ACIT RG 11(1), MUMBAI V. MAHARASHTRA FILM STAGE & CULTURAL DEVELOPMENT CORPORATION LTD, MUMBAI

ITA 653/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7776 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2002-2003
• Appeal Filed On: 02-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K SINGHS S RANASMT VANDANA
• Keywords: Bad and doubtful debts; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.MANMOHAN, VP AND SHRI T.R. SOOD, AM I.T.A. NO. 653/MUM/09 ASSESSMENT YEAR :2002-03 THE ASST. COMMISSIONER OF INCOME-TAX, RANGE 11(1), MUMBAI VS. M/S. MAHARASHTRA FILM STAGE & CULTURAL DEVELOPMENT CORPORATION LIMITED, FILM CITY, GOREGAON (WEST), MUMBAI 400 065 PAN: AAACM 7646 K (APPELLANT) (RESPONDENT) APPELLANT BY :: S/SHRI S.K. SINGH/S.S.RANA/SMT . VANDANA RESPONDENT BY :: NONE O R D E R PER T.R. SOOD (AM): IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWIN G GROUNDS: WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IS RIGHT IN DE LETING THE DISALLOWANCE OF RS. 38,57,796/- MADE BY THE A.O. ON ACCOUNT OF BAD DEBT S, DESPITE THE FACT THAT THE DEBT HAS NOT BECOME BAD. 2. NOTICE WAS ISSUED BY RPAD BUT NONE APPEARED ON B EHALF OF THE ASSESSEE. WE HAVE PROCEEDED TO DECIDE THE APPEAL ON EX PARTE BASIS BE CAUSE THE MATTER NEEDS TO GO BACK TO THE ASSESSING OFFICER. 3. REVENUE WAS HEARD. 4. AFTER CONSIDERING THE RELEVANT MATERIAL ON RECOR D AND THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE WE FIND THAT WHEN THE A SSESSING OFFICER NOTICED DURING THE ASSESSMENT PROCEEDINGS THAT ASSESSEE HAS CLAIMED BA D DEBTS HE DISALLOWED THE SAME WITH THE FOLLOWING OBSERVATIONS IN PARA 4: ACCORDINGLY, THE ASSESSEE HAS WRITTEN OFF BAD DEBT S OF RS. 38,57,796/-. HOWEVER, THE ASSESSEE HAS NOT CONSIDERED THE PROVISION FOR D OUBTFUL DEBTS OF RS.10,27,490/- WHICH HAS BEEN MADE IN THE BOOKS. THUS, THE BAD DE BTS ALLOWABLE WOULD BE ONLY RS.28,30,306/-. THIS AMOUNT OF RS. 28,30,306/- ALS O CANNOT BE ALLOWED AS BAD DEBTS SINCE APPARENTLY THE REASONS FOR WRITING OFF THE DEBTS APPEARS TO BE THAT THE SAME WERE BEING CARRIED FORWARD SINCE PAST MANY YEA RS. THE ASSESSEE WAS ASKED 2 TO PRODUCE DETAILS OF BAD DEBTS BUT FAILED TO DO SO . THUS, THE BAD DEBTS OF RS. 38,57,796/- IS DISALLOWED AND ADDED BACK TO THE TOT AL INCOME . 5. ON APPEAL, THE CLAIM WAS ALLOWED BY THE LEARNED CIT(A) RELYING ON THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. STAR CHEMICALS BOMBAY PVT. LTD., IN INCOME-TAX APPEAL LODGING NO. 1915 OF 2007, WHEREIN IT WAS HELD THAT AFTER THE AMENDMENT OF SECTION 36 WITH EFFECT FROM 1.4.1989, WRITING OFF IN THE BOOKS OF ACCOUNT WAS GOOD ENOUGH FOR CLAIMING DEDUC TION. HOWEVER, AS POINTED OUT BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE HON BLE BOMBAY HIGH COURT WHILE CONSIDERING THE ISSUE OF BAD DEBTS IN DETAIL, AFTER THE AMENDMENT OF SECTION IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXAT ION) VS. OMAN INTERNATIONAL BANK (2009) 313 ITR 128, HAS VERY CLEARLY HELD AS UNDER: HELD, THAT TO TREAT THE DEBT AS A BAD DEBT HAD TO B E A COMMERCIAL OR BUSINESS DECISION OF THE ASSESSEE BASED ON THE RELEVANT MATE RIAL IN THE POSSESSION OF THE ASSESSEE. ONCE THE ASSESSEE RECORDS THE DEBT AS A B AD DEBT IN HIS BOOKS OF ACCOUNT THAT WOULD PRIMA FACIE ESTABLISH THAT IT WA S A BAD DEBT UNLESS THE ASSESSING OFFICER FOR GOOD REASONS HOLDS OTHERWISE. THE WRITING OFF IN THE ACCOUNTS HAD TO BE BONA FIDE. ONCE THAT BE THE CASE, THE ASSESSEE WAS NOT CALLED UPON TO DISCHARGE ANY FURTHER BURDEN. AFTER THE AMENDMENT IT WAS NEITHER OBLIGATORY NOR WAS THE BURDEN ON THE ASSESS EE TO PROVE THAT THE DEBT WRITTEN OFF BY HIM WAS INDEED A BAD DEBT AS LONG AS IT WAS BONA FIDE AND BASED ON COMMERCIAL WISDOM OR EXPEDIENCY. 6. FROM THE HIGHLIGHTED PORTION IT BECOMES CLEAR TH AT WRITE OFF HAS TO BE BONAFIDE. WE FURTHER FIND THAT IN THIS CASE THE AS SESSEE HAD NOT SUBMITTED ANY PARTICULARS BEFORE THE ASSESSING OFFICER REGARDING THE BAD DEBTS AND CIT(A) HAS NOT GIVEN ANY FINDING THAT THE DEBTS WERE WRITTEN OFF A S BONAFIDE BAD DEBT. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF THE LEARNED CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSEE SHOULD FILE NECESSARY PARTICULARS AND THE ASSESSING OFFICER SHOULD DECIDE THE ISSUE IN THE LIGHT OF THE 3 DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) VS. OMAN INTERNATIONAL BAN K (SUPRA). 7. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 2 ND DAY OF FEBRUARY, 2010. SD. SD . (D. MANMOHAN) (T.R. SOOD ) VICE-PRESIDENT ACCOUNTANT MEMBR MUMBAI, DATED THE 2 ND FEBRUARY, 2010. KN COPY TO: 1. THE ASSESSEE. 2. THE ACIT, RANGE -11(1), MUMBAI 3. THE CITXI, MUMBAI 4. THE CIT(A)-XI, MUMBAI 5. THE DR, B BENCH, MUMBAI BY ORDER /TRUE COPY/ ASST. REGISTRAR, I.T.A.T.MUMBAI 4 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 02.02.2010 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 02.02.2010 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER