The DCIT, Baroda Circle-1, V. Alembic Ltd.,

ITA 4313/AHD/2003

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8616 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-08-2007
• Assessment Year: 1999-2000
• Appeal Filed On: 05-12-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C PANDIT
• Assessee Lawyers: S N SOPARKAR
• Keywords: Bad and doubtful debts; Set aside
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.4313/AHD/2003 ASSESSMENT YEAR: 1999-00 DATE OF HEARING:12.3.10 DRAFTED:12.3.10 DCIT, BARODA, CIRCLE-1, BARODA V/S . ALEMBIC LTD. ALEMBIC ROAD, BARODA PAN NO.AAABCA7950P (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.C. PANDIT, DR RESPONDENT BY:- SHRI S.N.SOPARKAR, AR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF THE O RDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-I, BARODA IN APPEAL NO. CAB/I- 0097/2002-2003 DATED 12-09- 2002. THE ASSESSMENT WAS FRAMED BY THE DCIT CIRCLE- 1, BARODA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 28-03- 2002 FOR ASSESSMENT YEAR 1999-00. 2. AS THIS IS A RECALL MATTER AND THE ONLY ISSUE RE MAINED TO BE DECIDED WAS AS REGARDS TO THE ISSUE RAISED BY THE REVENUE BY GROUND NO.1 (III) AS UNDER:- (III) IN DELETING THE ADDITION MADE OF RS.2,27,57,7 54/- BEING DOUBTFUL DEBTS WHILE COMPUTING THE BOOK PROFIT U/S.115JA OF THE AC T. 3. THE MAIN CONTENTION OF THE REVENUE WAS THAT, THE ASSESSING OFFICER FOUND THAT THE PROVISION FOR DOUBTFUL DEBTS WAS NOT THE A SCERTAINED QUANTUM AS ENVISAGED U/S.115JA. THEREFORE, THE ASSESSEE DID NOT ACTUALLY WRITE OFF THESE DEBTS IN ITS BOOKS ITA NO.4313/AHD/2003 A.Y. 1999-00 ALEMBIC LTD. V. DCIT CIR-I BD R PAGE 2 OF ACCOUNT. THEREFORE, IT WAS IN THE NATURE OF CONT INGENT LIABILITY. ACCORDINGLY, THE AO MADE ADDITION OF RS.2,27,57,754/- AND CIT(A) DELETE D THE ADDITION. 4. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STAT ED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F HONBLE APEX COURT IN THE CASE OF CIT V. HCL COMNET SYSTEMS AND SERVICES LTD. (2008) 305 ITR 409 (SC), WHEREIN THE HONBLE APEX COURT INTERPRETED THE EXPLANATION CLAUSE OF THE EXPLANATION TO SECTION 115JA OF THE ACT:- AS STATED ABOVE, THE SAID EXPLANATION HAS PROVIDED SIX ITEMS, I.E. ITEM NOS. (A) TO (F) WHICH IF DEBITED TO THE PROFIT AND LOSS ACCOUNT CAN BE ADDED BACK TO THE NET PROFIT FOR COMPUTING THE BOOK PROFIT. IN TH IS CASE, WE ARE CONCERNED WITH ITEM NOS. (C) WHICH REFERS TO THE PROVISION FO R BAD AND DOUBTFUL DEBTS. THE PROVISION FOR BAD AND DOUBTFUL DEBTS CAN BE ADD ED BACK TO THE NET PROFIT ONLY IF ITEM (C) STANDS ATTRACTED. ITEM (C) DEALS W ITH AMOUNT(S) SET ASIDE AS PROVISION MADE FOR MEETING LIABILITIES, OTHER THAN ASCERTAINED LIABILITIES. THE ASSESSEES CASE WOULD, THEREFORE, FALL WITHIN THE A MBIT OF ITEM (C) ONLY IF THE AMOUNT IS SET ASIDE AS PROVISION; THE PROVISION IS MADE FOR MEETING A LIABILITY; AND THE PROVISION SHOULD BE FOR OTHER THAN AN ASCER TAINED LIABILITY, I.E., IT SHOULD BE FOR AN UNASCERTAINED LIABILITY. IN OTHER WORDS, ALL THE INGREDIENTS SHOULD BE SATISFIED TO ATTRACT ITEM (C) OF THE EXPLANATION TO SECTION 115JA. IN OUR VIEW, ITEM (C) IS NOT ATTRACTED.. THERE ARE TWO TYPES OF DEBT. A DEBT PAYABLE BY THE ASSESSEE IS DIFFERENT FROM A DEBT RE CEIVABLE BY THE ASSESSEE. A DEBT IS PAYABLE BY THE ASSESSEE WHERE THE ASSESSE E HAS TO PAY THE AMOUNT TO OTHERS WHEREAS THE DEBT RECEIVABLE BY THE ASSESS EE IS AN AMOUNT WHICH THE ASSESSEE HAS TO BE RECEIVED FROM OTHERS. IN THE PRESENT CASE, THE DEBT UNDER CONSIDERATION IS A DEBT RECEIVABLE BY THE A SSESSEE. THE PROVISION FOR BAD AND DOUBTFUL DEBT, THEREFORE, IS MADE TO COVER UP THE PROBABLE DIMINUTION IN THE VALUE OF THE ASSESSEE, I.E., DEBT WHICH IS A N AMOUNT RECEIVABLE BY THE ASSESSEE. THEREFORE, SUCH A PROVISION CANNOT BE SAI D TO BE A PROVISION FOR A LIABILITY, BECAUSE EVEN IF A DEBT IS NOT RECOVERABL E NO LIABILITY COULD BE FASTENED UPON THE ASSESSEE. IN THE PRESENT CASE, TH E DEBT IS THE AMOUNT RECEIVABLE BY THE ASSESSEE AND NOT ANY LIABILITY PA YABLE BY THE ASSESSEE AND, THEREFORE, ANY PROVISION MADE TOWARDS IRRECOVERABIL ITY OF THE DEBT CANNOT BE SAID TO BE A PROVISION FOR LIABILITY. THEREFORE, IN OUR VIEW, ITEM OF THE EXPLANATION IS NOT ATTRACTED TO THE FACTS OF THE PRESENT CASE. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT JUSTIF IED IN ADDING BACK THE PROVISION FOR DOUBTFUL DEBTS OF RS.92,15,187 UNDER CLAUSE OF THE EXPLANATION TO SECTION 115JA OF THE 1961 ACT. WE FIND THAT LD. DEPARTMENTAL REPRESENTATIVE COULD NOT DISTINGUISH THE FACTS IN THE PRESENT CASE. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE APEX COURT IN THE CASE OF HCL COMNET ITA NO.4313/AHD/2003 A.Y. 1999-00 ALEMBIC LTD. V. DCIT CIR-I BD R PAGE 3 SYSTEMS AND SERVICES LTD. (SUPRA). ACCORDINGLY, WE DISMISS THIS ISSUE OF RE VENUES APPEAL AND CONFIRM THE ORDER OF CIT(A). 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 12/03/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD, DATED : 12/03/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-I, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD