TRICON ENTERPRISES P. LTD, MUMBAI V. ITO WD 8(3)(3), MUMBAI

ITA 6143/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48924 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 11-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 24-11-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHIMA GUPTA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, E BENCH, MUMBAI. BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI V.DURGA RAO, JUDICIAL MEMBER I.T.A NO.6143/ MUM/2009 ASSESSMENT YEAR: 2006-07 TRICON ENTERPRISES PVT.LTD. .. APPELLANT 37, KAMALA BHUVAN II, S.NITYANAND MARG, ANDHERI(E), MUMBAI-69 PA NO.AAACT 1676 L VS INCOME TAX OFFICER 8(3)(3) ,. RESPONDEN T AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. APPEARANCES: B.V. JHAVERI, FOR THE APPELLANT ASHIMA GUPTA, FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. THE SHORT ISSUE THAT WE ARE REQUIRED TO ADJUDICA TE IN THIS APPEAL IS, WHETHER OR NOT THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE DI SALLOWANCE OF RS.33,60,396/- ON ACCOUNT OF BAD DEBTS. THE ASSESSMENT YEAR INVOLVED IS 2006-2007 AND THE IMPUGNED CIT(A)S ORDER DATED 7-1-2009 WAS PASSED IN THE MAT TER OF ASSESSMENT UNDER SECTION 143 (3) OF THE I.T. ACT, 1961. 2. BRIEFLY STATED THE RELEVANT MATERIAL FACTS ARE L IKE THIS. THE ASSESSEE IS 100% EXPORTER OF PHARMACEUTICAL, LEATHER AND ENGINEERING PRODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTIC ED THAT THE ASSESSEE HAS CLAIMED I.T.A NO.6143/ MUM/2009 TRICON ENTERPRISES PVT.LTD. 2 DEDUCTION ON ACCOUNT OF BAD DEBTS AMOUNTING TO RS.3 3,60,396. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE ALLOWABIL ITY OF BAD DEBTS, ESPECIALLY AS THE SAME PERTAINS TO EXPORTS, TO WHICH, THE ASSESSEE HA S ALREADY AVAILED DEDUCTION U/S. 80 HHC OF THE ACT. IN REPLY, IT WAS SUBMITTED THAT THE BAD DEBTS ARE IN RESPECT OF EXPORT SALES ONLY AND ARE WRITTEN OFF PURSUANT TO APPLICATIONS TO THE RBI THROUGH INDIAN BANK. THE AO REJECTED THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE AMOUNT, INTER ALIA, OBSERVING THAT THE DEBTS PERTAI N TO EXPORT; AS PER BUSINESS NORMS, EXPORTS ARE DONE ONLY AGAINST LETTER OF CREDITS; EX PORTS ARE MADE TO ONLY KNOWN & REPUTED PARTIES AND AS PER ASSESSEES OWN ADMISSIO N, DEDUCTION U/S. 80 HHC HAS BEEN CLAIMED IN RESPECT OF THE SAID EXPORTS, IN WHI CH DOUBLE BENEFITS CANNOT BE GIVEN. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS IN VIEW OF THE FACT THAT THE AS SESSEE COULD NOT PRODUCE THE RBI PERMISSION TO WRITE OFF OF DEBTS. 3. AGGRIEVED FURTHER, THE ASSESSEE IS IN APPEAL BEF ORE US. 4. WE FIND THAT THE GRANT OF DEDUCTION OF BAD DEBTS , EVEN IN THE CASE OF EXPORTERS, DOES NOT AMOUNT TO DOUBLE BENEFIT FOR TH E ELEMENTARY REASON THAT UNREALIZABLE AMOUNTS, WHICH ALONE CAN BE WRITTEN OF F AS BAD DEBTS, HAVE TO BE EXCLUDED FROM EXPORT TURNOVER FOR THE PURPOSES OF C OMPUTING ADMISSIBLE DEDUCTION UNDER SECTION 80 HHC. AS EVIDENT FROM THE ORDERS PA SSED BY THE ASSESSING OFFICER IN RESPECT OF THE YEAR IN WHICH RELEVANT EXPORTS HAVE TAKEN PLACE, AND AS EVIDENT FROM THE ORDER PASSED BY A COORDINATE BENCH IN RESPECT O F THE SAME, THE UNREALIZED EXPORT BILLING HAS NOT BEEN INCLUDED FOR THE PURPOSES OF C OMPUTING DEDUCTION UNDER SECTION 80 HHC. IN THIS VIEW OF THE MATTER, THE VERY APPROA CH ADOPTED BY THE ASSESSING OFFICER, IN DECLINING DEDUCTION FOR BAD DEBTS ON TH E GROUND THAT THE ASSESSEE HAS BEEN ALLOWED DEDUCTION UNDER SECTION 80 HHC IN RESP ECT OF THE RELATED TRADE DEBT, IS FALLACIOUS. WHEN THESE FACTS WERE POINTED OUT TO TH E LEARNED DEPARTMENTAL REPRESENTATIVE, SHE DID NOT HAVE MUCH TO SAY AND SH E RATHER DUTIFULLY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. THERE IS ALSO NO DISPUTE THAT THE TRADE DEBT HAS BEEN WRITTEN OFF IN THE RELEVANT PREVIOUS YEAR, AND THAT, ACCORDINGLY, IN TERMS OF THE I.T.A NO.6143/ MUM/2009 TRICON ENTERPRISES PVT.LTD. 3 LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF TRF LTD VS CIT ( 323 ITR 397), THE ASSESSEE IS ENTITLED TO DEDUCTION IN RESP ECT OF THE SAME. AS REGARDS THE OBJECTION TAKEN BY THE CIT(A), I.E. THE ASSESSEE HA S NOT OBTAINED THE RBI PERMISSION FOR WRITE OFF OF DEBTS, AND, THEREFORE, THE CLAIM F OR BAD DEBTS IS INADMISSIBLE, WE FIND THE ISSUE IS NOW COVERED BY HONBLE DELHI HIGH COUR TS JUDGMENT IN THE CASE OF CIT VS NILOFER I SINGH (309 ITR 233). THEIR LORDSHIPS H AVE HELD THAT OBTAINING RBIS PERMISSION FOR WRITE OFF OF DUES ON A FOREIGN IMPOR TER IS AN IRRELEVANT FACTOR; SO FAR ADMISSIBILITY OF DEDUCTION AS BAD DEBTS, ON WRITING OFF THE SAME, IS CONCERNED. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE UPHOLD THE GRIEVANCE OF THE ASSESSEE AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE OF BAD DEBTS. THE ASSESSEE GETS THE RE LIEF ACCORDINGLY. 5. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST MAY 2011. SD/- (V. DURGA RAO) JUDICIAL MEMBER SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 31 ST MAY, 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),18, MUMBAI 4. COMMISSIONER OF INCOME TAX, 8 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI