K.Balasubramanian, Salem V. ITO, Salem

ITA 637/CHNY/2011

• Counselvise Citation: 63721714 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 26-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 11-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S DASGUPTA
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C B ENCH C HENN AI BEFORE SHRI ABRAHAM P.GEORGE ACCOUNTANT MEMBER AND SHRI S.S.GODARA , JUDICIAL MEMBER .. ITA NO. 1148 TO 1150 /MDS./ 20 12 ASSESSMENT YEAR S : 1998 - 99,2001 - 02 & 2007 - 08 THE DEPUTY COMMISSIONE R OF INCOME - TAX, CIRCLE I, D.P.THOTTAM, MUTHIALPET, PUDUCHERRY 605 003. VS. M/S.PIPDIC LTD., NO.60,ROMAIN ROLLAND STREET, PUDUCHERY 605 001, PAN AADCP 0446 M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.DASGUPTA, JCIT DR RESPONDENT BY : SHRI PHILIP GEORGE, ADVOCATE DATE OF HEARING : 24 .0 7 .12 DATE OF PRONOUNCEMENT : 31 .0 7 .12 O R D E R PER ABRAHAM P.GEORGE ACCOUNTAN T MEMBER : THESE ARE APPEALS FILED BY THE ASSESSEE AGAINST THE CONSOLIDATED ORDER DATED 23.02.2010 OF COMMISSIONER OF IN COME TAX (APPEALS) XII, CHENNAI , FOR THE IMPUGNED ASSESSMENT YEARS. ITA . 1148 TO 1150 /MDS/ 12 2 2. ONLY ONE ISSUE IS RAISED BY THE REVENUE IN ALL THESE APP EALS. REVENUE IS AGGRIEVED THAT CLAIM OF BAD DEBTS WAS ALLOWED BY THE CIT(A). AS PER REVENUE, ASSESSING OFFICER WAS NOT GIVEN OPPORTUNITY AS REQUIRED UNDER RULE 46A OF THE INCOME TAX RULES WITH REGARD TO BIFURCATION OF ACTIVITIES DONE BY THE ASSESSEE, BEF ORE DECIDING THAT BAD DEBTS WAS CLAIMED ON AN ACTIVITY OTHER THAN INFRASTRUCTURE DEVELOPMENT. 3. SHORT FACTS APROPOS ARE THAT ASSESSEE HAD FILED ITS RETURN FOR IMPUGNED ASSESSMENT YEARS WHEREIN IT HAD CLAIMED WRITE OFF OF BAD DEBTS UNDER SECTION 36(1)(VI I), AS ALSO CLAIMED PROVISION FOR BAD & DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) (C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT ). SUCH CLAIM OF BAD DEBTS WERE ` 3 4,81,920, ` 3,97,123 & ` ` 21,40,211 RESPECTIVELY. C LAIM F OR PROVISION UNDER SECTION 36( 1) (VIIA) (C) OF THE ACT WERE ` 3,13,510/ - , ` 7,03,716/ - & ` 10,99,627/ - RESPECTIVELY . FOR ASSESSMENT YEARS 1998 - 99 & 2001 - 02, ASSESSMENTS WERE ORIGINALLY COMPLETED UNDER SECTION 143(3) OF THE ACT WHEREBY THE CLAIM FOR BAD DEBTS WRITTEN OFF WAS ALLOWED UNDER SECTION 36(1)(VII) WHEREAS THE CLAIM FOR PROVISION FOR DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) OF THE ACT WAS DISALLOWED. FOR THESE TWO ASSESSMENT YEARS, ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A), WHO ALLOWED ITA . 1148 TO 1150 /MDS/ 12 3 THE CLAIM OF THE ASSESSEE FOR PROVISIO N FOR BAD AND DOUBTFUL DEBTS. REVENUE MOVED IN FURTHER APPEAL S BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDER DATED 25.07.08 IN ITA NOS.1411 TO 1413/MDS./2005 REMITTED THE MATTER BACK TO THE FILE OF THE ASSESS ING OFFICER FOR CONSIDERING THE CLAIM OF T HE ASSESSEE BOTH WITH REGARD TO BAD DEBTS WRITTEN OFF AS WELL AS THE PROVISION FOR BAD AND DOUBTFUL DEBTS. ACCORDINGLY FOR THESE TWO YEARS, ASSESSING OFFICER TOOK UP THE MATTER AFRESH. ALMOST SIMULTANEOUSLY, THE SCRUTINY PROCEEDINGS FOR ASSESSMENT YEAR 20 07 - 08 WERE ALSO TAKEN UP. DURING THE COURSE OF THESE PROCEEDINGS, ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT ORIGINALLY ASSESSING OFFICER HAD HELD 5% PROVISION CLAIMED UNDER SECTION 36(1)(VIIA) (C) AS NOT AVAILABLE TO THE ASSESSEE , SINCE ITS CLAI M FOR WRITE - OFF OF BAD DEBTS UNDER SECTION 36(1)(VII) WAS ALLOWED. AS PER ASSESSEE SECTION 36(1)(VIIA) (C) WAS A SPECIAL PROVISION AP PLICABLE TO PUBLIC FINANCIAL OR S TATE FINANCIAL / INVESTMENT CORPORATION. ASSESSEE ALSO SUBMITTED THAT THERE WAS NO DOUBLE CLAIM MADE BY THE A SSESSEE. SINCE THE PROVISION MADE WERE NOT FOR THOSE ACCOUNTS ON WHICH WRITE OFF WERE AFFECTED , IT PLEADED THAT ITS CLAIM UNDER SECTION.36(1)(VIIA)(C) HAD TO BE ALLOWED. ITA . 1148 TO 1150 /MDS/ 12 4 4. HOWEVER, ASSESSING OFFICER WAS NOT IMPRESSED. ACCORDING TO HIM, SECTION 36(1)(VIIA) (C) DID APPLY TO THE ASSESSEE, BEING A STATE FINANCIAL INSTITUTION ENGAGED IN PROVIDING LONG TERM FIN ANCE FOR INDUSTRIAL DEVELOPMENT. ACCORDING TO HIM, ASSESSEE HAD SUBSTANTIAL BALANCE IN PROVISION FOR BAD AND DOUBTFUL DEBTS ACC OUNT IN ITS BALANCE SHEET. NEVERTHELESS, ACCORDING TO HIM, ASSESSEE S CLAIM FOR BAD DEBTS WRITE OFF COULD NOT BE ALLOWED , SINCE IT WAS ELIGIBLE ONLY FOR THE PROVISION MADE UNDER SECTION 36(1)(VIIA) (C) OF THE ACT. IN OTHER WORDS, IN THE ORIGINAL ASSESSM ENT WHEN THE ASSESSING OFFICER HAD ALLOWED THE CLAIM FOR PROVISION FOR BAD DEBTS WRITE OFF UNDER SECTION 36(1)(VII) OF THE ACT AND DISALLOWED THE CLAIM FOR BAD AND DOUBTFUL DEBTS MADE BY THE ASSESSEE UNDER SECTION 36(1)(VIIA) ( C ) OF THE ACT, I N THE ASSESS MENT, PURSUANT TO THE TRIBUNAL DIRECTIONS , HE HELD IT VICE VERSA. IN OTHER WORDS, HE DISALLOWED THE CLAIM FOR BAD DEBTS WRITE OFF , WHEREAS HE ALLOWED THE CLAIM FOR PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) ( C ) OF THE ACT. 5 . ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A) AGAINST THE DISALLOWANCE OF BAD DEBTS. AS PER ASSESSEE, THE CLAIM FOR DEDUCTION UNDER SECTION 36(1)(VIIA) (C ) WAS A STATUTORY CLAIM BASED ON PERCENTAGE OF ADVANCES. HOWEVER, ACTUAL BAD DEBTS WERE ITA . 1148 TO 1150 /MDS/ 12 5 C LAIMED AS WRITE OFF AN D THIS HAD TO BE ALLOWED UNDER SECTION 36(1)(VII) OF THE ACT. ACCORDING TO ASSESSEE, ITS MAIN ACTIVITY W AS PROVIDING INDUSTRIAL FINANCE . BAD DEBTS WRITTEN OFF PERTAINED TO SUCH ACTIVITY I.E. PROVIDING INDUSTRIAL FINANCE. IT HAD ALSO ANOTHER ACTIVITY, WHICH WAS PROVIDING INFRASTRUCTURE FACILITIES. ITS CLAIM UNDER SECTION.36(1)(VIIA)(C) WAS I N RELATION TO THE SECOND ACTIVITY . LD. CIT(A) OBSERVED THAT SINCE THE ASSESSEE ITSELF HAD ADMITTED THAT THE PROVISIO N FOR BAD AND DOUBTFUL DEBTS WERE IN RELATION T O AN ACTIVITY OF PROVIDING INFRASTRUCTURE, ITS CLAIM UNDER SECTION 36(1)(VIIA) (C) COULD NOT BE ALLOWED. HOWEVER, ACCORDING TO H IM, ITS CLAIM FOR BAD DEBT WRITE OFF UNDER SECTION 36(1)(VII) WAS TO BE ALLOWED, SINCE ASSESSEE HAD WRITTEN OFF THE BAD DEBTS IN ITS BOOKS. THEREFORE, EFFECTIVELY HE REVERSE D THE ORDER OF ASSESSING OFFICER AND HELD THAT CLAIM OF BAD DEBT UNDER SECTION 36(1)(VII) WAS ALLOWABLE WHERE AS PROVISION FOR BAD AND DOUBTFUL DEBTS CLAIMED UNDER SECTION 36(1)(VIIA) (C) WAS HELD AS NOT ALLOWAB LE. 6 . NOW BEFORE US, LD. D.R. ASSAILING THE ORDER OF THE CIT(A) SUBMITTED THAT NO EVIDENCE WAS PRODUCED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER TO PROVE THAT PROVISION FOR BAD AND DOUBTFUL DEBTS WERE AGAINST THE ACTIVITY RELATING TO INFRASTRUCTURE FACILITY. AS PER LD. DEPARTMENTAL REPRESENTATIVE , ONCE ASSESSEE HAD ITA . 1148 TO 1150 /MDS/ 12 6 CLAIMED PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) (C) OF THE ACT, IT COULD NOT CLAIM WRITE OFF BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. 7 . PER CONTRA LD. A.R. SUPPORTING THE ORDER OF THE CIT(A) SUBMITTED THAT THERE IS NO DOUBLE CLAIM MADE BY THE ASSESSEE. ACCORDING TO HIM, ONCE PROVISION FOR BAD AND DOUBTFUL DEBTS CLAIMED UNDER SECTION 36(1)(VIIA) (C) WAS TOTALLY DISALLOWED, THERE WAS NO QUESTION OF ANY DOUBL E CLAIM BEING ALLOWED TO THE ASSESSEE. IN ANY CASE, ACCORDING TO HIM THE DECISION OF HON BLE APEX COURT IN THE CASE OF CATHO LIC SYRIAN BANK LTD (CIVIL APPEAL NO.1143 OF 2011) DATED 17.02.2012 WENT IN FAVOUR OF THE ASSESSEE. 8 . WE HAVE PERUSED THE ORDER S OF THE AUTHORITIES BELOW AND HEA RD THE RIVAL CONTENTIONS. LD. CIT(A) HAS GIVEN A CLEAR FINDI NG THAT ASSESSEE HAD CLAIMED PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) (C) ON ITS ACTIVITY RELATING TO PROVIDING INFRASTRUCTURE FACILITY. LD. CIT(A) HAD HELD THAT SUCH PROVISION COULD NOT BE ALLOWED UNDER SECTION 36(1)(VII A ) (C) AS DEDUCTION, SINCE THE ACTIVITY WAS NO T RELATABLE TO PROVIDING LOANS OR ADVANCES. HOWEVER, ACCORDING TO HIM, TO THE EXTENT ASSESSEE ITA . 1148 TO 1150 /MDS/ 12 7 HAD WRITTEN OF F BAD DEBTS , IT S CLAIM UNDER SECTION 36(1)(VII) HAD TO BE ALLOWED . ASSESSING OFFICER , IN HIS ORIGINAL ASSESSMENTS FOR ASSESSMENT YEARS 1999 - 00 & 2001 - 02 HAD ALSO TAKEN THE SAME VIEW INITIALLY. HON BLE APEX COURT IN THE CASE O F CATHO LIC SYRIAN BANK LTD (SUPRA) HELD THAT DEDUCTION UNDER SECTION 36(1)(VII) ON THE BASIS OF WRITE - OFF AND PROVISION UNDER SECTION.36(1)(VIIA) CAN BO TH BE CLAIMED AS LONG AS THERE WA S NO DUPLICATION . SINCE ASSESSEE HERE WAS NOT ALLOWED ITS CLAIM UNDER SECTION 36(1)(VIIA) (C) FOR THE PROVISION FOR BAD AND DOU BTFUL DEBTS, THERE WAS NO THREAT OF ANY D OUBLE DEDUCTION BEING AVAILED BY IT. THERE IS NO DISPUTE THAT FOR THE AMOUNT CLAIMED UNDER SECTION.36(1)(VII) , THERE WAS AN ACTUAL WRITE OFF EFFECTED IN IT S BOOKS. C LAIM OF REVENUE THAT THERE W AS VIOL ATION OF RULE 46A, IS WITHOUT ANY BASIS , S INCE ASSESSEE HAS NO T BEEN GIVEN THE BENEFIT OF PROVISION UNDER SECTION 36(1)(VIIA) (C) OF THE ACT. HENCE, THE QUESTION OF BIFURCATION OF ACTIVITIES BECOMES REDUNDANT. IT IS TO BE NOTED THAT THE ASSESSEE IS NOT IN APPEAL BEFORE US AGAINST DISALLOWANCE OF ITS CLAIM FOR PROVISION FOR BAD AND DOUBTFUL DEBTS UNDER SECTION 36(1)(VIIA) (C). WE THEREFORE, DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). THE APPEALS OF THE REVENUE FOR ALL THE THREE YEA RS STAND DISMISSED. ITA . 1148 TO 1150 /MDS/ 12 8 9 . IN THE RESULT, THE THREE APPEALS FILED BY REVENUE ARE DISMISSED. ORDER P RONOUNCED ON TUESD A Y , THE 31 ST JULY , 2012 AT CHENNAI SD/ - SD/ - ( S.S.GODARA ) (ABRAHAM P.GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED 31 ST JULY , 2012 . K S SUNDARAM COPY TO: ASSESSEE / AO / CIT (A) / CIT / D.R. / GUARD FILE