DCIT (OSD) 8(2), MUMBAI V. HOUSEFULL INTERNATIONAL P.LTD, MUMBAI

ITA 5364/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0768 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 08-01-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UDAY BHASKAR JAKKA
• Assessee Lawyers: SANJAY R PARIKH
• Keywords: Bad and doubtful debts
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH H, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO.5364/M/2013 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME TAX, (OSD)-8(2), R.NO.218, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 VS. M/S. HOUSEFULL INTERNATIONAL P. LTD., GR. FLOOR, PLOT NO.09, LADY LONDON HOUSE, ANDHERI (EAST), MUMBAI 400 059 PAN: AADCR 1930N (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SANJAY R. PARIKH, A.R. REVENUE BY : SHRI UDAY BHASKAR JAKKA, D.R. DATE OF HEARING : 04.06.2015 DATE OF PRONOUNCEMENT : 04.06.2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 17.05.2013 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2008-09. 2. THE REVENUE IS AGGRIEVED BY THE ACTION OF THE LD . CIT(A) IN DELETING THE DISALLOWANCE OF RS.16,67,755/- WHICH WAS MADE BY TH E ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) UNDER SECTION 3 6(1)(VII) READ WITH SECTION 36(2) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE YEAR ASSESSEE HAD DEBITED AN AMOUNT OF RS.16,67,755/- ON ACCOUNT OF ADVANCES WRITTEN OFF IN ITS P & L ITA NO.5364/M/2013 M/S. HOUSEFULL INTERNATIONAL P. LTD. 2 ACCOUNT. THE AO OBSERVED THAT THIS WAS THIRD YEAR OF THE OPERATION OF THE ASSESSEE COMPANY, HENCE, NONE OF THE ADVANCES WRITT EN OFF WERE MORE THAN THREE YEARS OLD. HE FURTHER OBSERVED THAT THE ASSE SSEE WAS NOT IN THE BUSINESS OF ADVANCING LOANS TO OTHERS, THEREFORE NO INTEREST ON ADVANCES WAS EVER OFFERED AS INCOME. HE THEREAFTER, RELYING UPON THE PROVISIONS OF SECTION 36(1)(VII) READ WITHSECTION 36(2) OF THE ACT, DISAL LOWED THE SAID EXPENDITURE. 4. IN APPEAL, THE LD. CIT(A) HELD THAT THE ADVANCES WRITTEN OFF WERE ALLOWABLE UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT HOLDING THAT IT WAS NOT A CASE OF CESSATION OF LIABILITY AND ACCORDINGL Y ALLOWED THE CLAIM OF THE ASSESSEE. THE REVENUE HAS, THUS, COME IN APPEAL BE FORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE LD. R EPRESENTATIVES OF BOTH THE PARTIES AND HAVE ALSO GONE THROUGH THE RECORD. WE FIND THAT THE ASSESSEE FROM THE VERY BEGINNING HAS CLAIMED THE ADVANCES W RITTEN OFF AS TRADING ADVANCES WRITTEN OFF. IT HAS BEEN EXPLAINED THAT T HE ADVANCES WERE RELATING TO THE TRADING OF GOODS. SINCE SOME OF THE ITEMS WERE NOT MOVING AND THE ASSESSEE WAS UNABLE TO SELL, HENCE, THE ASSESSEE DE CIDED TO CANCEL THE ORDER FOR FRESH SUPPLIES. THE CONCERNED PARTIES DID NOT REFU ND THE MONEY GIVEN AS ADVANCE FOR THE SUPPLY OF TRADING GOODS. UNDER SUC H CIRCUMSTANCES, THE TRADING ADVANCES WRITTEN OFF WERE NOTHING BUT THE B USINESS LOSS OF THE ASSESSEE ALLOWABLE UNDER SECTION 28 OF THE ACT. THE AO WRON GLY TREATED THE SAID ADVANCES AS BAD DEBTS WRITTEN OFF UNDER SECTION 36( 1)(VII) OF THE ACT. WHEREAS THE LD. CIT(A) ALSO WRONGLY APPLIED THE PROVISIONS OF SECTION 41(1) OF THE ACT HOLDING THAT IT WAS NOT A CASE OF CESSATION OF LIAB ILITY . WE FIND THAT NEITHER THE PROVISIONS OF SECTION 36(1 )(VII) NOR THE PROVISIONS OF SECTION 40(1)(1) ARE ATTRACTED IN THI S CASE. IT IS A SIMPLE CASE OF TRADING ADVANCES WRITTEN OFF WHICH ARE LIABLE TO BE ALLOWED UNDER SECTION 28 OF ITA NO.5364/M/2013 M/S. HOUSEFULL INTERNATIONAL P. LTD. 3 THE ACT AS BUSINESS LOSS. IN VIEW OF OUR ABOVE OBS ERVATIONS, THE CLAIM OF THE ASSESSEE IS HELD TO BE ALLOWABLE BUT UNDER DIFFEREN T PROVISIONS OF THE ACT. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS THER EFORE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 04.06.201 5. SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 10.09.2015. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.