THE ITO 8(3)-3, Mumbai V. M/S. REGAL COMMERICIAL P. LTD, Mumbai

ITA 4041/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2724 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 06-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 37; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.4041/MUM/2008 - A.Y 2004-05 INCOME TAX OFFICER 8 (3)(3) MUMBAI VS. M/S REGAL COMMERCIAL P. LTD., JAY APARTMENT, SERVICE ROAD, VILE PARLE [EAST] MUMBAI 400 057 PAN NO.AABCR 3246B (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MOHD. USMAN. ASSESSEE BY : SHRI SUNIL NAHTA. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST CIT (A)S ORDER DATED 11-3-2008. 2. THE ONLY GRIEVANCE OF THE REVENUE IN THIS APPEAL IS AGAINST THE ORDER OF THE CIT[A] DELETING THE DISALLOWANCE OF PROVISION FOR BAD DEBTS OF RS.12 LAKHS WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF FINANCE AND INVESTMENT. IT FILED ITS RETURN OF INCOME ON 1-11-2004 DECLARING TOTAL INCOME OF RS.6, 92,190/-. THE RETURN WAS PROCESSED U/S.143[3] OF THE INCOME TAX A CT. SUBSEQUENTLY, IT WAS NOTICED BY THE AO THAT THE EXPENSES DEBITED TO THE PROFIT & LOSS ACCOUNT INCLUDED AN AMOUNT OF RS.12 LAKHS AS PROVIS ION FOR DOUBTFUL DEBTS WHICH ARE NOT ALLOWABLE AS EXPENDITURE U/S.3 6 AND 37 OF THE 2 ACT. THEREFORE, HE REOPENED THE ASSESSMENT BY ISSUA NCE OF NOTICE U/S.148 OF THE ACT AND THE ASSESSEES EXPLANATION W AS CALLED FOR. THE ASSESSEE VIDE LETTER DATED 23-11-2007 SUBMITTED THA T THE AMOUNT OF RS.12 LAKHS WAS A LOAN TO M/S PHOENIX THEATRES WHIC H HAS BEEN WRITTEN OFF AS BAD DEBT. IT WAS SUBMITTED THAT IT H AS BEEN SHOWN AS PROVISION FOR DOUBTFUL DEBTS UNDER THE ADMINISTRATI VE EXPENSES IN THE PROFIT & LOSS ACCOUNT ONLY DUE TO A TYPOGRAPHICAL E RROR. IT WAS FURTHER SUBMITTED THAT THIS AMOUNT DOES NOT APPEAR UNDER LO ANS AND ADVANCES IN THE BALANCE-SHEET AND IT HAS BEEN SPECIFICALLY E XCLUDED AS ON 31-3- 2004 MENTIONING THE NAME OF M/S PHOENIX THEATRES TH EREIN AND, THEREFORE, THE CLAIM OF BAD DEBT U/S.36[1][VII] IS NOT HIT BY THE PROVISIONS OF EXPLANATION TO THAT CLAUSE. AO, HOWEV ER, HELD THAT THE SAID SUM OF RS.12 LAKHS HAS BEEN INCLUDED UNDER THE HEAD ADMINISTRATIVE EXPENSES AS PROVISION FOR DOUBTFUL DEBTS AND THE ASSESSEES CONTENTION THAT THE SAID PROVISION DOES NOT APPEAR IN THE BALANCE-SHEET IS NOT CORRECT AS THE AMOUNT OF RS.12 LAKHS IS REDUCED FROM THE LOANS AND ADVANCES AS PROVISION FOR DOUBTF UL DEBTS AND THEREFORE INSTEAD OF SHOWING THE PROVISION ON THE L IABILITY SIDE, IT HAS BEEN REDUCED FROM THE LOANS AND ADVANCES. 4. AS REGARDS THE ASSESSEES RELIANCE ON THE DECISI ON OF THE TRIBUNAL IN THE CASE OF OMAN INTERNATIONAL BANK, HE HELD THAT THE SAID DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AN D APPEAL U/S.260A HAS BEEN FILED IN THE HIGH COURT. HE HELD THAT IN THE ASSESSEES OWN CASE FOR THE A.Y 2003-04, THE CIT[A] S ORDER ALLOWING 3 SUCH BAD DEBT HAS BEEN APPEALED IN THE ITAT MUMBAI BENCH. HE HAS ALSO HELD THAT THE ASSESSEES CONTENTION THAT IT WA S NOT A PROVISION BUT HAS ACTUALLY BEEN WRITTEN OFF IS ONLY AN AFTER THOU GHT. HE, THEREFORE, MADE ADDITION OF RS.12 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE. AGGRIEVED BY THE SAME, ASSESSEE FILED AN APPEAL BEF ORE THE CIT[A] WHO ALLOWED THE SAME HOLDING THAT THE AO HAS ERRED IN HOLDING THAT THE ASSESSEE SHOULD HAVE SHOWN THE PROVISION ON THE LIABILITY SIDE AND THAT THE AMOUNT HAS BEEN WRITTEN OFF FROM THE LOANS AND ADVANCES, THE EFFECT OF WHICH HAS BEEN THAT IT HAS BEEN REMOVED F ROM BALANCE-SHEET AND IT IS NO LONGER MERELY A PROVISION. HE, THEREFO RE, CONCLUDED THAT THE AMOUNT HAD ACTUALLY BEEN WRITTEN OFF. AGGRIEVED BY THE SAME, THE REVENUE IS IN APPEAL BEFORE US. 5. WHILE THE LD. DR PLACED RELIANCE UPON THE ORDER OF THE AO, THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON T HE ORDER OF THE CIT[A] AND ALSO THE DECISION OF THE TRIBUNAL IN TH E ASSESSEES OWN CASE FOR A.Y 03-04 WHEREIN THE ORDER OF THE CIT[A] HAS BEEN UPHELD. HE HAS ALSO FILED COPY OF THE WRITTEN SUBMISSIONS F ILED BEFORE THE CIT[A] AND OTHER RELEVANT DOCUMENTS IN THE FORM OF THE PAPER BOOK AND THE SAME ARE TAKEN ON RECORD. 6. AFTER HEARING BOTH THE PARTIES AND AFTER CONSIDE RING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ASSESSEES BUS INESS IS OF FINANCE AND INVESTMENT. AN AMOUNT OF RS.12 LAKHS HAS BEEN L ENT TO M/S PHOENIX THEATRES VIDE CHEQUE NO.491794 DATED 20-10- 2004 DRAWN ON CANARA BANK WITH INTEREST @ 18% P.A. FOR THE PRODUC TION OF THE FILM 4 DURGAASHTHAMI. THIS IS REFLECTED IN THE SCHEDULE FORMING PART OF THE ACCOUNTS AS ON 31-3-2003 AT PAGE 23 OF THE PAPER BO OK FILED BY THE ASSESSEE. FURTHER, FROM SCHEDULE 5 FORMING PART OF THE ACCOUNTS FOR A.Y 03-04 IT IS SEEN THAT THE LOAN HAS BEEN WRITTEN OFF THOUGH IT IS MENTIONED AS NET PROVISION MADE. IN VIEW OF THE SAM E, IT IS CLEAR THAT IT IS NOT MERELY A PROVISION BUT IS ACTUALLY A LOAN ADVANCED TO M/S PHOENIX THEATRES WHICH HAS SUBSEQUENTLY BEEN WRITTE N OFF. THE ASSESSEE HAS ALSO STATED IN HIS WRITTEN SUBMISSIONS THAT ONLY AN AMOUNT OF RS.3 LAKHS COULD BE RECOVERED FROM THE LO ANEE AND EFFORTS HAVE BEEN MADE BY THE ASSESSEE TO RECOVER THE BALAN CE AMOUNT BUT IN VAIN. THEREFORE CONSEQUENT TO THE BOARDS RESOLUTIO N DATED 23-2-2004, THE LOAN HAD BEEN WRITTEN OFF. IN VIEW OF THE SAME, WE FIND THAT IT HAS BEEN THE LOAN WHICH HAS BEEN WRITTEN OFF AS A BAD D EBT AND IT IS NOT A PROVISION WHICH HAS BEEN WRITTEN OFF. IN VIEW OF TH E SAME, WE UPHOLD THE FINDINGS OF THE CIT[A] AND SEE NO REASON TO IN TERFERE WITH THE SAME. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 10 TH DAY OF DECEMBER, 2009. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI: 10 TH DECEMBER, 2009. P/-* 5 COPY TO- 1) APPELLANT 2) RESPONDENT 3) CITA MUMBAI. 4) CIT CITY MUMBAI 5) DR BENCH MUMBAI TRUE COPY BY ORDER DY /ASST.REGISTRAR,ITAT MUMBAI. SR.NO. PARTICULARS DATE INITIALS 1 DRAFT DICTATED ON 4-12-09 P 2 DRAFT PLACED BEFORE AUTHOR 7-12-09 P 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR.PS/PS 6 ORDER KEPT FOR PRONOUNCEMENT 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER