DCIT, Hyderabad V. M/s Srinivasa Cystine Ltd., Hyderabad

ITA 508/HYD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53683 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-09-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: P MURALIKRISHNA
• Keywords: Business income; Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.508/HYD/2009 : ASSESSMENT YEAR 20 05-06 DY. COMMISSIONER OF INCOME-TAX CIRCLE 3(2)HYDERABAD VS M/S. SRINIVASA CYSTINE LTD., HYDERABAD. (PAN AADCS 4063 R ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.SRINIVAS RESPONDENT BY : SHRI P.MURALIKRISHNA DATE OF HEARING 19.9.2011 DATE OF PRONOUNCEMENT 4.10.2011 O R D E R PER G.C.GUPTA, VICE PRESIDENT: THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEA R 2005-06 IS DIRECTED AGAINST THE ORDER OF THE CIT(A) . 2. GROUNDS OF APPEAL OF THE REVENUE ARE AS UNDER- 1. THE CIT(A) ERRED ON FACTS OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF TH E ASSESSING OFFICER 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT(A) IS CORRECT IN HOLDING THAT INCOME FROM LET-O UT OF THE AM ENITIES SHOULD BE ASSESSED AS INCOME FROM HOUSE PROPERTY EVEN THOUGH THERE WAS A SEPARATE AGREEMENT FOR LET OUT OF AMENITIES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, WHET HER THE CIT(A) IS CORRECT IN ALLOWING THE BAD DEBTS EVEN TH OUGH THE DEBTS HAVE NOT BECOME BAD. 5. THE CIT(A) ERRED IN HOLDING THAT THE NECESSARY R EMEDIAL ACTION HAS BEEN TAKEN BY INITIATING THE LEGAL ACTIO N TO WRITE OFF THE DEBTS, EVEN THOUGH THE DEBTS HAVE BEE N SETTLED OUTSIDE THE COURT FOR THE REASONS BEST KNOW N TO THE ASSESSEE. ITA NO.508/H/2009 M/S. SRINIVASA CYSTINE LTD., HYDERABAD. 2 6. THE CIT(A) ERRED IN ALLOWING THE CLAIM OF THE AS SESSEE ON WRITE OFF THE BAD DEBTS IN THE CASE OF M/S. PANY AM CEMENTS & MINERALS LTD. EVEN THOUGH NO LEGAL PROCEEDINGS HAVE BEEN INITIATED DURING THE F.Y. UND ER CONSIDERATION. 7. THE CIT(A) ERRED IN ALLOWING THE CLAIM OF THE AS SESSEE ON WRITE OFF OF THE BAD DEBTS IN THE CASE OF B.RAMA MOHANA RAO, AS THE DEBTS HAS BEEN GIVEN ON MORTGAGE OF PROPERTY. 8. THE CIT(A) ERRED IN HOLDING THAT THE ASSESSEE WA S IN MONEY LENDING BUSINESS IGNORING THE FACT THAT THE ASSESSEE ITSELF SUBMITTED BEFORE THE CIVIL COURT DU RING THE SUIT TO ENFORCE THE RECOVERY OF THE DEBTS THAT IT WAS NOT IN THE BUSINESS OF MONEY LENDING. 9. THE CIT(A) ERRED IN DELETING THE INTEREST ON THE BAD DEBTS WRITE OFF EVEN THOUGH THE DEBTS HAVE NOT BEC OME BAD DURING THE YEAR UNDER CONSIDERATION. 10 THE CIT(A) OUGHT TO HAVE CONFIRMED THE VIEW OF T HE ASSESSING OFFICER IN DISALLOWING THE BAD DEBT TREAT ING THE RECOVERY ACTION AS COLOURABLE TRANSACTION. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REL IED ON THE ORDER OF THE ASSESSING OFFICER. HE REFERRED TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF THE CASE OF THE REVENUE IN ASSESSING THE RENTAL INCOME UNDER THE HEAD INCOME FROM PROPERTY AND THE INCOME REALIZED BY PROVIDING THE AMENITIES UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LEARNED CIT-DR SUBMITTED THAT THE BAD DEBTS WERE RIGHTLY DISALLOWED AND THE ASSE SSING OFFICER HAS PASSED A SPEAKING ORDER ON THE ISSUE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS OPPOS ED THE SUBMISSIONS OF THE LEARNED CIT-DR. HE SUBMITTED THA T THE CIT(A) HAS DECIDED THE ISSUE OF ASSESSABILITY OF COMPOSITE RE NT, VIZ. BOTH FROM THE PREMISES AS WELL AS THE AMENITIES THEREIN TO BE TREATED AS INCOME UNDER THE HEAD HOUSE PROPERTY AND HAS FOLLOWED TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SHAMBHU INVEST MENTS P. LTD. ITA NO.508/H/2009 M/S. SRINIVASA CYSTINE LTD., HYDERABAD. 3 V.S. CIT (263 ITR 143)-SC. HE SUBMITTED THAT ON TH E OTHER ISSUE OF ALLOWABILITY OF BAD DEBTS, THE CIT(A) HAS PASSED AN ELABORATE SPEAKING ORDER, AFTER DISCUSSING ALL THE RELEVANT CASE-LAW ON THE ISSUE AND HAS HELD THAT IT COULD BE SAID THAT SINCE THERE WAS NO DISPUTE THAT THE TRANSACTIONS OF LOAN/ICD HAD ACTUA LLY TAKEN PLACE AND INTEREST THEREON HAD BEEN OFFERED TO TAX OVER T HE YEARS AND ASSESSED AS BUSINESS INCOME, THE WRITE OFF OF SUCH BAD DEBTS AFTER INITIATION OF LEGAL PROCEEDINGS BY THE ASSESSEE COU LD NOT BE CONSIDERED AS LACKING BONA FIDES. HE HAS RELIED ON THE ORDER OF THE CIT(A). HE ALSO SUBMITTED THAT ON BOTH THE ISSUES INVOLVED IN THE APPEAL, THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-0 5 IN ITA NO.505/HYD/2009 DATED 11 TH DECEMBER, 2009, IS IN FAVOUR OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT BOTH THE ISSUES INVOLVED IN THE GROUNDS OF APPEAL O F THE REVENUE IN THIS APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE W ITH THE DECISION OF THE HYDERABAD BENCH OF THE TRIBUNAL IN ASSESSEES O WN CASE DATED 11.12.2009 FOR THE ASSESSMENT YEAR2004-05, CITED SU PRA, WHEREIN THE ISSUES WERE DECIDE IN FAVOUR OF THE ASSESSEE. W E FIND THAT THE CIT(A) HAS FOLLOWED THE DECISION OF THE HONBLE APE X COURT IN THE CASE OF SHAMBHU INVESTMENTS P. LTD. V/S. CIT (SUPRA ), WHILE DECIDING THAT THE COMPOSITE RENT FROM BOTH THE PREMISES AS W ELL AS THE AMENITIES INCLUDED THEREIN HAS TO BE TREATED AS IN COME FROM HOUSE PROPERTY. THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) IN FOLLOWING THE DECISION OF THE HONBLE APEX COURT ON THE ISSUE AND THE ISSUE BEING COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05, WE HOLD THAT THERE IS NO MERIT IN THE GROUNDS OF APPE AL OF THE REVENUE ITA NO.508/H/2009 M/S. SRINIVASA CYSTINE LTD., HYDERABAD. 4 ON THIS ISSUE, WHICH ARE ACCORDINGLY REJECTED. AS FOR THE SECOND ISSUE OF DISALLOWANCE OF BAD DEBTS, WE FIND THAT THE CIT( A) HAS DISCUSSED THE RELEVANT DECISIONS ON THE ISSUE AND HAS RIGHTL Y CONCLUDED THAT THERE WAS NO DISPUTE THAT THE TRANSACTIONS OF DEBT S/ICDS HAD ACTUALLY TAKEN PLACE AND INTEREST THEREON HAD BEEN OFFERED T O TAX OVER THE YEARS AND ASSESSED AS BUSINESS INCOME IN THE HANDS OF THE ASSESSEE, AND AS SUCH, WRITE OFF OF SUCH DEBTS AFTER INITIATI ON OF LEGAL PROCEEDINGS BY THE ASSESSEE COULD NOT BE CONSIDERED AS LACKING BONA FIDES. THERE BEING NO MISTAKE IN THE ORDER OF THE C IT(A) IN THE FACTS OF THE CASE ON THIS ISSUE AND THE ISSUE BEING COVER ED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF THE HYDERABAD BENCH O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2004-05 , WE HOLD THAT THERE IS NO MERIT IN THE GROUNDS OF APPEAL OF THE R EVENUE ON THIS ISSUE AS WELL. WE ACCORDINGLY REJECT THE SAME. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE COURT ON 4.10.2011 SD/- SD/- (CHANDRA POOJARI) ( G.C. G UPTA) A CCOUNTANT MEMBER V ICE PRESIDENT DATED THE 4 TH OCTOBER, 2011 COPY FORWARDED TO: 1. M/S. SRINIVASA CYSTINE LTD., 6-3-658/G-2, CONCOR DE APARTMENTS, SOMAJIGUDA, HYDERABAD. 2. DY. COMMISSIONER OF INCOME - TAX CIRCLE 3 ( 2 )HYDERABAD 3. COMMISSIONER OF INCOME - TAX (APPEALS), - IV, HYDERABAD 4. COMMISSIONER OF INCOME-TAX III, HYDERABAD 5. THE D.R., ITAT, HYDERABAD. B.V.S