DCIT, Coimbatore V. M/s. Bannari Amman Exports Limited, Coimbatore

ITA 715/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4772 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 18-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Bad and doubtful debts
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH B, CHENNAI B E F O R E DR. O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER .. ITA NO.715(MDS)/2011 ASSESSMENT YEAR: 2006-07 THE DEPUTY COMMISSIONER M/S.BANNA RI AMMAN EXPORTS OF INCOME-TAX, VS. L TD., 252, METTUPALAYAM ROAD, COMPANY CIRCLE I(2), CO IMBATORE 641 043. COIMBATORE. PAN AAACB8514H. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.B.SEKARAN, CIT , D.R. RESPONDENT BY: SHRI R.VIJAYARAGHAVAN, ADVOCATE. O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2006-07. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I AT COIMBATORE ITA NO.715(MDS)/2011 2 DATED 7-1-2011. THE APPEAL ARISES OUT OF THE ASSES SMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ONLY GROUND RAISED BY THE REVENUE IS THAT T HE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN D IRECTING THE ASSESSING AUTHORITY TO ALLOW THE IRRECOVERABLE ADVA NCES AS TRADING LOSS UNDER SECTION 28 OF THE ACT. 3. IN FACT THE ASSESSEE HAD CLAIMED BAD DEBTS TO T HE EXTENT OF ` 40,12,526/- OUTSTANDING IN THE ACCOUNTS OF SIX DEB TORS. WE FIND THAT THE AMOUNTS WRITTEN OFF BY THE ASSESSEE WERE I N FACT IRRECOVERABLE ADVANCES. THE ADVANCES WERE GIVEN TO PARTIES WHO WERE REGULARLY DEALING WITH THE ASSESSEE. ONCE THE ASSESSEE FOUND THE BALANCE LYING WITH THOSE PARTIES NO MORE RECOVE RABLE, HE WROTE OFF THE SAME AND CLAIMED THEM AS DEDUCTIBLE BUSINESS LO SS. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS FOUND THAT THOSE ADVANCES WERE MADE FOR THE PURPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE AND THE NON RECOVERY OF THOSE ADVANCES WOULD DEFINITELY BE EXPENSES ALLOWABLE IN COMPUTING THE T AXABLE INCOME OF THE ASSESSEE AS THOSE ADVANCES GO TO REDUCE THE PRO FIT OF THE ASSESSEE COMPANY TO THAT EXTENT AND THE DEDUCTION S HOULD BE GIVEN UNDER SECTION 28 OF THE INCOME-TAX ACT, 1961. ITA NO.715(MDS)/2011 3 4. IRRESPECTIVE OF THE CONTROVERSY ON THE EXACT SE CTION UNDER WHICH THE DEDUCTION IS TO BE ALLOWED, THE FACT IS T HAT THOSE ADVANCES GIVEN BY THE ASSESSEE IN THE COURSE OF ITS REGULAR BUSINESS HAVE BECOME IRRECOVERABLE AND THE ASSESSEE HAS ACCORDING LY WRITTEN OFF THOSE ADVANCES. ONCE THIS IS THE POSITION, IT TAKE S THE NATURE OF BUSINESS LOSS. THE COMMISSIONER OF INCOME TAX (APPE ALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING AUTHORITY. 5. IN RESULT THIS APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON MONDAY, THE 27 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 27 TH JUNE, 2011. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.