THE SWASTIK SAFE DEPOSITS & INVEST LTD, MUMBAI V. THE ITO 7(2)(1),

ITA 7294/MUM/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8480 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 17-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 06-12-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K SINGH
• Assessee Lawyers: M D INAMDAR
• Keywords: Depreciation; Source of fund; Bad and doubtful debts
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J, MUMBAI BEFORE SHRI R.V. EASWAR (PRESIDENT) AND SHRI B. RAMAKOTAIAH (ACCOUNTANT MEMBER) ITA NO.7294/MUM/2007 ASSESSMENT YEAR : 2004-2005 THE SWASTIK SAFE DEPOSITS & INVESTMENTS LTD. NICHOLAS PIRAMAL TOWER, GANPATRAO KADAM MARG, LOWER PAREL, MUMBAI 400 013. PAN : AAACT3608G VS. I.T.O. 7(2)(1) AAYAKAR BHAVAN, MUMBAI 400 020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.D. INAMDAR RESPONDENT BY : SHRI K. SINGH, D.R. O R D E R PER B. RAMAKOTAIAH, A.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) VII, MUMBAI DATED 10.08.2007 RELATING TO ASSESSMENT YEAR 2004-05. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: GROUND NO.1: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A)-VII, MUMBAI [THE CIT(A)] ERRED IN UPHOLDING THE ACTION OF THE INCOME TAX OFFICER, RANGE 7(2)(1) MUM BAI (THE ASSESSING OFFICER), IN DISALLOWING A SUM OF ` 1,57,34,827/- ALLEGEDLY REGARDED AS THE INTEREST EXPENDITURE ATTR IBUTED TO EARNING TAX FREE INCOME, U/S.14A OF THE INCOME TAX ACT, 1961 (THE ACT). 2. HE FURTHER ERRED IN NOT CONSIDERING THE APPELLAN TS OWN FUNDS AMOUNTING TO ` 9,45,03,108/- INTEREST FREE LOANS AND ADVANCES RECEIVED AS WELL AS PROFIT BEFORE DEPRECIA TION WHILE MAKING THE AFORESAID DISALLOWANCES U/S.14A OF THE A CT. 3. THE APPELLANT, THEREFORE, PRAYS THAT THE DISALLO WANCE OF ` 1,57,34,827/- U/S.14A BE DELETED. 4. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT PR AYS THAT THE DISALLOWANCE BE APPROPRIATELY REDUCED. ITA NO.7294/MUM/2007 A.Y.: 2004-2005 2 GROUND NO.2: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE CIT(A) ERRED IN DISALLOWING SUNDRY BALANCES WRITTEN OFF AMOUNTING TO ` 3,60,771/- (CORRECT AMOUNT BEING 3,06,171/-) ON THE ALLEGED GROUND THAT THE APPELLANT HAS NOT ESTAB LISHED THAT THE DEBT HAS BECOME BAD. 2. THE APPELLANT, THEREFORE, PRAYS THAT THE SUM OF ` 3,60,171/- BE ALLOWED AS BAD DEBT AS CLAIMED BY THE APPELLANT. 2. WE HAVE HEARD SHRI M.D. INAMDAR, LEARNED COUNSEL FOR THE ASSESSEE AND SHRI K. SINGH, LEARNED DR. 3. THE ISSUE IN GROUND NO.1 IS WITH REFERENCE TO DI SALLOWANCE OF INTEREST EXPENDITURE ATTRIBUTABLE TO EARNING TAX FREE INCOME U/S.14A. THE ASSESSEE IS IN THE BUSINESS OF INVESTMENT AND FINANCE AND MA DE VARIOUS INVESTMENTS IN SHARES AND SECURITIES. THE ASSESSEE CLAIMED TOT AL INTEREST EXPENDITURE OF ` 6,44,61,831/- ON ACCOUNT OF INTEREST ON BORROWED F UNDS. THE ASSESSEE HAS RECEIVED DIVIDEND INCOME AMOUNTING TO ` 1,10,75,152/- WHICH WAS EXEMPT U/S.10(34) OF THE ACT. WHILE FILING THE RETU RN OF INCOME, THE ASSESSEE DISALLOWED THE INTEREST AMOUNTING TO ` 67,84,103/- U/S. 14A OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE F URNISHED WORKING FOR DISALLOWANCE MAKING A REVISED CLAIM OF ` 56,43,790/- AND THE ASSESSING OFFICER ANALYZED THE INVESTMENTS OF ` 19 CRORES AND IGNORING THE CONTENTIONS OF THE ASSESSEE THAT IT HAD OWN FUNDS AND RESERVES, DISALLOWED INTEREST OF ` 1,57,34,827/- U/S.14A. THE CIT(A) ACCEPTING THAT IT HAD OWN FUNDS HOWEVER, CONFIRMED THE DISALLOWANCE. HENCE, THE A SSESSEE IS AGGRIEVED. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, AFTER EXPL AINING THE FACTS OF THE CASE AND HOW THE DISALLOWANCE WAS WORKED OUT SUBMIT TED THAT THE ISSUE IS AGITATED IN ASSESSMENT YEAR 2001-02 BEFORE THE HON BLE ITAT, MUMBAI IN ITA NO.9424/M/04 DATED 19.04.2007 AND VIDE PARA 6 O F THE ORDER WORKED OUT THE INVESTMENT FROM THE TIME OF INVESTMENT AND GAVE CERTAIN DIRECTIONS FOR WORKING THE DISALLOWANCE. IT WAS FURTHER SUBMI TTED THAT IF THE SAME IS TO ITA NO.7294/MUM/2007 A.Y.: 2004-2005 3 BE CONSIDERED, THE DISALLOWANCE FOR THE YEAR WOULD WORK OUT TO ` 63.18 LACKS AS PER THE FOLLOWING WORKING: PARTICULARS AMOUNT PERIOD DAYS INTEREST @ 8.28% OPENING BALANCE OF INVESTMENTS AS ON 01.04.2003 1900.34 LESS: OWN FUNDS AS ON 01.04.2003 (NOTE 1) -1138.03 UPTO OUT OF BORROWED FUND S: 762.31 30.06.03 90 15.56 ADD: PURCHASE OF SHARES ON 01.07.2003 ` 98,000/- 0.98 _________ UPTO OUT OF BORROWED FUND S: 763.29 31.03.04 275 47.62 ======== _______ _______ TOTAL INTEREST 63.18 ====== NOTE 1: OWN FUNDS AS ON 01.04.2003 SHARE CAPITAL (OPENING) 24.00 RESERVES & SURPLUS (OPENING) 921 .03 INTEREST FREE LOANS RECD. 193.00 1138.03 ======= 4. THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER MAY BE DIRECTED TO EXAMINE THE WORKING AND ALLOW THE NECESSARY RELIEF. THE LEARNED DR HOWEVER RELIED ON THE ORDERS OF THE ASSESSING OFFIC ER AND THE CIT(A). 