Victory Transformers and Swithgears Limited, Medchal, R.R.Dist V. DCIT, Circle-17(2), Hyderabad, Hyderabad

ITA 737/HYD/2017

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3782 (ITAT-HYDERABAD)
• Duration Of Justice: 4 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Assessment Year: 2012-2013
• Appeal Filed On: 28-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R DIPAK
• Assessee Lawyers: S RAMA RAO
• Keywords: Earning of tax free income; Bad and doubtful debts; TDS; Rule 8D
• Section: 143(3); 14A; 40(a)(ia); 37(1); 201; 13; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO. 737 /HYD/20 1 7 (ASSESSMENT YEAR : 2012 - 13 ) M/S. VICTORY TRANSFORMERS & SWITCHGEARS LIMITED, MEDCHAL, R.R. DISTRICT. PAN AABCV 9082D ..APPELLANT. VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 17(2), HYDERABAD. .. RESPONDENT. APPELLANT BY : SHRI S. RAMA RAO, ADVOCATE. RESPONDENT BY : SHRI R. DIPAK (D.R.) DATE OF HEARING : 26.04 .2021. DATE OF PRONOUNCEMENT : 31 .05. 2021. O R D E R PER SHRI S.S. GODARA, J.M. : THIS ASSESSEES APPEAL FOR ASST. YEAR 201 2 - 13 ARISES FROM THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 , HYDERABAD S ORDER DT. 28.02.2017 PASSED IN CASE 2 ITA NO. 737/HYD/2017 NO. 0032/2015 - 16/CIT(A) - 5 IN PROCEEDINGS UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (THE ACT). HEARD BOTH TH E PARTIES . C ASE FILE PERUSED. 2. THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS IN THE APPEAL : 2. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.29,09,138 MADE BY THE ASSESSING OFFICER U/S. 14A OF THE IT ACT. 3. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,31,668 MADE BY THE ASSESSING OFFICER U/S. 40(A)(IA) OF THE I.T. ACT. 4. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS DEBITED TO THE PROFIT AND LOSS ACCO UNT OF RS.46,74,98,650. 3. WE COME TO THE FIRST AND FOREMOST ISSUE OF SECTI O N 14A R.W. RULE 8D DISALLOWANCE OF RS.29,09,138 MADE BY BOTH THE LOWER AUTHORITIES. IT EMERGES AT THE OUTSET THAT THE ASSESSEE HAS NOT DERIVED ANY EXEMPT INCOME IN THE IMP UGNED ASSESSMENT YEAR. THAT BEING SO, WE QUOTE CHEMINVEST LTD. VS. CIT (2015) 378 ITR 33 (DEL); CIT VS. CHETTINAD LOGISTICS PVT. LTD. 80 TAXMANN.COM 221 (MAD) AND CIT VS. CORRETECH ENERGY PVT. LTD. 223 TAXMAN 130 3 ITA NO. 737/HYD/2017 (GUJ) THAT THE IMPUGNED DISALLOWANCE DOES NOT APPLY IN ABSENCE OF ANY SUCH EXEMPT INCOME. THE SAME IS DIRECTED TO BE DELETED FOR THIS PRECISE REASON ALONE. 4. NEXT COMES SECTION 40(A)(IA) DISALLOWANCE OF RS.7,31,668 PERTAINING TO TDS DEDUCTION QUA AUDITORS REMUNERATION, SELLING AND OTH ER EXPENSES, R&D EXPENSES, SECURITY CHARGES, LEGAL AND PROFESSIONAL CHARGES AND MISCELLANEOUS EXPENDITURE. THE REVENUES CASE AS PER LE A RNED LOWER AUTHORITIES DETAILED DISCUSSION IS THAT THE ASSESSEE HAD ALTHOUGH DE DUCTED TDS ON THESE PAYMENTS TO THEM BUT FAILED TO REMIT THE SAME TO THE GOVERNMENT ACCOUNT. LEARNED COUNSEL, ON THE OTHER HAND, QUOTED SEC . 40(A)(IA), 1 ST PROVISO THAT SUCH AN EXPENDITURE IS TO BE ALLOWABLE AS A DEDUCTION FOR ITS PREVIOUS YEAR IN WHICH THE TDS IN ISSUE STANDS DEPOSITED. WE T HUS RESTORE THE INSTANT ISSUE BACK TO THE ASSESSING OFFICER TO BE EXAMINE D AFRESH IN LIGHT OF FOREGOING PROVISO AS PER LAW. 4 ITA NO. 737/HYD/2017 5. LASTLY COMES BAD DEBT DISALLOWANCE ISSUE OF RS.46,74,98,650 PERTAINING TO RECEIPT TOWARDS SALE PRICE OF POWER AND THE AMOUNTS WHICH COULD NOT BE RECOVERED FROM THE CONCERNED GOVERNMENT COMPANIES. . THE ASSESSING OFFICER OBSERVED IN HIS ASSESSMENT ORDER DT.16.3.2015 THAT THE ASSESSEE HAD FAILED TO FURNISH ALL THE COGENT EVIDENCES THAT THE IMPUGNED SUM HAD BEEN FIRST DEBITED AND THE CORRESPONDING PARTYS LEDGER HAD BEEN CREDITED TO THIS EFFECT FOLLOWED BY CLOSURE OF THE ACCOUNT. THE ASSESSEE'S CASE, O N THE OTHER HAND, IS THAT IT HAD REDUCED THE POWER UNIT RATES TO PUBLIC SECTOR COMPANY (IES) TO THIS EFFECT . FACED WITH THIS SITUATION, WE ARE OF THE OPINION THA T THE INSTANT ISSUE OF BAD DEBT PERTAINING TO PUBLIC SECTOR COMPANIES ALSO REQUIRES AFRESH DETAILE D EXAMINATION REGARDING ALLEGED CORRESPONDING POWER UNITS RATE S REDUCTION FROM THE ASSESSEE'S SIDE. WE MAKE IT CLEAR THAT THE ASSESSING OFFICER SHALL ALSO EXAMINE THE INSTANT ISSUE FROM THE POINT OF VIEW OF BUSINESS L OSS U/S. 28 R.W.S. 37(1) OF THE ACT AS W ELL. ORDERED ACCORDINGLY. 5 ITA NO. 737/HYD/2017 6. THIS ASSESSEE'S APPEAL IS PARTLY ALLOWED IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 31ST MAY, 2021. SD/ - SD/ - (LAXMI PRASAD SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DT. 31 .05 .2021. * REDDY GP COPY TO : 1. M/S. VICTORY TRANSFORMERS & SWITCHGEARS LIMITED, PLOT NO.8, S.NO.855, INDUSTRIALESTATE, MEDCHAL, R.R. DISTRICT - 501401 2. DCIT, CIRCLE 17(2), HYDERABAD. 3. PR. C I T - 5 , HYDERABAD. 4. CIT(APPEALS) - 5, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.