DCIT 8(2), MUMBAI V. PAREKH PLATINUM LTD, MUMBAI

ITA 4676/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2969 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts
• Section: 143(3); 37(1)

Judgement Text

, INCOME-TAX APPELLATE TRI BUNAL C BENCH MUMBAI , , BEFORE S/SHJOGINDER SINGH,JUDICIAL ME MBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A./4676/MUM/2013, /ASSESSMENT YEAR: 2009-10 THE DCIT, CIRCLE-8(2) ROOM NO.216-A, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. PAREKH PLATINUM LTD. 50, BANK OF INDIA BUILDING, 2 ND FLOOR 185, SHEIKH MENON STREET,ZAVERI BAZAR MUMBAI-400 002. PAN:AAACP 1996 R ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI M. DAYASAGAR CIT-DR ASSESSEE B Y: NONE / DATE OF HEARING: 31.05.2016 / DATE OF PRONOUNCEMENT: 29.06.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER,DT.02.11.2012, OF THE CIT(A)- 17,MUMBAI,THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY ,ENGA GED IN THE BUSINESS OF MANUFACTURING OF CHEMICALS,CATALYSTS, ENGINEERING PRODUCTS FROM PREC IOUS METALS,PRE ALLOYS AND JEWELLERY PRODUCTS ETC.,FILED ITS RETURN OF INCOME ON 30.9.09 DECLARING INCOME OF RS. (-) 9,46,11,350/-. THE AO COMPLETED THE ASSESSMENT,U/S. 143(3) OF THE ACT,ON 14.12.2012 DETERMINING THE INCOME OF THE ASSESSEE AT RS. NIL. 2. FIRST EFFECTIVE GROUND(GOA.S1-2)IS ABOUT DELETING T HE DISALLOWANCE OF BAD DEBTS AMOUNTING TO RS.49.86 CRORES.DURING THE ASSESSMENT PROCEEDING S,THE AO FOUND THAT THE ASSESSEE HAD WRITTEN OFF AN AMOUNT OF RS.49,86,23,627/-FOR THE R EASON THAT THE SUBSIDIARY NAMELY M/S. GULF METALS AND CHEMICALS, FZE HAD CEASED TO BE IN EXIST ENCE. AS PER THE AO THE ASSESSEE HAD NOT FILED ANY DETAILS IN THAT REGARD. HE HELD THAT ONUS LIED ON THE ASSESSEE TO PROVE THAT THE AMOUNT RECEIVABLE FROM ITS SUBSIDIARY HAD BECOME BAD,THAT THE IDEA OF AMOUNT OF SUBSIDIARY BEING IRRECOVERABLE WAS ILLOGICAL AND AGAINST COMMON PRUD ENCE. HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE U/S.36(1)(VII) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLAT4E AUTHORITY(FAA).AFTER CONSIDERING THE SUB MISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, FAA REFERRED TO THE CASE OF TRF LTD. (323ITR397) AND HELD THAT POSITION OF LAW HAD CHANGED AFTER 1.4.89, THAT IT WAS NOT NE CESSARY FOR THE ASSESSEE TO ESTABLISH THAT 4676/M/13-PAREKH 2 DEBTS HAD BECOME RECOVERABLE, THAT IT WAS ENOUGH IF THE BAD DEBT HAD BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE,THAT THE ASSESSEE HAD WRITTEN OFF THE AMOUNT,DUE FROM ITS SUBSIDIARY,IN ITS BOOKS.FINALLY,HE DELETED THE DISA LLOWANCE MADE BY AO. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTE D THE ORDER OF THE AO. AS STATED EARLIER NONE APPEARED ON BEHALF OF THE ASSESSEE. 5. WE HAVE HEARD THE DR AND PERUSED THE MATERIAL AVAIL ABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD WRITTEN OFF AN AMOUNT OF RS.49.86 CROR ES DUE FROM ITS SUBSIDIARY, THAT NECESSARY ENTRIES WERE MADE IN THE BOOKS OF ACCOUNT, THAT THE FAA HAD DELETED THE DISALLOWANCE MADE BY THE AO. FOLLOWING THE JUDGMENT OF TRF LTD., WE ARE OF THE OPINION THAT IF AN ASSESSEE MAKES NECESSARY ENTRIES IN THE BOOKS OF ACCOUNT AND WRITES OFF THE BAD DEBTS THERE WAS NO JUSTIFICATION ON PART OF THE AO TO DISALLOW THE CLA IM MADE IN THAT REGARD.THE DECISION TO WRITE OFF A PARTICULAR ITEM DURING A PARTICULAR YEAR IS T HE PREROGATIVE OF A BUSINESSMAN. THE DEPARTMENTAL AUTHORITIES ARE NOT SUPPOSED TO ENTER INTO THE SHOE OF A BUSINESSMAN. THEREFORE, IN OUR OPINION,THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY. CONFIRMING HIS ORDER,WE DECIDE THE FIRST EFFECTIVE GROUND RAISED BY AO IN HIS FAVOUR. 6. THE SECOND EFFECTIVE GROUND OF APPEAL (GOA.S3-5) IS ABOUT DELETING THE DISALLOWANCE OF RS.55.93 LAKHS ON ACCOUNT OF UNREALISED FOREIGN EXC HANGE LOSS ON EXPORTS OUTSTANDING. WE FIND THAT,WHILE DECIDING THE APPEAL, THE FAA HAD RELIED UPON THE CASE OF WOODWARD GOVERNOR INDIA (P) LTD. (312ITR254). WE FIND THAT THE HONBLE APEX COURT HAD HELD THAT LOSS SUFFERED BY AN ASSESSEE ON ACCOUNT OF FLUCTUAT ION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF BALANCE SHEET WAS AN ITEM OF EXPENDITUR E U/S. 37(1) OF THE ACT. IT IS FURTHER FOUND THAT LOSS IN THE INSTANT CASE IS A TRADING LOSS COM PUTED AND CLAIMED BY THE ASSESSEE BY FOLLOW - ING THE ACCRUAL SYSTEM OF ACCOUNTING. CONSIDERING T HE FACT THAT THE FAA HAD RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF W OODWARD GOVERNOR INDIA (P.) LTD. (SUPRA),WE DECIDE SECOND EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMISSE D. . ORDER PRONOUNCED I N THE OPEN COURT ON 29 TH JUNE,2016. 29 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29 .06.2016. JV.SR.PS. 4676/M/13-PAREKH 3 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.