5. THIS ISSUE WAS CONSIDERED BY THE ITAT IN ABO VE REFERRED ORDER FOR ASSESSMENT YEAR 2001-02 WHEREIN THE COORDINATE BENC H CONSIDERED THE ARGUMENTS AND REASONABLE DISALLOWANCE WAS WORKED OU T VIDE PARA 6 OF THE ORDER AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE MATERIALS ON RECORD AND HAVE GONE THROUGH THE ORDER S OF THE AUTHORITIES BELOW. WE ARE IN AGREEMENT WITH THE LEA RNED AR OF THE ASSESSEE THAT SINCE DATE AND AMOUNT WISE DETAIL S OF THE PURCHASE AND SALE OF SHARES IS AVAILABLE ON RECORD, THE AMOUNT OF INTEREST TO BE DISALLOWED UNDER SECTION 14A CAN BE EXACTLY WORKED OUT AND HENCE THERE IS NO REASON FOR WHICH T HE DISALLOWANCE OF INTEREST SHOULD BE WORKED OUT ON AV ERAGE BASIS OR ON ANY OTHER BASIS AS DONE BY THE LEARNED CIT(A) . WE ARE IN AGREEMENT WITH LEARNED AR THAT THE WORKING DONE BY THE LEARNED CIT(A) IS NOT CORRECT BECAUSE WE FIND THAT IN THIS WORKING, LEARNED CIT(A) HAS NOT ALLOWED CREDIT IN R ESPECT OF OPENING SHARE CAPITAL AND RESERVES OF RS.605.09 LAC S ITA NO.7294/MUM/2007 A.Y.: 2004-2005 4 ALTHOUGH IT IS SAID BY HIM THAT IT SHOULD BE ALLOWE D. IN PARA NO.2 OF HIS ORDER, IT IS OBSERVED BY THE LEARNED CI TA) THAT CREDIT FOR ALL THE OWN FUNDS IS ALLOWED AGAINST INVESTMENT IN SHARES BUT IN FACT, NO SUCH CREDIT IS ALLOWED BY HIM BECAU SE WE FIND THAT IN PARA NO.1.4, HE HAS CALCULATED INTEREST OF RS.279.72 LACS ON THE TOTAL INVESTMENT OF SHARES OF RS.1804.6 5 LACS WITHOUT ALLOWING ANY CREDIT FOR OWN FUNDS. SIMILARL Y IN PARA NO.1.5, HE HAS CALCULATED INTEREST OF RS.208.33 LAC S ON RS.1344.07 LACS I.E. TOTAL PURCHASE OF SHARES DURIN G THIS YEAR RS.1950.80 LACS LESS PROFIT ON SALE OF SHARES DURIN G THIS YEAR RS.606.73 LACS. RS.78.56 LACS IN THE INTEREST UP TO THE DATE OF SALE OF SHARES AS CALCULATED BY THE ASSESSEE AND TH IS IS ALSO WITHOUT ALLOWING CREDIT ON ACCOUNT OF OWN FUNDS. WE ALSO FIND THAT AGAINST SALE PROCEEDS OF SHARES OF RS.5559.44 LACS, LEARNED CIT(A) HAS ALLOWED CREDIT ONLY TO THE EXTEN T OF RS.606.73 LACS I.E. THE PROFIT ON SALE OF SHARES. W E ARE NOT IN AGREEMENT WITH LEARNED CIT(A) THAT SINCE THE NATURE OF AMOUNT RECEIVED ON SALE OF SHARES TO THE EXTENT OF COST OF SHARES REMAINS SAME I.E. BORROWED FUNDS, CREDIT CANNOT BE ALLOWED. WE ARE IN AGREEMENT WITH LEARNED AR OF THE ASSESSEE REGARDING THIS ASPECT THAT ALTHOUGH THE NATURE OF F UND REMAINS THE SAME I.E. BORROWED FUNDS BUT IT DOES NOT REMAIN INVESTED IN SHARES FROM THE DATE OF SALE OF SHARES AND HENCE TH IS AMOUNT SHOULD ALSO BE REDUCED. WHEN WE EXAMINE THE WORKING S OF INTEREST DISALLOWABLE UNDER SECTION 14A FILED BY TH E LEARNED AR OF THE ASSESSEE, WE FIND THAT IN THE FIRST WORKING AVAILABLE ON PAGE NO.1 OF THE PAPER BOOK, DISALLOWANCE IS WORKED OUT AFTER CONSIDERING PROFIT BEFORE DEPRECIATION OF THE CURRE NT YEAR OF RS.368.07 LACS AND WITHOUT EXCLUDING THE INTEREST O N FUNDS USED FOR PURCHASE OF SHARES TILL THE DATES OF PURCH ASE AND AS PER THIS WORKING, INTEREST DISALLOWABLE IS WORKED O UT AT RS.109.96 LACS. IF, WE COMPARE THIS WORKING WITH TH E WORKING GIVEN BY THE LEARNED AR OF THE ASSESSEE ON THE DATE OF HEARING, WE FIND THAT THERE ARE ONLY TOW DIFFERENCES IN THES E TOW WORKINGS. ONE DIFFERENCE IS THAT IN THE FIRST WORKI NG, DISALLOWANCE IS WORKED OUT AFTER CONSIDERING PROFIT BEFORE DEPRECIATION OF THE CURRENT YEAR OF RS.368.07 LACS BUT IN THE SECOND WORKING, THIS PROFIT OF RS.368.07 LACS IS NO T CONSIDERED. WE FEEL THAT THE SECOND WORKING IS MORE RELIABLE BE CAUSE PROFIT OF THE CURRENT YEAR CANNOT BE CONSIDERED AS SOURCE OF FUNDS PARTICULARLY WHEN SALE PROCEEDS OF SHARES IN FULL I S REDUCED WHILE WORKING OUT THE INTEREST DISALLOWABLE. THE SE COND DIFFERENCE IS THAT IN THE SECOND WORKING, INTEREST ON PURCHASE OF SHARES FOR THE PERIOD PRIOR TO DATES OF PURCHASES I S COMPUTED AT RS.74.86 LACS AND THE SAME IS EXCLUDED. IN THE FIRS T WORKING AS APPEARING ON PAGE NO..1 OF THE PAPER BOOK, ALTHOUGH INTEREST IN RESPECT OF SHARES SOLD FOR THE PERIOD PRIOR TO SALE WAS ADDED, THE INTEREST IN RESPECT OF SHARES PURCHASES FOR THE PERIOD PRIOR TO DATES OF PURCHASE WAS NOT EXCLUDED. WE FEEL THAT BORROWED FUNDS WERE UTILIZED ON ACCOUNT OF SHARES PURCHASES ONLY FROM THE DATE OF PURCHASE OF SHARES AND HENCE THE INTERE ST FOR THE PERIOD PRIOR TO DATE OF PURCHASE HAS TO BE EXCLUDED . THERE IS NO OTHER DIFFERENCE. THE OTHER WORKING AS APPEARING ON PAGE 97 OF THE PAPER BOOK IS NOT RELEVANT SINCE IT INCLUDES LO ANS ALSO, ITA NO.7294/MUM/2007 A.Y.: 2004-2005 5 WHICH ARE ADVANCED BY THE ASSESSEE WITHOUT CHARGING INTEREST OR BY CHARGING INTEREST AT LOWER RATE. THIS ISSUE I S COVERED SEPARATELY AS PER GROUND NO.2 RAISED BY THE ASSESSE E AND HENCE THIS WORKING IS NOT RELEVANT. WE, THEREFORE, FEEL THAT THE WORKING FILED BY THE LEARNED AR OF THE ASSESSEE IN COURSE OF HEARING SHOULD BE IN PRINCIPLE ACCEPTED AND THERE I S NO NEED TO RESTORE THE MATER AGAIN TO THE FILE OF THE ASSESSIN G OFFICER AS URGED BY THE LEARNED DR BECAUSE WE FIND THAT ALL TH E DATES AND AMOUNTS USED BY THE LEARNED AR OF THE ASSESSEE IN T HIS FINAL WORKING ARE TALLYING WITH THE FACTS NOTED BY THE LE ARNED CIT(A) IN HIS ORDER EXCEPT MINOR DIFFERENCES IN SOME DATES OF SALES OF SHARES AND HENCE WE ARE WORKING SEPARATELY ON THE B ASIS OF SALE DATES AS NOTED BY LEARNED CIT(A) ON PAGE NO.10 OF HIS ORDER. THE OPENING BALANCE OF SHARES LESS OPENING O WN FUNDS IS NOTED BY LEARNED CIT(A) AT RS.4179.26 LACS IN PARA NO.1.6 OF HIS ORDER. THE SAME FIGURE IS ADOPTED BY THE ASSESS EE IN THE LAST WORKING AND HENCE WE ARE ALSO ADOPTING THE SAM E FIGURE IN OUR WORKING BELOW. DATES AND AMOUNTS OF PURCHASES O F SHARES AND SALES OF SHARES ARE TALLYING WITH THE DATES AND AMOUNTS NOTED BY THE LEARNED CIT()A IN PARA NO.1.5 OF HIS O RDER EXCEPT SOME MINOR DIFFERENCES IN A FEW DATES OF SALES, WHI CH ARE BEING ADOPTED BY US IN OUR WORKING BELOW AS PER THE ORDER OF LEARNED CIT(A). RATE OF INTEREST ADOPTED IN THIS WORKING AN D BY LEARNED CIT(A) IS SAME I.E. 15.5%. INTEREST ON COST OF SHAR ES SOLD BY THE ASSESSEE TILL THE DATES OF SALE IS ADOPTED BY THE A SSESSEE AT RS.78.56 LACS AND LEARNED CIT(A) HAS TAKEN THE SAME FIGURE IN HIS WORKING. THE AMOUNT OF RS.74.86 LACS REDUCED BY THE ASSESSEE ON ACCOUNT OF INTEREST ON FUNDS USED FOR P URCHASE OF SHARES TILL THE DATE OF PURCHASE IS CHECKED BY US A ND FOUND CORRECT. WE HAVE VERIFIED IT FROM THE DATES AND AMO UNT OF PURCHASES NOTED BY THE LEARNED CIT(A) IN PARA NO.1. 5 OF HIS ORDER. PURCHASE OF RS.1056.30 LACS. WAS ON 18.04.20 00 AND HENCE INTEREST ON THIS AMOUNT @ 15.50% TILL 17.04.2 000 I.E. FOR 17 DAYS WORKS OUT TO RS.7.63 LACS. SECOND PURCHASE WAS ON 25.09.2000 OF RS.894.50 LACS AND HENCE INTEREST ON THIS AMOUNT @ 15.50% TILL 24.09.20000 I.E. FOR 177 DAYS WORKS OUT TO RS.67.23 LACS. TOTAL OF BOTH WORKS OUT TO RS.74. 86 LACS. THE OBJECTIONS OF THE LEARNED CIT(A) ARE THAT PROFIT O F THE YEAR UNDER CONSIDERATION SHOULD NOT BE CONSIDERED AND TH AT SALE PROCEEDS OF SHARES CANNOT BE REDUCED. REGARDING THE ISSUE OF THE PROFIT OF THE CURRENT YEAR, WE FIND THAT THE LE ARNED AR OF THE ASSESSEE HAS NOT CONSIDERED THE SAME IN THIS REVISE D WORKING OF ` 92.15 LACS AND HENCE THIS OBJECTION DOES NOT SURVI VE. REGARDING SALE PROCEEDS OF SHARES, WE FEEL THAT IF THE BORROWED FUNDS UTILIZED FOR ENTIRE INVESTMENT IN SHARES AS O N 1.04.2000 IS CONSIDERED TO WORK OUT INTEREST DISALLOWABLE ON BORROWED FUNDS USED FOR INVESTMENT IN SHARES AND PURCHASE OF SHARES IN THE CURRENT YEAR IS ADDED, THEN THE SALE PROCEEDS R ECEIVED FROM SALE OF SHARES IS TO BE REDUCED IN ORDER TO FIND OU T EXACT AMOUNT OF BORROWED FUNDS USED FOR INVESTMENT IN SHARES. I T IS CORRECT THAT THE NATURE OF THE SALE PROCEEDS OF SHARES REMA INS SAME I.E. THAT IT REMAINS BORROWED FUNDS TO THE EXTENT OF COS T OF SHARES BUT THAT BORROWED FUN DOES NOT REMAIN INVESTED IN S HARES FROM THE DATE OF SALE OF SHARES AND HENCE NO DISALLOWANC E CAN BE ITA NO.7294/MUM/2007 A.Y.: 2004-2005 6 MADE U/S.14A ON THAT AMOUNT AFTER THE DATE OF SALE OF SHARES. WE FEEL THAT THE CORRECT AMOUNT OF INTEREST TO BE D ISALLOWED CAN BE WORKED OUT ON THE BASIS OF OPENING VALUE OF SHAR ES LESS OPENING OWN FUNDS AS DONE BY THE LEARNED AR OF THE ASSESSEE AND THEREAFTER INCREASING THE SAME ON THE DATE OF P URCHASE OF SHARES BY THE COST OF PURCHASE AND BY REDUCING THE SAME ON THE DATE OF SALE OF SHARES BY THE AMOUNT OF SALE PR OCEEDS. OUR WORKING AS PER ABOVE DISCUSSION IS AS UNDER:- DATE PARTICULARS RS.IN LACS PERIOD DAYS INTEREST @ 15.5% RS. IN LACS 01.04.2000 CLOSING BALANCE OF INVESTMENT IN SHARES 4,784.35 LESS : OUT OF OWN FUNDS 605.09 BALANCE OUT OF BORROWED FUNDS 4,179.26 UP TO 17.04.2000 17 30.17 18.04.2000 LESS : SALE OF SHARES 2,700.00 1,479.26 18.04.2000 ADD : PURCHASE OF SHARES 1,056.30 BALANCE OUT OF BORROWED FUNDS 2,535.56 UP TO 09.05.2000 22 23.69 10.05.2000 LESS : SALE OF SHARES 1,920.00 50 13.07 BALANCE OUT OF BORROWED FUNDS 615.56 UP TO 28.06.2000 29.06.2000 LESS : SALE OF SHARES 474.00 BALANCE OUT OF BORROWED FUNDS 141.56 UP TO 14.09.2000 78 4.69 15.09.2000 LESS : SALE OF SHARES 350.00 BALANCE OUT OF BORROWED DUNDS (208.44) UP TO 24.09.2000 10 0.00 25.09.2000 ADD: PURCHASE OF SHARES 894.50 BALANCE OUT OF BORROWED FUNDS 686.06 UP TO 17.11.2000 54 15.73 18.11.2000 LESS : SALE OF SHARES 112.44 BALANCE OUT OF BORROWED FUNDS 573.62 UP TO 30.03.2001 133 32.40 31.03.2001 LESS : SALE OF SHARES 3.00 BALANCE OUT OF BORROWED FUNDS 570.62 UP TO 31.03.2001 1 0.24 TOTAL 365 119.99 7. AS PER THE ABOVE WORKING, THE TOTAL INTEREST DIS ALLOWABLE U/S.14A WORKS OUT TO ` 119.99 LACS. ` .79.98 LACS IS ALREADY DISALLOWED BY THE ASSESSEE ITSELF AND HENCE BALANCE DISALLOWANCE OF ` 40.01 LACS IS HEREBY CONFIRMED. GROUND NO.1 STANDS PARTLY ALLOWED. 5. SINCE, THE COORDINATE BENCH IN THE EARLIER YEAR ESTABLISHED CERTAIN PRINCIPLES IN WORKING OUT THE DISALLOWANCE, THE ASS ESSING OFFICER IS DIRECTED ITA NO.7294/MUM/2007 A.Y.: 2004-2005 7 TO FOLLOW THE SAME AND EXAMINE THE WORKING AND DISA LLOW THE AMOUNT U/S 14A ON THE SAME PRINCIPLES AS IN THE EARLIER YEAR. SUBJECT TO VERIFICATION OF THE ABOVE WORKING, THE GROUND IS CONSIDERED AS PART LY ALLOWED. 6. GROUND NO.2, PERTAINS TO THE ISSUE OF BAD DEBTS CLAIMED ` 3,60,171/-. THE ASSESSEE CLAIMED AN AMOUNT OF ` 6,60,171/- AS SUNDRY BALANCE WRITTEN OFF AND ` 3,00,000/- HAS BEEN ADDED BACK WHILE COMPUTING THE INCOME THUS, MAKING THE CLAIM OF BAD DEBT OF ` 3,30,171/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE REASON THAT THE ASSESSE E HAS NOT FURNISHED ANY DETAILS OF CLAIM OF BAD DEBT AND FURTHER NO STEPS W ERE TAKEN FOR RECOVERY OF SUNDRY BAD DEBTS. ACCORDINGLY, THE AMOUNT OF ` 3,60,171/- WAS DISALLOWED 7. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTE D THAT IT HAD WRITTEN OFF INTEREST RECEIVABLE FROM THREE COMPANIES TOTALI NG TO ` 1,71, 160/-, THE DETAILS OF WHICH WERE AVAILABLE IN PARA 3.1 OF THE CIT(A) ORDER AND THUS RESTRICTED THE CLAIM TO THE AMOUNT WHICH SATIS FIED THE CONDITION U/S.36(2). WITH REFERENCE TO THE BALANCE DEBTS, I T WAS SUBMITTED THAT IT WAS A SUFFICIENT COMPLIANCE IF THE AMOUNT WAS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS PER PROVISION OF SECTION 36(1)(VII). THE CIT(A) HOWEVER DID NOT AGREE AND CONFIRMED THE SAID DISALLOWANCE . 8. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A), REFERRED TO THE ITEMS OF INTERES T ACCOUNTED IN EARLIER YEAR AS INCOME AND RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. COMMISSIONER OF INCOME TAX (2010) 323 ITR 397 (SC) TO SUBMIT THAT THE AMOUNTS WERE ACTUALLY WRITTEN OF F. HOWEVER, HE FAIRLY ADMITTED THE CLAIM HAS TO BE RESTRICTED TO THE AMOU NT ` 1,71,160/- IE. INTEREST RECEIVABLE FROM THREE COMPANIES FOR WHICH DETAILS WERE SUBMITTED BEFORE THE CIT(A) AND NO OBJECTION THAT THE ISSUE I S RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING THE ABOVE AMOUNTS A ND ALLOW THE SAME. THE LEARNED DR RELIED ON THE ORDERS OF THE REVENUE AUTH ORITIES. ITA NO.7294/MUM/2007 A.Y.: 2004-2005 8 9. ON THE ISSUE OF LEGAL PRINCIPLES AS RIGHTLY HELD BY THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD (SUPRA) THE AMOUNT IS ALLOWABLE IF THE SAME IS WRITTEN OFF IN THE BOOKS OF ACCOUNTS SUBJECT TO SAT ISFYING THE CONDITIONS U/S 36(2). IT WAS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THEY COULD FURNISH THE DETAILS OF THE BAD DEBTS CLAIMED TO THE EXTENT OF ` 1,71,160/- PERTAINING TO KAJARIA IRON CASTING LTD- INTEREST ` 23,840/-, KNOP TRADING CO.(P) LTD-INTEREST ` 28,670/- AND, NANDKISHORE PODDAR- INTEREST ` 1,18,650/-. SINCE THESE DETAILS ARE FURNISHED BEFO RE THE CIT(A) AND AS THE ASSESSEE HAS TO SATISFY THE CONDITIONS LAID DOWN IN SECTION 36(2) THAT THESE AMOUNTS WERE OFFERED TO TAX IN EARLIER YEAR, IN THE INTEREST OF JUSTICE WE DIRECT THE ASSESSING OFFICER TO EXAMINE THE ABOVE A MOUNTS AND ALLOW THE CLAIM TO AN EXTENT OF ` 1,71,160/-. THE ASSESSEE SHOULD BE GIVEN AN OPPORTUNITY. THE ASSESSEE IS DIRECTED TO FURNISH DE TAILS OF YEAR OF OFFERING THE INCOME SO THAT THE ASSESSING OFFICER CAN EXAMINE TH E RELEVANT CONDITION LAID DOWN IN SECTION 36(2). SUBJECT TO VERIFICATION, T HE GROUND IS CONSIDERED AS PARTLY ALLOWED. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY, 2011. SD/- (R.V. EASWAR) PRESIDENT SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER MUMBAI, DATED 24 TH FEBRUARY, 2011. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- , MUM BAI 4. COMMISSIONER OF INCOME TAX, CITY- , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH J, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI