Alchem International Ltd, V. JCIT Circle 1 (1),

ITA 67/DEL/2008

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5715 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 17-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 08-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIRENDER TALWAR
• Keywords: Business income; Depreciation; Bad and doubtful debts
• Section: 80HHC

Judgement Text

I.T.A. NO.67 /DEL/08 1/5 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.67 /DEL/2008 ASSESSMENT YEAR : 2003-04 M/S ALCHEM INTERNATIONAL LTD., JT. CIT, 301-AVALON APARTMENTS, CIRCLE-1(1), MANGLAPURI, MEHRAULI NEW DELHI. GURGAON ROAD, NEW DELHI. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO.AAACA-2251-L APPELLANT BY : SHRI VIRENDER TALWAR, C.A. RESPONDENT BY : MS. BANITA DEVI NEOREM, SR. DR. ORDER PER A.K. GARODIA, AM: THIS IS AN ASSESSEE'S APPEAL DIRECTED AGAINST THE O RDER OF LD CIT(A)-IV, NEW DELHI DATED 16.10.2007 FOR ASSESSMENT YEAR 2003 -04. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS UNDER :- 1. THE LD CIT(A) HAS WRONGFULLY UPHELD ADDITION OF RS.23,44,649 (RS.36,02,828/- - RS.12,58,170/-) OUT OF RS.29,85,0 89/- (RS.42,43,468/- - RS.12,58,179/-) ADDITION MADE BY THE ASSESSING OFFI CER IN RESPECT OF DEPB ENTITLEMENT. II) THE LD CIT(A) HAS FURTHER ERRED IN UPHOLDING TH E DEPB ADDITION ON THE BASIS OF APPLICATION SUBMITTED AT RS.36,02,828/- TH E FIGURE BEING A WRONG . I.T.A. NO.67/DEL/08 2/5 FIGURE. THE ASSESSEE WAS NOT ASKED AT ASSESSMENT S TAGE OR CIT(A) STAGE THIS FIGURE. THE FIGURE OFG RS.36,02,828/- RELATES TO ALL THE ENTITLEMENTS WHETHER APPLICATION SUBMITTED OR NOT. THE CORRECT F IGURE OF APPLICATION IS RS.14,65,038/- LESS UTILIZED DURING THE YEAR RS.11, 68,203/- - RS.2,96,835/-. III) THE LD CIT(A) FURTHER ERRED IN NOT ALLOWING DE DUCTION OF THE DEPB INCOME OF THE YEAR UNDER SECTION 80HHC. IV) THE LD CIT(A) HAS NOT GIVEN ANY FINDING IN RESP ECT OF CLAIM OF THE ASSESSEE THAT IN CASE THE INCOME ON DEPB IS ASSESSE D A SIMILAR AMOUNT IS ALLOWABLE AS PAYMENT OF DUTY U/S 43B. V) THE INCOME ON DEPB HAVING BEEN ASSESSED IN THE Y EAR OF UTILIZATION BY THE ASSESSEE CANNOT BE TAXED AGAIN THIS YEAR, THIS AMOU NT TO TAXATION OF THE AMOUNT TWICE. 2. THE LD CIT(A) HAS WRONGFULLY UPHELD BY PART DISA LLOWANCE OF DEPRECIATION ON PURCHASE OF UPS AMOUNTING TO RS.7616 BEING PART OF COMPUTER (ALLOWED 25% INSTEAD OF 60%). 3. THE LD CIT(A) HAS WRONGFULLY UPHELD DISALLOWANCE OF AMOUNTS WRITTEN OFF OF RS.441074/-. ADVANCE DATA-WARE CALCUTTA FOR SUPPLY OF RAW MATERIAL IN 1997-98. 250000 ADVANCE TO EMPIRE BLDG. FOR FIRE EEQUIPMENT TEST IN 1997-98. 150000 MINOR BALANCE WRITTEN OFF. 41074 4. THE LD CIT(A) HAS WRONGFULLY UPHELD THE TAXATION OF MISC. INCOME OF RS.551000 AS FROM OTHER SOURCES AS AGAINST CLAIM OF THE ASSESSEE THAT THESE ARE TAXABLE AS BUSINESS INCOME. SALE OF SCRAP. 3500 NOTICE PAY. 14165 RENT 42000 . I.T.A. NO.67/DEL/08 3/5 PROCESSING CHARGES. 246900 INTEREST 44400 DIVIDEND 30600 PROFIT ON SALE OF ASSETS 161000 SHARE FROM FIRM. 8000 ------------- TOTAL 550565 ------------- 5. THE LD CIT(A) HAS ERRED IN INTERPRETING THE AMEN DMENTS MADE BY TAXATION LAWS AMENDMENT ACT, 2005 REGARDING 80 HHC IN RESPECT OF 28(IIID) ETC. 3. IT WAS SUBMITTED BY THE LD AR OF THE ASSESSEE TH AT SUB GROUND (IV) OF GROUND NO.1 IS NOT PRESSED AND THE REMAINING ISSUES OF GROUND NO.1 HAS TO GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRE SH DECISION AS PER THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE C ASE OF TOPMAN EXPORTS AS REPORTED IN 318 ITR (AT) 87 (SB). REGARDING GROUND NO.2, IT IS SUBMITTED BY HIM THAT THIS ISSUE IS NOW COVERED AGAINST THE ASSESSEE BY VARIOUS JUDGMENTS AND HENCE THE SAME CAN BE DECIDED ACCORDINGLY. REGARDIN G GROUND NO.3, IT WAS SUBMITTED THAT WRITE OFF OF THESE ADVANCES SHOULD B E ALLOWED AS BUSINESS LOSS. REGARDING GROUND NO.4, IT WAS SUBMITTED THAT OUT OF TOTAL RECEIPTS OF RS.5,50,565/-, THE RECEIPT OF RS.2,46,900/- SHOULD BE ASSESSED AS BUSINESS INCOME BECAUSE THIS RECEIPT IS ON ACCOUNT OF PROCES SING CHARGES. 4. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. REGARDING GROUND NO.1OF THE AS SESSEE, SUB GROUND (IV) IS REJECTED AS NOT PRESSED. THE REMAINING ISSUES AS PE R GROUND NO.1 OF THE ASSESSEE ARE RESTORED BACK TO THE FILE OF THE ASSES SING OFFICER FOR A FRESH DECISION IN THE LIGHT OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL RENDERED IN THE CASE OF TOPMAN EXPORTS (SUPRA). THE ASSESSING OFFIC ER SHOULD PASS NECESSARY . I.T.A. NO.67/DEL/08 4/5 ORDER AS PER LAW AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 6. REGARDING GROUND N.2 OF THE ASSESSEE, LD AR OF T HE ASSESSEE HAS FAIRLY CONCEDED THAT THIS ISSUE IS NOW SETTLED AND THIS TR IBUNAL IS TAKING A CONSISTENT VIEW THAT DEPRECIATION ON UPS IS ALLOWABLE AT THE R ATE OF 25% ONLY. ACCORDINGLY, GROUND NO.2 OF THE ASSESSEE IS REJECTED. 7. REGARDING GROUND NO.3 OF THE ASSESSEE, WE FIND T HAT IT WAS SUBMITTED BY THE ASSESSEE BEFORE LD CIT(A) THAT THE ADVANCES WER E GIVEN FOR RAW MATERIAL AND ONE MORE ADVANCE WAS GIVEN FOR CARRYING OUT CER TAIN TESTS FOR INSTALLING FIRE FIGHTING SYSTEM. LD CIT(A) HAS DECIDED THIS ISSUE AGAINST THE ASSESSEE ON THE BASIS THAT SUCH WRITE OFF OF THESE ADVANCES ARE NOT ALLOWABLE AS WRITING OFF OF BAD DEBTS U/S 36(1)(VIII) OF THE ACT. THE CLAIM BEFORE US IS THAT SUCH WRITE OFF SHOULD BE ALLOWED AS BUSINESS LOSS. WE FIND THAT THIS ASPE CT WAS NOT EXAMINED BY THE AUTHORITIES BELOW AS TO WHETHER THESE ADVANCES ARE BUSINESS ADVANCES OR NOT AND WHETHER THESE ADVANCES ARE FOR CAPITAL GOODS OR OTHERWISE. BEFORE THE AUTHORITIES BELOW, THE CLAIM OF THE ASSESSEE WAS RE GARDING WRITE OFF OF BAD DEBTS WHICH WAS NOT ALLOWED AND FOR THE FIRST TIME, THIS CLAIM HAS BEEN MADE BEFORE US THAT THIS WRITE OF SHOULD BE ALLOWED AS BUSINESS LO SS. WE FEEL IT FIT AND PROPER THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE ASSES SING OFFICER FOR A FRESH DECISION AFTER EXAMINING THE FACTS AND HENCE WE SET ASIDE TH E ORDER OF THE LD CIT(A) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION. THE ASSESSING OFFICER SHOULD DECID E THIS CLAIM OF THE ASSESSEE AS TO WHETHER THE WRITE OFF THESE ADVANCE IS ALLOWA BLE AS BUSINESS LOSS. GROUND NO.3 OF THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. 8. REGARDING GROUND NO.4, WE FIND THAT WHILE COMPUT ING DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC OF THE ACT, THE ASSESSING OFFICER HAS EXCLUDED A SUM OF RS.5.51 LAKHS AS MISC. INCOME AND THE SAME WAS A SSESSED BY THE ASSESSING OFFICER AS INCOME FROM OTHER SOURCES. AS PER THE DE TAILS GIVEN BY THE ASSESSEE IN GROUND NO.4, THE AMOUNT IS ACTUALLY RS.550565/- AND NOT RS.5.51 LAKHS. THE ASSESSING OFFICER SHOULD EXAMINE THE SAME AND RECTI FY THE SAME IF THE CONTENTION OF THE ASSESSEE IS CORRECT. OUT OF THE D ETAILS OF THIS AMOUNT OF . I.T.A. NO.67/DEL/08 5/5 RS.550565/-, IT IS SUBMITTED BY THE ASSESSEE BEFORE US THAT IT INCLUDES AN AMOUNT OF RS.2,46,900/- RECEIVED BY THE ASSESSEE AS PROCES SING CHARGES. THE ASSESSING OFFICER SHOULD EXAMINE THIS CLAIM OF THE ASSESSEE ALSO AND IF FOUND CORRECT, THE SAME SHOULD BE ASSESSED AS BUSINESS IN COME AND ACCORDINGLY THE SAME SHOULD NOT BE EXCLUDED FROM PROFIT OF BUSINESS WHILE COMPUTING THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC OF TH E ACT BUT AT THE SAME TIME, THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 80HHC S HOULD BE WORKED OUT AFTER INCLUDING THIS AMOUNT IN TOTAL TURNOVER IF NOT SO A LREADY INCLUDED. . GROUND NO.4 OF THE ASSESSEE ALSO STANDS PARTLY ALLOWED FOR STATIST ICAL PURPOSES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 12TH MAR CH, 2010. SD/- SD/- (R.P. TOLANI) (A.K. GARO DIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 12.3.2010. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. BY ORDER (ITAT, NEW DELHI).