Indo Nabin Projects Ltd., Kolkata V. DCIT, CIR-10, KOLKATA, Kolkata

ITA 424/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1539 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 11-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ALONG YADEN
• Assessee Lawyers: S R BHATTACHARYA
• Keywords: Bad and doubtful debts
• Section: 37(1)

Judgement Text

1 ITA NO.424/KOL/2016 INDO NABIN PROJECTS LTD., AY 2012-13 , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE . . , /AND . . , ) [BEFORE SHRI P. M. JAGTAP, AM & SHRI A. T. VARKEY, JM] I.T.A. NO. 424/KOL/2016 ASSESSMENT YEAR: 2012-13 INDO NABIN PROJECTS LTD. (PAN: AAACI6515M) VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-10, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 18.05.2017 DATE OF PRONOUNCEMENT 14.07.2017 FOR THE APPELLANT SHRI S. R. BHATTACHARYA, AR FOR THE RESPONDENT SHRI SALONG YADEN, ADDL. CIT ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE IS AGAI NST THE ORDER OF LD. CIT(A)-4, KOLKATA DATED 22.02.2016 FOR AY 2012-13. 2. THE FIRST GROUND OF APPEAL OF ASSESSEE IS AGAINS T THE DISALLOWANCE OF 50% OF RS.9,48,144/- WHICH WAS CLAIMED BY THE ASSESSEE TOW ARDS GENERAL EXPENSES. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PUBLIC LIMITED COMPANY WHICH IS ENGAGED IN VARIOUS ELECTRICAL AND CIVIL CONTRACTUAL JOBS AWARDED BY VA RIOUS STATE AND CENTRAL GOVERNMENT UNDERTAKINGS. THE MAJOR TURNOVER DURING THE YEAR W AS ON RURAL ELECTRIFICATION JOBS CARRIED OUT IN THE STATES OF ASSAM, TRIPURA, ARUNACHAL PRAD ESH AND OTHER NORTH EASTERN STATES. THE ASSESSEE MADE A CLAIM OF TOTAL GENERAL EXPENSES OF RS.18,19,763.59 AND FURNISHED THE PARTY- WISE BREAK-UP OF THE SAME. ACCORDING TO THE AO, RS .9,48,144.28 WAS PAID BY CASH TO 27 INDIVIDUALS WHO WERE SUPPOSED TO BE THE EMPLOYEES O F THE ASSESSEE. HE NOTED THAT THE ASSESSEE FAILED TO PRODUCE PROPER VOUCHERS WITH REF ERENCE TO THE CLAIM OF THESE EXPENDITURES OF THE SAID AMOUNT. HE FOUND FAULT WITH THE SELF M ADE VOUCHERS AND ACCORDING TO HIM, IT WAS 2 ITA NO.424/KOL/2016 INDO NABIN PROJECTS LTD., AY 2012-13 WITHOUT ANY NARRATION AS TO FOR WHAT PURPOSE EXPENS ES WAS INCURRED. THEREFORE, HE DISALLOWED AN AMOUNT OF RS.9,48,144/- OUT OF THE TO TAL GENERAL EXPENSES OF R.18,19,763/-. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) WHO WAS PLEASED TO RESTRICT THE DISALLOWANCE @ 50% OF THE AMOUNT, SO H E DISALLOWED RS.4,74,072/- THUS GIVING PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AF ORESAID DECISION OF LD. CIT(A) THE ASSESSEE IS BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE ASSESSEE IS A PUBLIC LIMITE D COMPANY WHICH IS ENGAGED IN VARIOUS ELECTRICAL AND CIVIL CONTRACTUAL JOBS AWARDED BY VA RIOUS STATE AND CENTRAL GOVERNMENT UNDERTAKINGS AND HAS CARRIED OUT RURAL ELECTRIFICAT ION JOBS IN THE NORTH EASTERN STATES. IN THE RELEVANT ASSESSMENT YEAR THE ASSESSEE CLAIMED GENER AL EXPENSES TO THE TUNE OF RS.18,19,763/-. HOWEVER, THE AO DISALLOWED RS.9,48 ,144/- ON THE GROUND THAT THE EXPENSES ARE SUPPORTED ONLY BY SELF MADE VOUCHERS WITHOUT AN Y NARRATION EXCEPT MENTIONING THE NAME OF THE STAFF WHO HAVE INCURRED THE EXPENSES. ON AP PEAL, THE LD. CIT(A) TAKING INTO CONSIDERATION THE FACT THAT THE GENERAL EXPENSES HA VE BEEN INCURRED BY THE ASSESSEE AT VARIOUS SITES AND CONSIDERING THE URGENCY FROM TIME TO TIME THE SAID EXPENDITURE WERE INCURRED AND THE SAME ARE SUPPORTED BY SELF MADE VO UCHERS IN THE NAME OF THE STAFF. THE LD. CIT(A) RESTRICTED THE DISALLOWANCE TO 50% AND S USTAINED THE ADDITION OF RS.4,74,072/- ON THE REASON THAT THE POSSIBILITY OF EXPENSES BEIN G INCURRED FOR NON-BUSINESS PURPOSES COULD NOT BE RULED OUT. ON THE SAID PLEA THE LD. C IT(A) GAVE ONLY 50% RELIEF TO THE ASSESSEE. WE NOTE THAT DURING THE FY 2011-12 RELEV ANT TO AY 2012-13, THE GROSS RECEIPT WAS RS.119,92,41,656/- AND THE MISCELLANEOUS EXPENS ES WAS AT RS.2,47,02,641/- WHICH WAS ONLY 2.06% OF THE TOTAL GROSS RECEIPT AND OUT OF TH AT ONLY RS.18,19,763/- WAS ON ACCOUNT OF GENERAL EXPENSES WHICH IS ONLY 7.36% AND MISCELLANE OUS EXPENSES OF 0.015% OF TOTAL GROSS RECEIPT. OUT OF THAT THE AO HAS DISALLOWED RS.9,48 ,144/- U/S. 37(1) OF THE ACT WHICH IS 52.01% OF THE GENERAL EXPENSES. THE ASSESSEE HAS TO EXECUTE PROJECT OF RURAL ELECTRIFICATION JOBS IN THE NORTH EASTERN STATES AND FOR THE SMOOTH EXECUTION OF ITS PROJECTS AT TIMES CERTAIN URGENT NECESSITY ARISES FOR WHICH DISBURSEMENT OF E XPENSES ARE REQUIRED AND DUE TO THE EXIGENCY AND FOR VARIOUS FACTORS FOR THE SMOOTH EXE CUTION OF THE PROJECT IN FAR FLUNG REMOTE 3 ITA NO.424/KOL/2016 INDO NABIN PROJECTS LTD., AY 2012-13 AREAS OF NORTH-EAST, THE ASSESSEE DISBURSED THE AD VANCED AMOUNTS THROUGH SUPERVISORS AT VARIOUS SITES, WHO SPENT THE AMOUNT AND THE SAME A RE SUPPORTED BY SELF MADE VOUCHERS ONLY BECAUSE THE THIRD PARTY WILL NOT BE IN A POSITION T O GIVE BILLS FOR INCURRING EXPENSES. THE LD. AR BROUGHT TO OUR NOTICE THAT THOUGH THERE WERE SOM E SELF MADE VOUCHERS, HOWEVER, NARRATIONS IN RESPECT TO THE EXPENSES WERE IN FACT WRITTEN LIKE SHIFTING OF MATERIAL, PURCHASE OF STATIONERY ITEMS AT SITE OFFICE, CLEANING CHARGE S, COURT FEES, FOOD CHARGES, TEA AND TIFFIN AT SITE ETC. HAVE BEEN WRITTEN. THE GENERAL EXPENSES ARE AN ALLOWABLE EXPENDITURE U/S. 37(1) OF THE ACT IF IT IS NOT IN THE NATURE OF CAPITAL OR PE RSONAL EXPENSES AND NOT FOR THE PURPOSES WHICH IS AN OFFENCE OR PROHIBITED BY LAW. IN THIS C ASE, THE NATURE OF THE WORK EXECUTED BY THE ASSESSEE AND THAT TOO AT REMOTE AREAS OF NORTH-EAST ERN STATES WHEREIN THE ASSESSEE IS ENGAGED IN THE RURAL ELECTRIFICATION JOBS AND AS GR OSS RECEIPT OF MORE THAN RS.119 CR. THE MISCELLANEOUS EXPENSES CLAIMED OF RS.18,19,763/- WH ICH COMES TO ONLY 0.015% OF THE TOTAL GROSS RECEIPT AND THE NATURE OF THE WORK EXECUTED B Y THE ASSESSEE IS SUCH THAT PROPER BILLS CANNOT BE EXPECTED TO BE THERE FOR CLAIMING THE EXP ENSES. IT IS A FACT THAT THESE EXPENSES WERE CLAIMED ON SELF MADE VOUCHERS AND RECIPIENT PA RTY FORCED TO MAKE PAYMENT IN CASH. THE NATURE OF EXPENSES ARE SUCH THAT THIRD PARTY EV IDENCE CANNOT BE COLLECTED BY THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE LD. CIT(A) THAT CERTAIN EXPENSES FOR PERSONAL PURPOSES COULD HAVE BEEN INCURRED BY THE ASSESSEE, WHICH REASONING OF THE LD. CIT(A) IS BASED ON SURMISES AND CONJECTURES AND SO IT CANNOT BE SUSTAINED, SO, WE ARE INCLINED TO ALLOW THIS GROUND OF APPEAL OF ASSESSEE. 4. GROUND NO. 2 IS AGAINST THE ACTION OF THE LD. C IT(A) IN SUSTAINING THE DISALLOWANCE OF RS.1,98,922/- ON ACCOUNT OF BAD DEBTS. 5. THE BRIEF FACTS OF THE CASE IS THAT THE AO NOTED THAT THE ASSESSEE HAS CLAIMED BAD DEBT OF RS.30,50,881/- IN RESPECT OF PARTY KNOWN AS AREA VA T&D OUT OF TOTAL BAD DEBTS CLAIMED FOR RS.50,15,083/-. THE AO NOTED THAT THE ASSESSEE HAS BEEN ALLOWED CREDIT OF RS.1,98,992/- DEDUCTED BY THE SAID PARTY IN THE NATURE OF TDS FRO M THE BILL. ACCORDING TO AO, THE ASSESSEE WHILE COMPUTING THE BAD DEBT IN RESPECT OF THE SAID PARTY HAS INCLUDED THE SAID TDS AMOUNT ALSO AND DEBITED IN THE P&L ACCOUNT UNDER TH E HEAD BAD DEBT. THEREFORE, HE DISALLOWED RS.1,98,992/- OUT OF THE TOTAL BAD DEBT CLAIMED BY THE ASSESSEE. AGGRIEVED, THE 4 ITA NO.424/KOL/2016 INDO NABIN PROJECTS LTD., AY 2012-13 ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE AO. AGGRIEVED, THE ASSESSEE IS BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT THE FOLLOWING FIGURES WERE BROUG HT TO THE KNOWLEDGE OF THE AO: IN RS. 1) TOTAL BILL RAISED DURING 2006-07 TO 2008-09 554 35067.27 2) A) LESS, PAYMENT RECEIVED 26564815.29 B) LESS, ADVANCE RECEIVED 12467480.39 C) LESS, TDS 874269.87 D) LESS, WCT 517106.01 E) LESS, MISC. RECOVERY 3171655.18 F) LESS, BAD DEBT DECLARED DURING 2009-10 87 88859 TOTAL OF (2) 52384185.92 BALANCE AS ON 2011-12 (1-2) (AMOUNT DECLARED AS BAD DEBT DURING 2011-12) 3050881.35 THE LD. AR DREW OUR ATTENTION TO THE SUBMISSIONS MA DE BY THE ASSESSEE BEFORE THE LD. CIT(A) WHICH IS REPRODUCED AT PAGE 9 OF THE IMPUGNE D ORDER FROM WHERE THE ASSESSEE HAS BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE TO TAL INVOICE RAISED AGAINST M/S. AREAVA T&D FROM 2006-07 TO 2008-09 WAS TO THE TUNE OF RS.5 ,54,34,067/- AND OUT OF THOSE M/S. AREAVA T&D HAS PAID A SUM OF RS.2,65,64,815/- AFTER DEDUCTING A SUM OF RS.8,74,269/- AS TDS. IT WAS BROUGHT TO OUR NOTICE THAT DURING THE YEAR 2009-10 A SUM OF RS.87,88,859/- AND IN THE YEAR 2011-12 A SUM OF RS.30,50,881/- WERE DE CLARED AS BAD DEBTS. IT WAS SUBMITTED THAT A SUM OF RS.8,74,269.87 AS TDS DURING THE YEAR S (2006-07, RS.1,30,777/-, 2007-08 RS.5,44,500.87 AND 2009-10 RS.1,98,992.00) WAS CLAI MED BY THE ASSESSEE. THE LD. AR SUBMITTED THAT IT WAS BROUGHT TO THE NOTICE OF THE AUTHORITIES BELOW THAT THE TDS AMOUNTS WERE DULY CONSIDERED WHILE CALCULATING THE BALANCE OUTSTANDING OF M/S. AREAVA T&D AND HAVE DISALLOWED A SUM OF RS.1,98,922/- OUT OF THE B AD DEBT CLAIMED BY THE ASSESSEE. THE LD. AR DREW OUT ATTENTION TO THE COMPUTATION WHICH IS R EPRODUCED BY THE LD. CIT(A) AT PAGE 9 OF THE ORDER WHICH IS REPRODUCED AS UNDER: IN RS. 1) TOTAL BILL RAISED DURING 2006-07 TO 2008-09 554 35067.27 2) A) LESS, PAYMENT RECEIVED 26564815.29 B) LESS, ADVANCE RECEIVED 12467480.39 C) LESS, TDS 874269.87 D) LESS, WCT 517106.01 E) LESS, MISC. RECOVERY 3171655.18 5 ITA NO.424/KOL/2016 INDO NABIN PROJECTS LTD., AY 2012-13 F) LESS, BAD DEBT DECLARED DURING 2009-10 87 88859 TOTAL OF (2) 52384185.92 BALANCE AS ON 2011-12 (1-2) (AMOUNT DECLARED AS BAD DEBT DURING 2011-12) 3050881.35 WE NOTE THAT THE AMOUNT OF RS.8,74,269.87 WHICH WAS REDUCED INCLUDES THE AMOUNT OF RS.1,98,922/- SO THE ASSESSEE HAS DULY MADE THE ADJ USTMENT AND THERE WAS NO NECESSITY FOR THE DISALLOWANCE OF RS.1,98,922/- AND, THEREFORE, W E ARE INCLINED TO ALLOW THIS GROUND OF APPEAL OF ASSESSEE. 7. WITH REGARD TO GROUND NO. 3 IN RESPECT OF GRANTI NG TDS CREDIT TO THE TUNE OF RS.29,81,341/-, WE FIND THAT THE LD. CIT(A) HAS DIR ECTED THE AO TO GRANT THE CREDIT AS PER THE STANDARD PROCEDURE BY PLACING RELIANCE ON CBDT INSTRUCTION NO. 5/2013 DATED 08.07.2013. WE FIND THAT THE ASSESSEE HAS TO BE GI VEN CREDIT FOR TDS IF THE AO IS SATISFIED THAT INCOME RELATABLE THERETO HAS BEEN DULY OFFERED TO TAX IN THE YEAR UNDER APPEAL IN CONSONANCE WITH THE PROVISIONS OF THE ACT. HENCE, THE AO IS DIRECTED TO GIVE CREDIT FOR TDS DEPENDING UPON THE OFFERING OF INCOME BY THE ASSESS EE IN THE YEAR UNDER APPEAL. ACCORDINGLY, THIS GROUND OF APPEAL OF ASSESSEE IS A LLOWED. 8. IN THE RESULT, APPEAL OF ASSESSEE ARE ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 14.07.2017 SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14TH JULY, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT INDO NABIN PROJECTS LTD., 1582, RAJDANG A MAIN ROAD, SOUTHEND CONCLAVE, 7 TH FLOOR, KOL-700 107 2 RESPONDENT DCIT, CIRCLE-10, KOLKATA 3 . THE CIT(A)-21, MUMBAI 4. 5. CIT(A) ,KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY