M/s JBM MA Automotive Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4914/DEL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4096 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUR ESH MALIK
• Keywords: Capital asset; Bad and doubtful debts; Revenue expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D: NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 4914/DEL /2016 ASSESSMENT YEAR: 2012-13 M/S JBM MA AUTOMOTIVE PVT. LTD., 601, HEMKUNT CHAMBERS, 89, NEHRU PLACE, NEW DELHI-110019 VS DCIT, CIRCLE-13(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SURESH MALIK, CA RESPONDENT BY : SHRI AMIT JA IN, SR. DR DATE OF HEARING: 22.1.2018 DATE OF PRONOUNCEMENT : 23.1.2018 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 4.7.2016 PASSED BY THE LD. CIT(A)-5, DELHI FOR ASSESSMENT YEAR 2012-13 WHEREIN THE LD. COMMISSIONER OF INCOME TAX(A) HAS UPHELD THE ASSESSING OFFICERS ACTION OF NOT ALLOWING WRITE OF F OF RS. 46,26,450/- AS BAD DEBTS. ITA NO. 4914/DEL/2016 ASSESSMENT YEAR 2012-13 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTOMOBILE COMPONENTS. THE RETURN OF INCOME WAS FI LED DECLARING NIL INCOME. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO EXPLAIN ITS CLAIM OF BAD DEBTS AMOUNTING TO RS. 46,26,450/- BEING ADVANCE GIVEN TO SUPPLIER FOR PURCHASE OF MACHINERY . THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ADVANCE WAS IN THE NATURE OF CAPITAL ADVANCE WHICH WAS GIVEN FOR PURCHASE OF MACHINERY WHICH WOULD HAVE BE EN CAPITALISED AND, THEREFORE, THE EXPENSE WAS IN THE NATURE OF CAPITAL AND WAS HENCE NOT ALLOWABLE. THIS DISALL OWANCE WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (A) AND NOW THE ASSESSEE HAS APPROACHED THE ITAT AND HA S CHALLENGED THE ACTION OF THE LD. COMMISSIONER OF IN COME TAX(A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW HAVE ERRED, BOTH ON FACTS AND IN LAW, IN MAKING ILLEGAL ADDITION OF RS.46,26,450/- EQUAL TO US $ 115000 WHICH BECAME IRRECOVERABLE AND HAD TO BE WRITTEN-OFF BY THE APPELLANT AS REVENUE LOSS INCIDENTAL TO BUSINESS AND THE ADDITION IS LIABLE TO BE DELETED. ITA NO. 4914/DEL/2016 ASSESSMENT YEAR 2012-13 3 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE AUTHORITIES BELOW HAVE ERRED IN NOT FOLLOWING THE BINDING DECISIONS OF THE SUPREME COURT AS WELL AS THE HIGH COURTS AND THE TRIBUNAL RELIED UPON BY THE APPELLANT IN SUPPORT OF ITS CLAIM THEREBY PASSING THE IMPUGNED ORDER CLEARLY VIOLATIVE OF JUDICIAL DISCIPLINE AND UNAUTHORIZED BY LAW. 3. LD. AR SUBMITTED THAT THE ASSESSEE HAD GIVEN AN ADVANCE TO M/S DAEHWA INDUSTRIES, KOREA FOR PURCHAS E OF MACHINERY IN MARCH 2008 AND WHEN THE SUPPLIER HAD FAILED TO DELIVER THE MACHINERY ACCORDING TO THE AG REED SCHEDULE, THE ASSESSEE COMPANY HAD CANCELLED THE OR DER DUE TO FUND CONSTRAINT AS WELL AS LOW UTILIZATION O F MACHINERY. IT WAS SUBMITTED THAT THE ADVANCE GIVEN TO THE SUPPLIER AMOUNTING TO RS. 1,20,96,000 ($ 3 LAKH ) WAS SHOWN UNDER THE HEAD CAPITAL WORK IN PROGRESS AND THE SAME WAS LATER SHIFTED UNDER THE HEAD LOANS AND ADVANCES IN ASSESSMENT YEAR 2011-12. IT WAS FURTH ER SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE RECEIVED RS. 74,42,550/- ($1,8,5000) AND DECIDED TO FOREGO THE BALANCE I.E. RS. 46,26,450/- ($1,15,000). IT WAS ARGUED BY THE LD. AR THAT THE ADVANCE REPRESENTED ADVANCE FOR SUPPLY OF MACHINERY AND SINCE THE MACHINERY WAS NOT SUPPLIED, UNRECOVER ED ITA NO. 4914/DEL/2016 ASSESSMENT YEAR 2012-13 4 AMOUNT WAS EXPENDITURE FOR THE PURPOSE OF BUSINESS ALLOWABLE U/S 37(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED 'THE ACT'). THE LD. AR ALSO PL ACED RELIANCE ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS NEW DELHI HOTELS LTD. REPORTE D IN 345 ITR 1(DEL) AND ON THE JUDGMENT OF HON'BLE HIGH COURT OF RAJASTHAN IN THE CASE OF CIT VS ANJANI KUM AR CO. LTD. REPORTED IN 124 TAXMAN 429 (RAJ) AND SUBMI TTED THAT EVEN ADVANCES PAID FOR ACQUIRING CAPITAL ASSET IF WRITTEN OFF AS IRRECOVERABLE, WERE DEDUCTIBLE AS BU SINESS EXPENSE. 4. IN RESPONSE, THE LD. SR. DR PLACED RELIANCE ON T HE FINDINGS OF THE AUTHORITIES BELOW AND SUBMITTED THA T SINCE THE IMPUGNED AMOUNT DID NOT PERTAIN TO ANY REVENUE RECEIPT/EXPENSE BUT WAS A CAPITAL ADVANCE, THE SAME WAS NOT ALLOWABLE AS A DEDUCTION AS THE SAME W AS AKIN TO LOSS ON ASSETS WRITTEN OFF. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE FACTS OF THE CASE ARE UNDISPUTED. IT IS UNDISPUTED THAT THE ADVANCE WAS GIVEN FOR PURCHASE OF MACHINERY BUT AS THE MACHINERY WAS NOT ITA NO. 4914/DEL/2016 ASSESSMENT YEAR 2012-13 5 SUPPLIED AND THE ENTIRE ADVANCE WAS NOT RECOVERED, THE ASSESSEE HAS WRITTEN OFF THE REMAINING ADVANCE TREA TING THE SAME AS REVENUE EXPENDITURE U/S 37(1) OF THE AC T. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX(A) VS ANJANI KUMAR CO. L TD. (SUPRA) HAD HELD THAT WHERE THE ASSESSEE HAD WRITTE N OFF ADVANCES MADE TO AGRICULTURISTS FOR PURCHASE OF AGRICULTURAL LAND AND THE LAND WAS TO BE ACQUIRED T O SET UP A FACTORY BUT ULTIMATELY DID NOT MATERIALISE AND THE AGRICULTURISTS TO WHOM THE ADVANCES WERE GIVEN ALSO REFUSED TO RETURN THE AMOUNT, THE SAME HAD TO BE TR EATED AS REVENUE EXPENDITURE. THIS JUDGMENT OF THE HON'B LE RAJASTHAN HIGH COURT WAS FOLLOWED BY THE ITAT MUMBA I BENCH IN THE CASE OF M/S PIK PEN PRIVATE LIMITED VS ITO IN ITA NO. 6847/MUM/2008 WHEREIN, VIDE ORDER DATED 28.1.2010, THE ITAT MUMBAI BENCH FOLLOWING THE JUDGMENT OF THE RAJASTHAN HIGH COURT AS AFOREMENTIO NED ALLOWED THE ASSESSEES CLAIM OF WRITE OFF OF ADVANC ES MADE TOWARDS PURCHASE OF MACHINERY. WE FIND THAT T HE FACTS OF THE PRESENT APPEAL AND THE FACTS IN M/S PI K PEN PRIVATE LIMITED (SUPRA) ARE IDENTICAL AND DRAWING S UPPORT ITA NO. 4914/DEL/2016 ASSESSMENT YEAR 2012-13 6 FROM THE SAME, WE HOLD THAT THE ASSESSEE IS ENTITLE D TO WRITE OFF THE IMPUGNED ADVANCE BY TREATING THE SAME AS REVENUE EXPENDITURE. THE GROUND RAISED BY THE ASSE SSEE IS ACCORDINGLY ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 23.1.2 018. SD/- SD/- (B.P. JAIN) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 RD JANUARY, 2018 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR