . HAS REFERRED TO PARA 6 OF THE AGREEMENT, WHICH IS AT PA GE 7 OF THE PAPER BOOK, ACCORDING TO WHICH, THE PURCHASER SHALL BEAR ALL THE EXPENSES, FEES THAT ARE REQUIRED BY THE COMPETENT A UTHORITY FOR OBTAINING APPROVED PLAN. 10. ON THE OTHER HAND, THE A.R. HAS PLACED ON RECOR D A CERTIFICATE FROM THE VENDEE STATING THAT OSR CHARGE S PAYABLE TO CMDA, CHENNAI HAS BEEN PAID BY THE VENDEE FOR OBTAI NING PLAN APPROVAL AND CONSTRUCTION AS PER CMDA RULES WHICH H AS BEEN REIMBURSED BY THE SELLER I.E. THE ASSESSEE AS PER M UTUAL AGREEMENT BETWEEN THE PARTIES. 11. WE ARE OF THE OPINION THAT ALTHOUGH THE VENDEE HAS CERTIFIED THAT THE EXPENSES HAVE BEEN PAID BY THE A SSESSEE FOR OSR CHARGES, BUT THE LEARNED AR COULD NOT SHOW FROM THE TERMS AND CONDITIONS OF THE AGREEMENT THAT THE ASSE SSEE/VENDOR WAS LIABLE TO PAY SUCH CHARGES OR WAS LIABLE TO REI MBURSE SUCH CHARGES TO THE VENDEE.. ON THE CONTRARY, AS PER PAR A 6 OF THE AGREEMENT BETWEEN THE PARTIES, WHICH IS REPRODUCED HEREIN ITA NO.392/MDS/2011 10 BELOW, EXPENSES, FEES FOR OBTAINING APPROVAL OF PLA N HAS TO BE BORNE BY THE PURCHASER:- 6. THE PURCHASER SHALL BEAR ALL THE EXPENSES, FEE S THAT ARE REQUIRED BY THE COMPETENT AUTHORITY FOR OBTAINI NG APPROVED PLAN. THEREFORE, THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED. 12. THE THIRD ISSUE RELATES TO BAD DEBTS OF ` 2,51,000/-. IT IS AN ADMITTED FACT THAT THE ASSESSEE IS A NON-BANKING FI NANCE COMPANY. AS A PART OF BUSINESS ACTIVITY THE ASSESSE E HAS INVESTED IN VARIOUS COMPANIES BY WAY OF INVESTMENT IN INITIAL PUBLIC OFFER AS WELL AS DEPOSITS ETC. THE CONTENTI ON OF THE DR THAT SUCH TRANSACTIONS ARE NOT CONNECTED WITH THE B USINESS OF THE ASSESSEE IS NOT TENABLE. THE ASSESSEE HAS SUFF ERED LOSS ON ACCOUNT OF INVESTMENTS MADE IN LOSS MAKING COMPANI ES DURING THE COURSE OF BUSINESS AND THE SAME AMOUNT HAS BECO ME UNRECOVERABLE. THE ASSESSEE HAS CLAIMED THE SAME A S BAD DEBTS WRITTEN OFF. THEREFORE, THE ASSESSEE IS ENTIT LED TO THE RELIEF. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. ITA NO.392/MDS/2011 11 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON WEDNESDAY, THE 31 ST DAY OF OCTOBER, 2012 AT CHENNAI. SD/- SD/- (ABRAHAM P.GEORGE ) (VIKAS AWASTHY) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 31 ST OCTOBER, 2012. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G.F.