AMBHE FERRO METAL PROCESSOR P.LTD, MUMBAI V. ASST CIT 6(1), MUMBAI

ITA 6854/MUM/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 7821 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 23-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Keywords: Bad and doubtful debts; Revenue expenditure; Capital expenditure; Set aside
• Section: 37(1); 143(1)

Judgement Text

P A G E | 1 ITA NO. 6854/MUM/2016 A.Y. 2011 - 12 M/S AMBHE FERRO METAL PROCESSOR PVT. LTD. VS. ASST. COMMISSIONER OF INCOME TAX - 6(1) IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6854/MUM/2016 (ASSESSMENT YEAR: 2011 - 12 ) M/S AMBHE FERRO METAL PROCESSOR PVT. LTD. A - 204 ZEST BUSINESS SPACE 2 ND FLOOR,17, M.G. ROAD, GHATKOPAR (EAST), MUMBAI - 400 077 VS. ASST. COMMISSIONER OF INCOME TAX - 6(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400 020. PAN AAACA3873E APPELLANT RESPONDENT APPELLANT BY: SHRI RAJESH S. SHAH, A.R. RESPONDENT BY: SHRI SATISH CHANDRA RAJORE, D.R DATE OF HEARING: 18 .12.2018 DATE OF PRONOUNCEMENT: 26 .12.2018 O R D E R PER RAVISH SOOD , JM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 12, MUMBAI, DATED 09.09.2016 WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) OF THE INCOME TAX 1961 (FOR SHORT I.T.ACT), DATED 31.10.2013. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOW ING GROUNDS OF APPEAL: BEING AGGRIEVED AGAINST THE ORDER PASSED BY COMMISSIONER OF INCOME TAX (APPEALS) - 12, MUMBAI, THIS APPEAL PETITION IS BEING FILED TO CONSIDER THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE INDEPENDENT, AND WITHOUT PREJUDICE TO EACH OTHE R. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX ERRED CONFIRMING THE DISALLOWANCE OF RS. 4, 00,000 / - UNDER SECTION 37(1) OF THE ACT . THE APPELLANT SUBMITS THAT THE PROVISIONS OF SECTION 37(1) ARE NOT APPLICABLE TO FACTS OF THE CASE. P A G E | 2 ITA NO. 6854/MUM/2016 A.Y. 2011 - 12 M/S AMBHE FERRO METAL PROCESSOR PVT. LTD. VS. ASST. COMMISSIONER OF INCOME TAX - 6(1) 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX ERRED CONFIRMING THE DISALLOWANCE ON ACCOUNT OF BAD DEBTS OF RS. 4,00,000/ - . 3. THE APPELLANT CRAVES LEAVE TO ADD , AMEND, MODIFY, SUBSTITU TE AND/ OR CANCEL ANY OF THE GROUND OF THE APPEAL. 2. BRIEFLY STATED, THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRAD ING IN IRON & STEEL PRODUCTS HAD E - FILED ITS RETURN OF INCOME FOR A.Y. 2011 - 12 ON 14.09.2011, DECLARING TOTAL INCOME AT RS.4,37,73,943/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESS ED AS SUCH UNDER SEC. 143(1) OF THE I.T. ACT. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SEL ECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2). 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 4,00,000/ - IN ITS PROFIT & LOSS A/C FOR THE YEAR UNDER CONSIDERATION. AS PER THE D ETAILS FURNISHED BY THE ASSESSEE IT WAS OBSERVED BY THE A.O THAT THE ASSESSEE HAD ADVANCED AN AMOUNT OF RS. 4,00,000/ - TO MR. KESHAV PANDEY FOR REPAIRING OF A FURN A CE WHICH FORMED PART OF THE PLANT & MACHINERY OF THE ASSESSEE COMPANY. IT WAS SUBMITTED BY T HE ASSESSEE THAT THOUGH MR. KESHAV PANDEY ALONGWITH THE MEMBERS OF THE TECHNICAL STAFF OF THE ASSESSEE HAD COMMENCED THE REPAIR WORK OF THE FURN A CE , BUT THEREAFTER HE HAD LEFT THE WORK WITHOUT COMPLETING THE SAME. IT WAS THE CONTENTION OF THE ASSESSEE THAT AS THERE WAS NEITHER ANY CHANCE OF RESUMING OF THE REPAIR WORK NOR RECOVERY OF THE AMOUNT FROM THE AFORESAID PERSON VIZ. MR. KESHAV PANDEY, THEREFORE, HE HAD WRITTEN OFF THE SAID AMOUNT AND CLAIMED THE SAME AS A LOSS IN ITS PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDERATION. THE A.O BEING OF THE VIEW THAT THE AFORESAID EXPENDITURE WAS IN THE N ATURE OF A CAPITAL EXPENDITURE, DECLINED TO ALLOW THE SAME AS A DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO THE CLAIM OF THE ASSESSEE UPHELD THE DISALLOWANCE RS.4 ,00,000/ - MADE BY THE A.O AND DISMISSED THE APPEAL. P A G E | 3 ITA NO. 6854/MUM/2016 A.Y. 2011 - 12 M/S AMBHE FERRO METAL PROCESSOR PVT. LTD. VS. ASST. COMMISSIONER OF INCOME TAX - 6(1) 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LD. AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE TOOK US THROUGH THE FACTS OF THE CASE . IT WAS SUBMITTED BY THE LD. A.R THAT AS THE AFORESAID AMOUNT ADVANCED BY T HE ASSESSEE FOR THE PURPOSE OF REPAIRING OF ITS FURN A CE WAS CLEARLY TOWARDS IN CURRING OF A REVENUE EXPENDITURE IN THE NORMAL COURSE OF ITS BUSINESS, THEREFORE, THE LOSS SUFFERED ON THE AMOUNT BECOMING IRRECOVERABLE WAS ALLOWABLE WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER S OF THE LOWER AUTHORITIES. 6. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF T HE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE AFORESAID AMOUNT OF RS.4 ,00,000/ - WAS ADVANCED BY THE ASSESSEE TO MR. KESHAV PANDEY FOR REPAIRING OF A FURN A CE WHICH FORMED PART OF ITS PLANT AND MACHINERY. IN OUR CONSIDERED VIEW , NOW WHEN THE AMOUNT ADVANCED TO THE AFORESAID PERSON WAS LOST/RENDERED IRRECOVERABLE, THE SAME WOULD CLEARLY BE IN THE NATURE OF A BUSINESS LOSS AND CANNOT BE HELD AS A CAPITAL LOSS. WE FIND THAT OUR AFORESAID VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF I.B.M WORLD TRADE CORPORATION VS. CIT (1990) 186 ITR 412 (BOM) . IN THE CASE BEFORE THE HONBLE HIGH COURT , THE ASSESSEE HAD ADVANCED MONIES TO THE LANDLORD OF ITS PREMISES FOR CONSTRUCTION OF A FACTORY SHED AND A RESIDENTIAL FLAT FOR LEASING THE M TO THE ASSESSEE . HOWEVER, AS THE LANDLORD BECAME INSOLVENT, THEREFORE, THE AMOUNT ADVANCED BY THE ASSESSEE BECAME IRRECOVERABLE. IN THE BACKDROP OF THE AFORESAID FACTS IT WAS OBSERVED BY THE HONBLE HIGH COURT THAT AS TH E ADVANCE GIVEN BY THE ASSESSEE IN THE NORMAL COURSE OF ITS BUSINESS FOR ACQUIRING OF THE FACTORY PREMISES ON LEASE ON HAVING BEEN LOST / BECOMING IRRECOVERABLE WOULD BE A BUSINESS LOSS AND NOT A CAPITAL LOSS. WE ARE OF THE CONSIDERED VIEW THAT NOW WHEN IT I S AN ADMITTED FACT THAT THE ASSESSEE IN THE CASE BEFORE US HAD ADVANCED AN AMOUNT OF RS.4 ,00,000/ - IN THE ORDINARY COURSE OF ITS BUSINESS FOR REPAIRING OF ITS FURN A CE, THEREFORE, THE SAME ON HAVING BEEN RENDERED AS IRRECOVERABLE WAS THUS CLEARLY A BUSINES S P A G E | 4 ITA NO. 6854/MUM/2016 A.Y. 2011 - 12 M/S AMBHE FERRO METAL PROCESSOR PVT. LTD. VS. ASST. COMMISSIONER OF INCOME TAX - 6(1) LOSS SUFFERED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS AND WAS ALLOWABLE AS A DEDUCTION WHILE COMPUTING ITS INCOME. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE A.O TO ALLOW THE AMOUNT OF RS.4 ,00,000/ - AS A DEDUCTION WHILE COMPUTING THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE GROUND S OF APPEAL NO. 1 & 2 ARE ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. 7. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRO NOUNCED IN THE OP EN COURT ON 26 . 12.2018 SD/ - SD/ - ( SHAMIM YAHYA ) (RAVISH SOOD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 26 .12 .2018 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI