ACIT, Kottayam V. M/s Central Advertising Agency, Kottayam

ITA 431/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64786 (ITAT-COCHIN)
• Duration Of Justice: 2 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 05-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 08-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SAJEEV
• Assessee Lawyers: A GOPALAKRISHNAN

Judgement Text

1 ITA NO.431/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 431/COCH/2010 (ASSESSMENT YEAR 2007-08) THE A.C.I.T., CIR.1 VS M/S CENTRAL ADVERTISING AGENCY KOTTAYAM ANAND THEATRE BUILDINGS THEATRE ROAD, KOTTAYAM PAN : AACFC8687K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P SAJEEV RESPONDENT BY : SHRI A GOPALAKRISHNAN DATE OF HEARING : 05-09-2012 DATE OF PRONOUNCEMENT : 14-09-2012 O R D E R PER N.R.S. GANESAN (JM) BEING AGGRIEVED BY THE ORDER OF COMMISSIONER OF IN COME-TAX(A)-I, KOCHI DATED 21-04-2010 THE TAXPAYER HAS FILED THE PRESENT A PPEAL BEFORE THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2007-08. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF RS. 12,31,000 AS BAD DEBT. 3. SHRI P SAJEEV, THE LD.DR SUBMITTED THAT THE TAXP AYER CLAIMED RS. 62,95,130 BEING THE IRRECOVERABLE ADVANCES AS BAD DEBT. THE ASSESSING OFFICER FOUND THAT TO 2 ITA NO.431/COCH/2010 THE EXTENT OF RS.12,31,000 THE TAXPAYER IS PURSUING THE RECOVERY BY WAY OF CIVIL SUIT BEFORE THE COMPETENT COURT. THEREFORE, TO THE EXTENT OF RS.12,31,000 THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE TAXPA YER. ACCORDING TO THE LD.DR SINCE THE TAXPAYER HAS FILED THE CIVIL SUIT AND TAKI NG LEGAL STEPS FOR RECOVERY, IT CANNOT BE REGARDED AS BAD DEBT. 4. ON THE CONTRARY, SHRI A GOPALAKRISHNAN, THE LD.REP RESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THE ADVANCE WAS MADE AT THE TIME OF PRODUCTION FOR PURCHASE OF TELECAST RIGHT IN THE FUTURE. FOR SOME REASONS, THE CONCERNED PRODUCER COULD NOT COMPLETE THE CINEMA AND THEREFOR E THE TAXPAYER COULD NOT GET THE TELECASTING RIGHT. HENCE, THE ADVANCE MADE BY THE TAXPAYER FOR PURCHASE OF THE TELECASTING RIGHT BECAME BAD. ON A QUERY FR OM THE BENCH WHETHER THE ADVANCE WAS MADE FOR THE PURPOSE OF PURCHASING ENTI RE FEATURE FILM OR IT IS ONLY A PURCHASE OF TELECASTING RIGHT, THE LD.REPRESENTATIV E CLARIFIED THAT THE ADVANCE WAS MADE ONLY FOR THE PURPOSE OF ACQUIRING TELECASTING RIGHT. HOWEVER, THE COPY OF THE AGREEMENT WAS NOT PRODUCED BEFORE THIS TRIBUNAL . THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT OUT OF RS.62,95,130 THE ASSE SSING OFFICER DISALLOWED ONLY RS.12,31,000 BECAUSE THE TAXPAYER HAS ALREADY FILED SUIT FOR RECOVERY OF RS.12,31,000. IN FACT, THE ASSESSING OFFICER HIMSE LF ALLOWED RS.50 LAKHS IN RESPECT OF WHICH NO CIVIL SUIT WAS FILED. ACCORDING TO THE LD.REPRESENTATIVE, MERE FILING OF CIVIL SUIT CANNOT BE A REASON FOR DISALLOWING THE C LAIM OF THE TAXPAYER. WHAT IS REQUIRED UNDER THE ACT IS THAT THE DEBT SHOULD BE W RITTEN OFF IN THE BOOKS OF ACCOUNT. ACCORDING TO THE LD.REPRESENTATIVE, SUBSE QUENTLY THE TAXPAYER HAS RECOVERED RS.7 LAKHS WHICH WAS OFFERED FOR TAXATION IN THE YEAR IN WHICH IT WAS RECEIVED. THEREFORE, THE DISALLOWANCE OF RS.12,31, 000 IS NOT JUSTIFIED AT ALL. 3 ITA NO.431/COCH/2010 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE TAXPAYER HAS ADVANCED FUNDS FOR ACQUIRING TELECASTING RIGHT IN THE FEATURE FILM PRO DUCED BY THE RESPECTIVE PRODUCER. THE ASSESSING OFFICER HAS DISALLOWED RS. 12,31,000 OUT OF RS.62,95,130 CLAIMED BY THE TAXPAYER AS BAD DEBT. IN FACT, THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE TAXPAYER TO THE EXTENT OF RS.50 LAKHS. THE ONLY REASON FOR DISALLOWANCE OF THE CLAIM OF THE TAXPAYER TO THE EX TENT OF RS.12,31,000 IS THAT THE TAXPAYER HAS ALREADY FILED CIVIL SUIT FOR THE RECOV ERY OF THE AMOUNT. SECTION 36(1)(VI) CLEARLY SAYS THAT WHEN THE AMOUNT IS WRIT TEN OFF IN THE BOOKS OF ACCOUNT AS IRRECOVERABLE AND SUBJECT TO CONDITIONS PROVIDED IN SUB SECTION (2) OF SECTION 36, THE CLAIM HAS TO BE ALLOWED. THEREFORE, MERELY BECAUSE THE TAXPAYER WAS TAKING STEPS TO RECOVER THE AMOUNT IT CANNOT BE A RE ASON TO DISALLOW ANY PART OF THE CLAIM. IT IS NOT IN DISPUTE THAT THE TAXPAYER HAS ALREADY WRITTEN OFF THE IRRECOVERABLE AMOUNT IN THE BOOKS OF ACCOUNT. SINC E THE REVENUE IS NOT DISPUTING THE NATURE OF THE DEBT WRITTEN OFF AND THE AMOUNT W AS DISALLOWED ONLY BECAUSE OF THE TAXPAYER FILED CIVIL SUIT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT MERE PENDENCY OF THE CIVIL SUIT CANNOT BE A REASON TO DI SALLOW ANY PART OF THE CLAIM OF THE TAXPAYER. THEREFORE, WE FIND NO INFIRMITY IN T HE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 6. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 14 TH SEPTEMBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 14 TH SEPTEMBER, 2012 PK/- 4 ITA NO.431/COCH/2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH