M/s. Disti Chemi Metal Works, Bilimora V. The Dy.CIT.,Navsari Circle, Navsari

ITA 4132/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5973 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 25-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 26-12-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H P MEENA
• Assessee Lawyers: R N VEPARI
• Keywords: Bad and doubtful debts
• Section: 234B

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AT SURAT CAMP BEFORE S/SHRIT T.K.SHARMA, JM AND D.C.AGRAWAL, AM M/S DISTI CHEMI METAL WORKS, SADANAND MILLS COMPOUND, GANDEVI ROAD, BILIMORA-396321 VS . DY. CIT, NAVSARI CIRCLE, NAVSARI. (APPELLANT) .. (RESPONDENT) APPELLANTS BY :- SHRI R. N. VEPARI, AR RESPONDENT BY:- SHRI H. P. MEENA, SR.DR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- I. DISALLOWANCE OF BAD DEBT RS.14,89,440/- (1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE GRANTED DEDUCTION OF RS.14,89,440/- O N ACCOUNT OF BAD DEBT. (2) THE APPELLANT SUBMITS THAT THE LD. CIT(A) WAS NOT J USTIFIED IN DISALLOWING THE CLAIM ON THE ONLY GROUND THAT THE A PPELLANT HAD NOT CLAIMED BEFORE THE AO THAT DEDUCTION SHOULD BE GRANTED AS DISCOUNT. (3) THE APPELLANT SUBMITS THAT WHEN THE ENTIRE FACTS AN D EVIDENCE WERE BROUGHT BEFORE THE LD. CIT(A), THE FACTUAL ASP ECTS OUGHT TO HAVE BEEN CONSIDERED AND DECISION TAKEN. ITA NO.4132/AHD/2008 ASST. YEAR:2005-06 2 II. DISALLOWANCE OUT OF EXPENSES : (A) THE LD. CIT(A) ERRED IN RETAINING DISALLOWAN CE OF 10% OUT OF CAR EXPENSES WHEN THE ENTIRE EXPENDITURE WAS INCURR ED FOR THE PURPOSE OF THE BUSINESS. (B) THE LD. CIT(A) ERRED IN RETAINING DISALLOWANCE OF 5 % OUT OF POSTAGE, TELEGRAM AND TRAVELING WHEN THE ENTIRE EXP ENDITURE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS. (C) THE LD. CIT(A) ERRED IN RETAINING DISALLOWANCE OF 5 % OUT OF STATIONERY AND PRINTING WHEN THE ENTIRE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF THE BUSINESS. III. MISCELLANEOUS : (1) THE LD. CIT(A) OUGHT TO HAVE DELETED INTEREST CHARG ED U/S 234B OF THE ACT. (2) THE LD. CIT(A) OUGHT TO HAVE DELETED INTEREST CHARG ED U/S 234C OF THE ACT. (3) THE LD. CIT(A) OUGHT TO HAVE DELETED INTEREST CHARG ED U/S 234D OF THE ACT. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS ENGA GED IN MANUFACTURING AND SUPPLYING OF DISTILLERY AND CHEMICAL PLANT EQUI PMENTS AND SPARE PARTS. THE FIRST ISSUE RELATES TO DISALLOWANCE OF B AD DEBT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THA T ASSESSEE HAS CLAIMED BAD DEBTS AS UNDER :- SL.NO. NAME OF THE DEBTORS BILL AMOUNT (RS.) PAYMENT RECEIVED (RS.) BAD DEBTS (RS.) 1. BHARAT DISTILLERS LTD. 9172259 9162214 10045 2 STERLING CHEMICAL & ALCHOHOL (P) LTD. 8085730 7808715 277021 3 SHREE INDRA DISTILLIY (P) LTD. 3868484 3849150 19334 3 4 VAIBHAV LIQUOR (P) LTD. 6032000 6000000 32000 5 SANTOSH SAHAKARI SAKHAR KARKHANA LTD. 5851040 470000 1151040 TOTAL 1489440 THE AO REQUIRED THE ASSESSEE TO PRODUCE PROOF OF EF FORTS MADE FOR RECOVERY OF SAID DEBT. THE ASSESSEE EXPLAINED THAT ASSESSEE HAS WRITTEN OFF ABOVE SUM DUE FROM 5 DEBTORS