PRESTRESS (INDIA) P. LTD, MUMBAI V. ADDL CIT RG 1(2), MUMBAI

ITA 5760/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75256 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 31-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 12-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: DAMADAR KABRA
• Keywords: Opportunity of being heard; Commercial expediency; Revenue expenditure

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI KARUNAKARA RAO, AM AND DR. S.T.M. PAVALAN, JM ./I.T.A. NO.5760/M/2011 ( / ASSESSMENT YEAR: 2006 - 2007) PRESTRESS (INDIA) P. LTD., 303, ELPHINSTONE HOUSE, 17, MURZBAN ROAD, MUMBAI 400 001. / VS. THE ADDL. CIT, RANGE 1(2), MUMBAI. ./ PAN : AAACP 2076 J ( / APPELLANT) .. ( / RESPONDENT ) / ASSESSEE BY : SHRI NITESH JOSHI & MR. DAMADAR KABRA / REVENUE BY : SMT. PARMINDER , DR / DATE OF HEARING : 31 .12.2013 / DATE OF PRONOUNCEMENT : 08 .01.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 12.8.2011 IS AGAINST THE ORDER OF CIT (A) - 2, MUMBAI DATED 27.6.2011 FOR THE ASSESSMENT YEAR 2006 - 2007. 2. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: THE CIT (A) ERRED IN CONFIRMING THE ADDITION MADE BY THE AO OF RS. 24,91,913/ - RELATING TO THE JOINT VENTURE WITH M/S. TECHNO CONSTRUCTIONS . ASSESSEE SUBMITS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THEIR CASE, THEY ARE ENTITLED FOR DEDUCTION OF RS. 24,91,913/ - BEING LOSS INCIDENTAL TO BUSINESS AS WRITTEN OFF IN THE BOOKS OF ACCOUNTS. 3. AT THE OUTSET, SHRI NITESH JOSHI & DAMADAR KABRA, LD COUNSELS FOR THE ASSESSEE SUBMIT THAT THE ASSESSEE MADE A CLAIM OF DEDUCTION QUA THE IMPUGNED INVESTMENT IN THE JOINT VENTURE AND WHICH WAS FINALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS FOR THE PERIOD OF FOUR YEARS COMMENCING FROM 2002 - 2003 TO 2005 - 2006 AND THE AY 2006 - 2007 BEING THE CURRENT APPEAL UNDER CONSIDERATION, THE OTHER AYS WERE ALSO BROUGHT TO OUR N OTICE BY THE LD COUNSEL. IN CONNECTION WITH THE OTHER AYS, LD COUNSEL FOR 2 THE ASSESSEE DEMONSTRATED BY FILING A COPY OF THE ORDER OF THE TRIBUNAL VIDE ITA NOS. 2178/M/2007 (2003 - 04); ITA NO.7157/M/2008 (AY 2004 - 05) AND ITA NO.7158/M/2008 (AY 2005 - 06) DATE D 30.9.2013. FURTHER, LD COUNSEL BROUGHT OUR ATTENTION TO PARA 14 TO 16 OF THE SAID ORDER OF THE TRIBUNAL AND MENTIONED THAT THE ISSUES NEED TO BE SET ASIDE TO THE FILES OF AO FOR ADJUDICATING THE ISSUE AS PER THE DIRECTIONS GIVEN IN THE SAID PARAS. 4. ON THE OTHER HAND, LD DR FAIRLY MENTIONED THAT THE ISSUES INVOLVED HAVE TO BE DECIDED IN THE LIGHT OF THE SAID ORDER OF THE TRIBUNAL. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL DAT ED 30.9.2013 (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL (SUPRA), WE FIND THAT PARA 14 TO 16 OF THE TRIBUNALS ORDER ARE RELEVANT IN THIS REGARD AND THE SAME READ AS UNDER: 14. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD REPRESENTATIVES OF THE PARTIES. 15. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE CONTRACT IN QUESTION WAS COMPLETED DURING THE FINANCIAL YEAR 2002 - 03 ITSELF. AFTER THE COMPLETION OF THE CONTRACT THE ASSESSEE HAS NOT RECEIVED ANY AMOUNT FROM M/S. TECHNO CONSTRUCTIONS DESPITE IT S BEST EFFORTS. SINCE, THERE WAS NO LIKELIHOOD OF THE RECOVERY OF THE AMOUNT, HENCE THE 1/5 TH OF THE DUE AMOUNT WAS WRITTEN OFF DURING THE FINANCIAL YEAR IN QUESTION AND THE REMAINING WAS WRITTEN OFF IN SUBSEQUENT YEARS. THE ADVANCES MADE IN THE COURSE O F BUSINESS. IT HAS BEEN CLAIMED THAT THE ASSESSEE HAS NOT BEEN RECEIVED ANY AMOUNT OF OUT OF THE ENTIRE DUE AMOUNT TILL DATE. NOW IT IS ALMOST A SETTLED LAW THAT IF THE LOANS AND ADVANCES ARE MADE DURING THE COURSE OF BUSINESS OR ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND THERE IS A NEXUS BETWEEN THE BUSINESS INTERESTS AND THE ADVANCES MADE BY THE ASSESSEE THEN THE SAME IS TO BE TREATED AS REVENUE EXPENDITURE. RELIANCE IN THIS RESPECT CAN BE PLACED ON THE HONBLE MADRAS HIGH COURTS JUDGMENT IN THE CASE OF INDIAN COMMERCE AND INDUSTRIES CO. PL LTD. VS. CIT (213 ITR 153), ON HONBLE SUPREME COURTS JUDGMENT IN THE CASE OF PATNAIK & CO. LTD VS. CIT (161 ITR 365), AND ON HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF CIT VS. INVESTA INDUSTRIAL CORP ORATION LTD (119 ITR 360). 16. HOWEVER, IT IS AGAIN A MAT T ER OF FACT TO BE ESTABLISHED AS TO WHETHER THE SAID ADVANCES WERE MADE BY THE ASSESSEE DURING THE COURSE OF BUSINESS OR DUE TO COMMERCIAL EXPEDIENCY AND THERE WAS A NEXUS BETWEEN THE ADVANCES MADE A ND THE BUSINESS INTERESTS OF THE ASSESSEE. THE ISSUE IS THUS RESTORED BACK TO THE FILE OF THE AO FOR A FRESH EXAMINATION IN THIS RESPECT. IF THE ASSESSEE WILL BE ABLE TO SHOW THAT THE ADVANCES WERE MADE DURING THE COURSE OF BUSINESS OR DUE TO COMMERCIAL EXPEDIENCY AND THE SAME HAD A NEXUS WITH THE BUSINESS INTERESTS OF THE ASSESSEE, THEN THE LOSS WILL BE ALLOWED AS A REVENUE LOSS. NEEDLESS TO SAY THAT THE AO WILL GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND NECESSARY DOCUMENTS, IF SO, REQUIRED . IT IS MADE CLEAR THAT IF THE AO WILL BE OF THE VIEW THAT THE ENTIRE AMOUNT OF RS. 1,04,80,141/ - IS TO BE TREATED AS BUSINESS LOSS FOR THE RELEVANT YEAR, THEN THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM ANY PART OF IT IN THE SUBSEQUENT YEARS. THI S ISSUE IS ACCORDINGLY ALLOWED IN FAVOUR OF THE ASSESSEE FOR STATISTICAL PURPOSES . 6. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THE ISSUE RAISED IN THIS APPEAL SHOULD NEEDS TO BE SET ASIDE TO THE FILES OF THE AO FOR 3 THE SAKE OF CONSISTENCY AND THE AO IS DIRECTED TO COMPLY WITH THE DIRECTIONS MENTIONED IN PARA 16 OF THE SAID ORDER OF THE TRIBUNAL (SUPRA) WHILE ADJUDICATING THE ISSUE AFRESH AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORD INGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNC ED IN THE OPEN COURT ON 08 TH JANUARY, 2014. SD/ - SD/ - ( DR. S.T.M. PAVALAN) (D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 08 .01.2014 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI