THE MAHARASHTRA STATE CO-OPERATIVE MARKETING FEDERATION LTD., MUMBAI V. M/s. ACIT CIR. - 13(3), MUMBAI

ITA 5874/MUM/2008

• Counselvise Citation: 587419914 RSA 2008
• Duration Of Justice: 3 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 26-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 24-09-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MOHIT JAIN
• Assessee Lawyers: BANSI G KALE
• Keywords: Bad and doubtful debts

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI .. , ! ' , # !, $ BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ./ ITA NO.5874/MUM/2008 & 6325/MUM/2009 ( #& ' #& ' #& ' #& ' / / / / ASSESSMENT YEARS : 2005-2006 & 2006-2007) THE MAHARASHTRA STATE CO-OPERATIVE MARKETING FEDERATION LIMITED KANMOOR HOUSE, NARSI NATHA STREET MUMBAI 400 009. PAN : AAAAT6218L. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 13(3) MUMBAI. ( () / // / APPELLANT) & & & & / VS. ( *+()/ RESPONDENT) () , ,, , - - - - / APPELLANT BY : SHRI BANSI G.KALE *+() , - , - , - , - / RESPONDENT BY : SHRI MOHIT JAIN & , . / / / / DATE OF HEARING : 26.07.2012 /0' , . / DATE OF PRONOUNCEMENT : 31.07.2012 !1 !1 !1 !1 / / / / O R D E R PER R.S.SYAL, AM : THESE TWO APPEALS BY THE ASSESSEE RELATE TO ASSESSM ENT YEARS 2005-2006 AND 2006-2007. THESE ARE RECALLED MATTERS INASMUCH AS THE EARLIER EX PARTE ORDERS PASSED BY THE TRIBUNAL WERE RECALLED. SINCE COMMON ISSUES ARE RAISED IN THESE APPEALS, WE ARE, THEREFORE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.5874/M/08 & 6325/M/09 THE MAHARASHTRA STATE CO-OP.MRKT. FED. LTD. 2 ASSESSMENT YEAR 2005-2006 2. GROUND NO.1(A) OF THE APPEAL ABOUT THE CONFIRMAT ION OF DISALLOWANCE ON ACCOUNT OF CONTRIBUTION TOWARDS STA TUTORY RESERVE FUND OF ` 5,54,582 WAS NOT PRESSED BY THE LEARNED AR. THE SAM E IS, THEREFORE, DISMISSED. 3. THE GROUND NO.1(B) IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF ` 39,34,259. THE FACTS APROPOS THIS GROUND ARE THAT T HE ASSESSEE DEBITED THIS AMOUNT IN ITS PROFIT AND LOSS ACCOUNT TOWARDS TRANSPORTATION AND HAMALI. THE ASSESSING OFFICER RE QUIRED THE ASSESSEE TO PRODUCE THE DETAILS IN THIS REGARD, WHI CH THE ASSESSEE COULD NOT. THIS LED TO THE MAKING OF THE ADDITION F OR THE EQUAL SUM, WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSING OFFICER MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE C OULD NOT FURNISH NECESSARY DETAILS BEFORE HIM. ON THE OTHER HAND, TH E LEARNED AR CONTENDED THAT THE TIME GRANTED BY THE ASSESSING OF FICER WAS TOO SHORT TO ENABLE IT TO FILE THE NECESSARY DETAILS. I T WAS ACCEPTED ON BEHALF OF THE ASSESSEE THAT ALL THE NECESSARY DETAI LS IN THIS REGARD WERE AVAILABLE. IT WAS PRAYED THAT ONE MORE OPPORTUNITY BE GRANTED TO THE ASSESSEE TO ADDUCE SUCH EVIDENCE BEFORE THE AO. CON SIDERING THE ENTIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE , WE ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WILL ME ET ADEQUATELY IF THE IMPUGNED ORDER ON THIS ISSUE IS SET ASIDE AND THE M ATTER IS RESTORED TO ITA NOS.5874/M/08 & 6325/M/09 THE MAHARASHTRA STATE CO-OP.MRKT. FED. LTD. 3 THE FILE OF A.O. WE ORDER ACCORDINGLY AND DIRECT THE ASSESSING OFFICER TO DECIDE THIS ISSUE AFRESH. NEEDLESS TO SA Y THE ASSESSEE WILL BE AT LIBERTY TO LEAD ANY EVIDENCE BEFORE THE ASSES SING OFFICER IN THE FRESH PROCEEDINGS. 5. SECOND GROUND IS AGAINST THE CONFIRMATION OF ADD ITION OF ` 88,72,926 TOWARDS ACCRUAL OF INTEREST INCOME. FROM THE TAX AUDIT REPORT FILED BY THE ASSESSEE, THE A.O. OBSERVED THA T THE INTEREST HAD ACCRUED ON DISPUTED DEBTORS OVER THE YEARS WHICH WA S TAKEN TO THE INTEREST SUSPENSE ACCOUNT WITH DEBIT OF THE EQUAL A MOUNT IN THE ACCOUNTS OF RESPECTIVE DEBTORS. IT WAS ALSO APPAREN T FROM THE SAID REPORT THAT THE ASSESSEE WAS CREDITING ITS PROFIT A ND LOSS ACCOUNT WITH THE AMOUNT OF INTEREST AS AND WHEN REALIZED. THE AS SESSING OFFICER OBSERVED THAT THE ASSESSEE WAS MAINTAINING ITS ACCO UNTS ON MERCANTILE SYSTEM OF ACCOUNTING AND AS SUCH THE ENTIRE INTERES T ACCRUED TO THE ASSESSEE DURING THE YEAR AMOUNTING TO ` 88.72 LAKH WAS REQUIRED TO BE CONSIDERED AS INCOME. HE, THEREFORE, MADE THIS ADDI TION, WHICH CAME TO BE APPROVED IN THE FIRST APPEAL. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THE LEARNED AR CONTENDED THAT T HE INTEREST WAS DEBITED IN THE ACCOUNT OF THE RESPECTIVE DEBTORS, W HO WERE DEFAULTERS AND NOT PAYING EVEN THE PRINCIPAL AMOUNT. IT WAS A RGUED THAT IT WAS DONE ONLY WITH A VIEW TO EXERCISE PRESSURE ON THE M FOR RECOVERY OF THE AMOUNT. IT WAS FURTHER SUBMITTED THAT MOST OF T HE DEBTORS ON WHICH SUCH INTEREST WAS CREDITED TO SUSPENSE ACCOUN T BECAME BAD AND ITA NOS.5874/M/08 & 6325/M/09 THE MAHARASHTRA STATE CO-OP.MRKT. FED. LTD. 4 WERE WRITTEN OFF. ON A SPECIFIC QUERY, THE LEARNED AR ADMITTED THAT IF AND WHEN THE INTEREST AMOUNT WAS ACTUALLY REALIZED THE SAME FOUND ITS PLACE TO THE CREDIT SIDE OF THE PROFIT AND LOSS ACCOUNT. 7. THERE IS NO DISPUTE ON THE FACT THAT THE A MOUNT OF INTEREST RELATED TO THE DISPUTED DEBTORS OVER THE YEARS. ONC E THE AMOUNT ITSELF IS DOUBTFUL OF RECOVERY, THERE CANNOT BE ANY QUESTI ON OF CONSIDERING THE INTEREST ON SUCH DOUBTFUL DEBTS ON THE BASIS OF ACCRUAL. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. EICHER LTD. [(2010) 320 ITR 410 (DEL.)] HAS HELD TO THIS EXTENT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF CIT V. GIRIRAJ UDYOG (P) LTD. [(2005) 273 ITR 495 (ALL.)] . ADVERTING TO THE FACTS OF THE INSTANT CASE, IT IS OBSERVED THAT THE ASSESSEES CONTENTION BEFORE THE A.O. THAT THIS INTEREST RELATED TO ` DISPUTED DEBTORS OVER THE YEARS HAS NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER . IT, THEREFORE, SHOWS THAT THE DEBTORS ON WHICH THE INTE REST INCOME HAS BEEN TAXED BY THE A.O. ON ACCRUAL BASIS, WERE IN FA CT DISPUTED. THE RATIO DECI DENDI LAID DOWN IN THE ABOVE CASES SQUARELY APPLIES TO TH E FACTS OF THE INSTANT CASE. WE, THEREFORE, HOLD THAT THE INTEREST INCOME ON DOUBTFUL DEBTS CANNOT BE TAXED ON ACCRUAL BASIS. THE ACTION OF THE AUTHORITIES BELOW IN THIS REGARD IS VACATED. HOWEVE R IT IS MADE CLEAR THAT AS AND WHEN THE AMOUNT OF INTEREST IS ACTUALLY REALIZED, THE SAME WILL BE SUBJECTED TO TAXATION AT THE RELEVANT POINT OF TIME. THIS GROUND IS ALLOWED. ITA NOS.5874/M/08 & 6325/M/09 THE MAHARASHTRA STATE CO-OP.MRKT. FED. LTD. 5 ASSESSMENT YEAR 2006-2007 8. BOTH THE SIDES ARE IN AGREEMENT THAT THE FACTS A ND CIRCUMSTANCES FOR THE INSTANT YEAR ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR ASSESSMENT YEAR 2005-2006. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE RESTORE THE QUESTION OF ADDITION TOWARDS TRANSPO RTATION AND HAMALI CHARGES TO THE FILE OF A.O. AND DELETE THE ADDITION TOWARDS INTEREST CREDITED TO THE SUSPENSE ACCOUNT. 9. 2 .3 #& 2. , 4 51 . 6 , 7. 89 IN THE RESULT, BOTH THE APPEALS ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JULY, 2012. !1 , /0' :!&3 0 , ; SD/- SD/- (VIVEK VARMA) (R.S.SYAL) # ! # ! # ! # ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI; :!& DATED 31 ST JULY, 2012. DEVDAS* !1 , *#.5' <''. !1 , *#.5' <''. !1 , *#.5' <''. !1 , *#.5' <''./ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. = () / THE CIT(A)XJII, MUMBAI. 4. = / CIT 5. '@; *#.#& , , / DR, ITAT, MUMBAI 6. ;A B / GUARD FILE. !1& !1& !1& !1& / BY ORDER, +'. *#. //TRUE COPY// C C C C/ // /8 7 8 7 8 7 8 7 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI