DCIT, CHENNAI V. M/s. Fichtner Consulting Engineers (I) Private Limited, CHENNAI

ITA 550/CHNY/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6519 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: M VISWANATHAN
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI (BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER) .. I.T.A. NO. 550/MDS/2011 ASSESSMENT YEAR : 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(1), CHENNAI 600 034. (APPELLANT) V. M/S FICHTNER CONSULTING ENGINEERS (I) PVT. LTD., NO.64, OLD NO.143, GANESH CHAMBERS, ELDAMS RD., CHENNAI 600 018. PAN : AAACF5620Q (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI M. VI SWANATHAN O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANCE IS THAT THE CIT(APPEALS) DELETED DISALLOWANCE IN RESPECT OF BAD DEBTS WRITTEN OFF CLAIMED BY THE ASSESSEE. AS PER THE REVENUE, SUCH BAD DEBTS INCLUDED EVEN DEBTS DUE FROM LOCAL BODIES AND GOVER NMENT UNDERTAKINGS AND THE DECISION OF HON'BLE APEX COURT IN THE CASE OF I.T.A. NO. 550/MDS/11 2 TRF LTD. V. CIT (323 ITR 397) COULD NOT BE APPLIED WITH REGARD TO DUES FROM GOVERNMENT AND GOVERNMENT OWNED COMPANIES . 2. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD, DURIN G THE RELEVANT PREVIOUS YEAR, WRITTEN OFF BAD DEBTS ` 54,00,496/- WHICH PARTLY COMPRISED DUES FROM GOVERNMENT AND PARTLY FROM OTHE R BODIES. ARGUMENT OF THE ASSESSEE WAS THAT THE AMOUNT WRITTE N OFF AS BAD DEBTS WAS TAKEN AS PART OF ITS INCOME FOR THE EARLI ER YEARS AND THEREBY IT HAD SATISFIED THE PROVISIONS OF SECTION 36 OF THE ACT. HOWEVER, THE A.O. WAS NOT IMPRESSED. ACCORDING TO HIM, ASSESSEE HAD WRITTEN OFF BAD DEBTS WITHIN ONE MONTH OR SAME MONTH OF THE BILLS RAISED. AS PER THE A.O., HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF SOUTH INDIA SURGICAL COMPANY LTD. V. ACIT (287 I TR 62) HELD THAT IT COULD NOT BE POSSIBLE TO CONSIDER GOVERNMENT AS NOT IN A POSITION TO DISCHARGE ITS ACKNOWLEDGED DEBTS. HE, THEREFORE, D ISALLOWED THE CLAIM OF BAD DEBTS. 3. BEFORE LD. CIT(APPEALS), ASSESSEE SUBMITTED AS U NDER:- BAD DEBTS WRITTEN OFF RS.54,00,496/- THE ABOVE REPRESENTS I.T.A. NO. 550/MDS/11 3 (I) AMOUNTS WHICH HAVE ALREADY BEEN TAKEN INTO ACCOUNT I N COMPUTING THE INCOME OF THE ASSESSEE. (II) THE DEBT IS IN RESPECT OF THE BUSINESS CARRIED ON B Y THE ASSESSEE AND (III) THE AMOUNT IS WRITTEN OFF IRRECOVERABLE IN THE ACCO UNTS OF THE ASSESSEE IN THE ABOVE ASSESSMENT YEAR. NECESSARY PAYMENT ADVICES FROM THE CUSTOMERS PROMPTIN G THE ASSESSEE TO WRITE OFF THE UNRECOVERABLE AMOUNT AS B AD DEBTS AND NECESSARY BOARD APPROVAL FOR THE SAME IS ALREADY ENCL OSED. THE APPELLANT RELIED UPON THE FOLLOWING CASES: (1) COMMISSIONER OF INCOME TAX V. VED CO (DELHI HIGH CO URT), 302 ITR 328 (2) ASSISTANT COMMISSIONER OF INCOME TAX V. WHIRLPOOL O F INDIA LTD., IN THE ITAT DELHI BENCH IN APPEAL NO. 4 401 OF 2002. WHEREIN IT IS HELD THAT WRITTEN OFF OF BAD DEBTS SU FFICIENT COMPLIANCE FOR CLAIMING DEDUCTION UNDER SECTION 36( 1)(VII) AND THE ASSESSEE NEED NOT PROVE THAT AMOUNT HAD BEC OME BAD DURING THE YEAR. 4. LD. CIT(APPEALS) RELYING ON THE DECISION OF HON' BLE APEX COURT IN THE CASE OF TRF LTD. (SUPRA) HELD THAT THE DEBTS HAVING BEEN WRITTEN OFF, IT HAD TO BE ALLOWED FOR DEDUCTION UND ER SECTION 36(1)(VII) OF I.T. ACT. HE, THEREFORE, DELETED THE DISALLOWAN CE. 5. NOW BEFORE US, LEARNED D.R., ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT VIS--VIS DEBTS DUE FR OM GOVERNMENT I.T.A. NO. 550/MDS/11 4 AND GOVERNMENT COMPANIES, THE DECISION OF TRF LTD. (SUPRA) COULD NOT BE APPLIED. 6. PER CONTRA, LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF LD. CIT(APPEALS). 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL C ONTENTIONS. HON'BLE APEX COURT IN THE CASE OF TRF LTD. (SUPRA) HELD THAT AFTER APRIL, 1989, IT WAS NOT NECESSARY FOR AN ASSESSEE T O ESTABLISH THAT ANY DEBT HAD BECOME IRRECOVERABLE BUT IT WAS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. NO DISTINCTION HAS BEEN MADE BY HON'BLE APEX COURT VIS --VIS DUES FROM GOVERNMENT AND GOVERNMENT COMPANIES AND SUCH BAD DE BTS CLAIM, AS LONG AS ASSESSEE HAD SATISFIED THE CONDITION REG ARDING WRITING OFF AND HAD PROVED THAT THE RELATED INCOME WAS CONSIDER ED IN COMPUTING ITS PROFITS OF THAT YEAR WOULD BE ALLOWABLE. IN OU R OPINION, IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE CASE OF T RF LTD. (SUPRA), DECISION OF JURISDICTIONAL HIGH COURT IN SOUTH INDI A SURGICAL COMPANY LTD. (SUPRA) HOLDING THAT DEBTS WHICH WERE UNILATER ALLY WRITTEN OFF I.T.A. NO. 550/MDS/11 5 CANNOT BE CLAIMED BY THE ASSESSEE, MAY NOT BE APPLI CABLE. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(APPEALS). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30 TH JUNE, 2011. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-III, CHENNAI (4) CIT, CHENNAI-I, CHENNAI (5) D.R. (6) GUARD FILE