WHO HAD PLACED ORDERS FOR MANUFACTURING AND SUPPLY OF DISTILLERY PLANTS AND EQUIPMENTS. DUE TO CHANGE IN POLICY OF THE GOVERNMENT ETHANOL WAS NO LONGER TREATED AS SUB STITUTE FOR THE FUEL AND, THEREFORE, THE PARTIES TO WHOM PLANTS WERE SUP PLIED DID NOT FULFILL THEIR COMMITMENTS AND, THEREFORE, PART OF THE AMOUN TS DUE FROM THEM AGAINST SUPPLY OF EQUIPMENTS BECAME IRRECOVERABLE A ND ASSESSEE HAD TO WRITE THEM OFF. THE AO, HOWEVER, DID NOT AGREE ON T HE GROUND THAT ASSESSEE DID NOT MAKE ANY EFFORT FOR RECOVERY OF TH E SAME. HE SIMPLY PRESUMED THE OUTSTANDING AMOUNT AS IRRECOVERABLE AN D WROTE OFF. THE AO ACCORDINGLY MADE THE ADDITION. BEFORE LD. CIT(A) TH E ASSESSEE CHANGED THE STAND AND REQUESTED FOR TREATING THIS AMOUNT AS DISCOUNT WHICH WERE DISALLOWED BY LD. CIT(A). 3. BEFORE US, THE LD. AR SUBMITTED THAT AMOUNTS WER E FOUND IRRECOVERABLE AND WERE WRITTEN OFF IN THE BOOKS. TH E ISSUE IS NOW COVERED BY THE DECISION OF HON. SUPREME COURT IN THE CASE O F TRF LTD. VS. CIT (2010) 35 DTR (SC) 156 WHEREIN IT IS HELD THAT IF A MOUNT IS WRITTEN OFF IN THE BOOKS THEN THE CLAIM SHOULD BE ALLOWED UNDER SE CTION 36(1)(VII). 4. THE LD. DR ON THE OTHER HAND, RELIED ON THE ORDE RS OF AUTHORITIES BELOW. 4 5. SINCE NOW THE ISSUE IS SETTLED AS A RESULT OF DE CISION OF HON. APEX COURT IN TRF LTD. VS. CIT (SUPRA) AND SINCE THE AMO UNT HAS BEEN WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNT AND THE Y PERTAINED TO SALES MADE BY THE ASSESSEE TO THOSE PARTIES AND HENCE HAV E BEEN TAKEN INTO ACCOUNT WHILE COMPUTING THE PROFITS OF THE ASSESSEE COMPANY IN THE EARLIER YEARS, ALL THE CONDITIONS LAID DOWN U/S 36( 1)(VII) READ WITH SECTION 36(2) ARE SATISFIED. THUS THIS GROUND OF ASSESSEE I S ALLOWED. 6. THE SECOND ISSUE RELATES TO DISALLOWANCE OF EXPE NSES. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE OF 10% OUT OF CAR EXPENSES, DISALLOWANCE OF 5% OUT OF POSTAGE, TELEGRAM AND TRA VELING AND DISALLOWANCE OF 5% OUT OF STATIONERY AND PRINTING E XPENSES. THE AO HAD DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT ALL THE EXPENSES ARE NOT VERIFIABLE AND WHETHER THEY WERE INCURRED F OR THE PURPOSES OF BUSINESS OR NOT. ASSESSEE FAILED TO PRODUCE VOUCHER S FOR SEVERAL AMOUNTS AND SEVERAL VOUCHERS DID NOT CONTAIN THE NAMES OF T HE PAYEES ETC. THE AO HAD DISALLOWED UNIFORMLY @ 10% AND LD. CIT(A) REDUC ED THE DISALLOWANCES TO 5% ON TRAVELING EXPENSES, POSTAL A ND TELEGRAM EXPENSES AND STATIONERY EXPENDITURE. 7. CONSIDERING THE FACTS AND CIRCUMSTANCES AND AFTE R HEARING THE PARTIES WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). THIS GROUND IS REJECTED. 8. GROUND NO.III RELATES TO CHARGING OF INTEREST UN DER SECTIONS 234A, 234B & 234C. IN OUR CONSIDERED VIEW THESE INTERESTS ARE CONSEQUENTIAL IN NATURE AND WILL DEPEND UPON THE FINALLY ASSESSED IN COME. NO SPECIFIC ADJUDICATION IS REQUIRED. THIS GROUND IS ACCORDINGL Y REJECTED. 5 9. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 11/6/2010 SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 11/6/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD