DCIT, CIR-2,KOLKATA, Kolkata V. M/s Navyug Enterprises Pvt. Ltd., Kolkata

ITA 651/KOL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9460 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADEN CITSRDR
• Keywords: Business income; Bad and doubtful debts
• Section: 143(3); 37(1); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 651 / KOL / 2014 ASSESSMENT YEAR :2008-09 DCIT, CIRCLE-2, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 V/S . M/S NAVYUG ENTERPRISES PVT. LTD., 226/1, A.J.C. BOSE ROAD, KOLKATA-700 020 [ PAN NO.AAACN 8833 D ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI SALLONG YADEN, ADDL. CIT-SR-DR /BY RESPONDENT SHRI RAVI TULSIYAN, FCA /DATE OF HEARING 17-01-2017 /DATE OF PRONOUNCEMENT 08-02-2017 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XX, KOLKATA DA TED 02.01.2014. ASSESSMENT WAS FRAMED BY ACIT, RANGE-2, KOLKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) VIDE HIS ORDER DATED 27.12.2010 FOR ASSESSMENT YEAR 2008-09. THE GROUND RAISED BY THE REVENUE PER ITS APPEAL IS AS UNDER:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING DISALLOWANCES OF RS.49,51,430 /- AND RS.13,61,849/- (WRONGLY WRITTEN RS.13,48,719/-) ON WRITTEN-OFF OF ADVANCE ON ACCOUNT OF RAILWAY INDENT BOOKING AND ADVANCE FOR RAILWAY FREI GHT FOR TRANSPORTATION OF GOODS RESPECTIVELY WHILE THERE IS NO PROVISION FOR ALLOWING WRITE-OFF OF ADVANCES MADE PREVIOUSLY. ITA NO.651/KOL/2014 A.Y. 2008-09 DCIT CIR-2, KOL. VS. M/S NAVYUG ENTE RPRISES PVT LTD. PAGE 2 SHRI SALLONG YADEN, LD. SENIOR DEPARTMENTAL REPRESE NTATIVE REPRESENTED ON BEHALF OF REVENUE AND SHRI RAVI TULSIYAN, LD. AUTHO RIZED REPRESENTATIVE APPEARED ON BEHALF OF ASSESSEE. 2. ONLY ISSUE RAISED BY REVENUE IN THIS APPEAL IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY ASSESSING OFFICER FOR 49,51,430/- AND 13,61,849/- ON ACCOUNT OF ADVANCES GIVEN TO THE RA ILWAYS FOR BOOKING. 3. FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRESENT CASE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN EXPORT BUSINESS. THE ASSESSE E, IN THE YEAR UNDER CONSIDERATION HAS FILED ITS RETURN DECLARING TOTAL INCOME OF 1,40,35,050/- COMPRISING OF BUSINESS INCOME, HOUSE PROPERTY INCOM E AND OTHER SOURCE OF INCOME. SUBSEQUENTLY THE CASE WAS SELECTED SCRUTINY UNDER CASS MODULE AND ACCORDINGLY NOTICE U/S. 143(2) WAS ISSUED UPON THE ASSESSEE. THE ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT AT A T OTAL INCOME OF 2,17,05,050/- AFTER MAKING CERTAIN ADDITIONS / DISA LLOWANCES. 4. THE ASSESSEE, IN THE YEAR UNDER CONSIDERATION HA S WRITTEN OFF THE ADVANCE GIVEN TO THE RAILWAYS FOR INDENT BOOKINGS A ND RAILWAY FREIGHT FOR 49,51,430/- AND 13,61,849/- RESPECTIVELY. ON QUESTION BY AO FOR THE AFORESAID WRITTEN OFF AMOUNT, ASSESSEE REPLIED THAT BOTH ADVANCES WERE MADE FOR THE TRANSPORTATION OF GOODS BUT GOODS WERE NOT TRANSPORTED THROUGH RAILWAY, THEREFORE, THE ADVANCES BECAME IRRECOVERAB LE AND ACCORDINGLY THE SAME WAS FORFEITED BY RAILWAYS. FURTHER, ASSESSEE S UBMITTED THAT ADVANCES WERE GIVEN IN THE COURSE OF TRADING ACTIVITIES AND THEREFORE ELIGIBLE FOR DEDUCTION. HOWEVER, AO DISREGARDED THE PLEA OF ASSE SSEE BY OBSERVING THAT THERE IS NO PROVISION FOR ALLOWING DEDUCTION OF THE ADVANCE WRITTEN OFF U/S 36(1)(VII) OF THE ACT. IT WAS ALSO OBSERVED BY AO T HAT ADVANCES WERE GIVEN BY ASSESSEE IN EARLIER YEARS AND THESE ARE ALSO NOT EL IGIBLE FOR DEDUCTION U/S 37(1) OF THE ACT. THE AFORESAID AMOUNT WAS DISALLOW ED AND ADDED BACK TO THE TOTAL INCOME OF ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D. CIT(A), WHEREAS ASSESSEE SUBMITTED THAT ADVANCES WERE GIVEN TO RAIL WAYS IN ORDINARY COURSE OF BUSINESS. THE AFORESAID AMOUNT REPRESENTED THE L OSS INCIDENTAL TO THE ITA NO.651/KOL/2014 A.Y. 2008-09 DCIT CIR-2, KOL. VS. M/S NAVYUG ENTE RPRISES PVT LTD. PAGE 3 BUSINESS OF ASSESSEE. THEREFORE, SAME IS ALLOWABLE AS DEDUCTION U/S. 37(1) OF THE ACT. AFTER CONSIDERING THE SUBMISSION OF ASSESS EE, LD. CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- A PAYMENT OF RS.49,51,430/- AND RS.13,48,719/- WAS MADE TO THE RAILWAYS ON ACCOUNT OF RAILWAY INDENT BOOKINGS FOR THE PURPOSE OF CARRYING OF GOODS. THE DEPOSITS WERE ADJUSTABLE AGAINST SUBS EQUENT BILLS RAISE BY THE RAILWAYS ON ACCOUNT OF TRANSPORTATION OF GOODS THRO UGH THE RAKES, HOWEVER, DUE TO FAILURE TO MAKE THE TRANSPORTATION OF GOODS, THE AMOUNT OF RS.49,51,430/- WAS FORFEITED BY THE RAILWAYS DURING THE YEAR. FURTHER, THE AMOUNT OF RS.13,48,719/- WAS ALSO COULD NOT BE ADJU STED AGAINST ACTUAL TRANSPORTATION THE APPELLANT TREATED IT AS NON RECO VERABLE AND ACCORDINGLY WRITTEN OFF BOTH THE AMOUNTS IN THE BOOKS OF ACCOUN T. I FIND FROM THE FACT THAT THE DEPOSITS/ADVANCES WAS MADE TOWARDS TRANSPORT EX PENSES TO BE MADE AS PER RAILWAY INDENT BOOKING SYSTEM. THE DEPOSITS WER E MADE DURING THE A.Y 2006-07 AND 2005-06 RESPECTIVELY FOR THE PURPOSE OF EXPENSES TO BE INCURRED IN THE YEAR IN WHICH TRANSPORTATION OF GOODS TAKE P LACE. DURING THE YEAR UNDER CONSIDERATION, THE AMOUNT OF RS.49,51,430/- WAS FOR FEITED BY THE RAILWAYS AND RS.13,48,719.- WAS WRITTEN OFF DUE TO NON ADJUS TMENT AGAINST ACTUAL TRANSPORTATION. I FIND MERIT IN THE ARGUMENT OF THE APPELLANT THAT THE AMOUNTS INCIDENTAL TO THE BUSINESS F THE APPELLANT ARE ALLO WABLE EXPENDITURE U/S. 28 OF THE IT ACT. IT WAS THE CONSISTENT BUSINESS PRACTICE OF THE APPELLANT TO MAKE DEPOSITS WITH THE RAILWAYS FOR FUTURE TRANSPORTATIO N OF GOODS. THE CLAIM OF EXPENDITURE WAS BEING MADE IN THE YEAR OF ACTUAL TR ANSPORTATION OF GOODS BUT DUE TO NON ADJUSTMENT OF THE AMOUNT AGAINST ACTUAL TRANSPORTATION, THE SAME BECAME NON RECOVERABLE DURING THE YEAR AND THEREBY, WRITTEN OFF IN THE BOOKS OF ACCOUNT. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND CASE LAWS CITED IN PARA 3-1 BY THE APPELLANT, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.49,51,430/- AND RS.13,48,719/- RESPECTIVELY. AGGRIEVED BY THIS, REVENUE HAS COME UP IN APPEAL BE FORE US. 6. BEFORE US BOTH PARTIES RELIED ON THE ORDER OF AU THORITIES BELOW AS FAVORABLE TO THEM 7. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PART IES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE PRE SENT CASE RELATES TO DISALLOWANCE MADE BY ASSESSING OFFICER ON ACCOUNT O F ADVANCES WRITTEN OFF. AS PER THE AO THESE ADVANCE WERE NEVER TAKEN IN THE INCOME OF EARLIER YEARS AND THEREFORE SAME CANNOT BE TREATED AS BAD DEBTS. THE AO WAS ALSO OF THE VIEW THAT THE DEDUCTION IS ALSO NOT AVAILABLE U/S. 37(1) OF THE ACT AS THESE ADVANCES PERTAIN TO EARLIER YEARS. HOWEVER, LD. CIT (A) GRANTED RELIEF TO ASSESSEE BY OBSERVING THAT ADVANCES REPRESENTED THE LOSS TO ASSESSEE INCIDENTAL TO ITS BUSINESS INCOME. NOW, ISSUE BEFOR E US ARISES WHETHER THE ITA NO.651/KOL/2014 A.Y. 2008-09 DCIT CIR-2, KOL. VS. M/S NAVYUG ENTE RPRISES PVT LTD. PAGE 4 LOSS IS ALLOWABLE DEDUCTION IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS SETTLED LAW THAT LOSSES WHICH ARE NOT CAPITAL IN NATURE ARE ALLOWABLE FOR DEDUCTION IF THEY ARE CONNECTED TO THE BUSINESS ACT IVITY OF ASSESSEE. THERE IS NO PROVISION UNDER THE ACT FOR THE NON-DEDUCTION OF SUCH LOSSES INCURRED BY ASSESSEE. IN HOLDING SO, WE FIND GUIDANCE & SUPPORT FROM THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. P.V.GORE AND CO. (1983) 143 ITR 922 (BOM) WHERE THE HON'BLE COURT HELD THAT IF THERE IS A DIRECT AND PROXIMATE NEXUS BETWEEN THE BUSINESS OPERATION AND THE LOSS OR WHERE THE LOSS IS INCIDENTAL TO THE BUSINESS OPERATION OF THE ASSESSEE, THE LOSS IS ALLOWABLE AS A BUSINESS LOSS. ACCORDINGLY RESPECTFULLY FOLLOWING THE PRECEDENT AS ABOVE WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. THIS GROUND OF REV ENUES APPEAL IS DISMISSED. 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 08/ 02/2017 SD/- SD/- ( !') ( !') (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP, SR.P.S $!% &- 08 / 02 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIRCLE-2, AAYAKAR BHAWAN, P-7, CHO WRINGHEE SQR, KOL-69 2. /RESPONDENT-M/S NAVYUG ENTERPRISES PVT. LTD., 226/1 , A.J.C. BOSE ROAD, KOL-20 3. %.%/0 1 1 2 / CONCERNED CIT KOLKATA 4. 1 1 2- / CIT (A) KOLKATA 5. 567 /0, 1 /0 , / DR, ITAT, KOLKATA 6. 7:; <= / GUARD FILE. BY ORDER/ 1! , /TRUE COPY/ / % 1 /0 ,