ACIT CIR 3(3), MUMBAI V. TEXOOL LTD, MUMBAI

ITA 7457/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1104 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 08-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 17-12-2012
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK LD
• Assessee Lawyers: BALDEV U IDNANI LD
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.7457/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(3) ROAD.NO. 609, 6 TH FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI 400 020 / VS. TEXOOL LIMITED 6 JENKINS HOUSE HENRY ROAD COLABA MUMBAI - 400005 ! ./ ./PAN/GIR NO. AAACT-1453-B ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# / APPELLANT BY : DR. A.K.NAYAK, LD. DR $%!# / RESPONDENT BY : SHRI BALDEV U. IDNANI, LD. AR / DATE OF HEARING : 27/04/2017 / DATE OF PRONOUNCEMENT : 28/04/2017 ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2009-2010 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-7, [CIT(A)], MUMBAI DATED 14/08/2012 QUA RELIEF PROVIDED TO THE ASSESSEE BY LD. CIT(A) AGAINST CERTAIN DISALLOWANCES MADE BY AO AGAINST BAD DEBTS AND RENT PAYMENTS . 2. BRIEFLY STATED, THE ASSESSEE, BEING RESIDENT COR PORATE ASSESSEE, WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) FOR IMPUGNED AY WHEREIN THE TOTAL INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1,37,01 ,290/- AFTER CERTAIN ADJUSTMENTS AND DISALLOWANCES AS AGAINST RETURNED I NCOME OF RS.66,74,732/- E-FILED BY THE ASSESSEE ON 30/09/2009. DURING ASSESSMENT PR OCEEDINGS, IT WAS NOTICED THAT THE ASSESSEE CLAIMED AN EXPENDITUR E OF RS.62,33,713/- UNDER THE HEAD CLAIMS PAYABLE, WHICH WERE NOTHING BUT BAD DEBTS WRITTEN OFF BY THE ASSESSEE. HOWEVER, THE AO REJECTED THE CLAIM OF THE ASSESSEE ON THE PREMISES THAT THE ASSESSEE FAILED TO SUBSTANTIATE T HE FACT THAT THESE DEBTS WERE OFFERED TO TAX IN EARLIER YEARS. FURTHER, THE ASSESSEE CLAIMED CERTAIN AMOUNT UNDER THE HEAD RENT WHICH INCLUDED AN AMOUNT OF RS.3,10,000/- PAID TO REGIONAL OFFICE PAY & ACCOUNTS ON BEHALF OF AN ENTITY NAMELY SHANLOK ENTERPRISES. THE SAME WAS ALSO DISALLOWED ON THE PREMISES THAT T HE SAME WAS INCURRED ON BEHALF OF A THIRD PARTY AND NOT INC URRED FOR THE ASSESSEES BUSINESS. AGGRIEVED, THE ASSESSEE CONTESTED BOTH TH E ADDITIONS BEFORE LD. CIT(A) SUCCESSFULLY VIDE ORDER DATED 14/08/2012 WHE REIN THE LD. CIT(A) AFTER CONSIDERING THE VARIOUS CONTENTIONS DELETED BOTH TH E ADDITIONS AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 3. THE LD. DEPARTMENTAL REPRESENTATIVE ASSAILED THE FINDINGS OF THE LD. CIT(A) ON THE GROUND THAT THE ASSESSEE COULD NOT SU BSTANTIATE THE FACT ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 3 WHETHER THE DEBTS WRITTEN OFF WERE OFFERED TO TAX IN EARLIER YEARS AND THE LD. CIT(A) PROVIDED RELIEF TO THE ASSESSEE WITHOUT DUE VERIFICATION OF THE SAME. FURTHER, THE RENT WAS PAID ON BEHALF OF A THIRD PER SON PURPORTEDLY FOR THE USE OF HIS PREMISES. HOWEVER, THE ASSESSEE COULD NOT PR ODUCE ANY LEASE AGREEMENTS WITH THE SAID PARTY AND ALSO COULD NOT S UBSTANTIATE THE FACT WHETHER HE HAS USED THE PREMISES FOR HIS BUSINESS P URPOSES AND HENCE RIGHTLY SUFFERED DISALLOWANCE AT THE HANDS OF AO. P ER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] PLACED RELIANCE ON THE STAND OF LD. C IT(A) AND CONTENDED THAT THE ASSESSEE HAS WRITTEN OFF SUNDRY DEBTORS IN HIS BOOKS OF ACCOUNTS WHICH IN ITSELF IS SUFFICIENT TO CLAIM THE BAD DEBTS AS NO O THER CONDITIONS IS REQUIRED TO BE FULFILLED IN THIS REGARD AS PER THE RELEVANT PRO VISIONS OF SECTION 36(I)(VII). THESE DEBTS WERE SHOWN AS SUNDRY DEBTORS IN THE BAL ANCE SHEET OF EARLIER YEARS AND HENCE, THE BAD DEBTS WRITTEN OFF WERE ALL OWABLE TO THE ASSESSEE. REGARDING RENTAL PAYMENT, IT WAS CONTENDED THAT THE ASSESSEE WAS OPERATING IN KANDLA SPECIAL ECONOMIC ZONE AND WAS ALLOTTED LAND BY THE AUTHORITY. HOWEVER THE ALLOTTED PREMISES WAS NOT SUFFICIENT TO FULFILL THE REQUIREMENTS OF THE ASSESSEE AND THEREFORE, THE ASSESSEE TOOK AN AD JACENT PREMISES FROM SHANLOK ENTERPRISES ON RENT UNDER ORAL AGREEMENT AND PAID THE SAID AMO UNT DIRECTLY TO THE AUTHORITY ON BEHALF OF THIS ENTITY. NEVERTHELESS, THE PREMISES WAS USED FOR THE BUSINESS PURPOSES OF THE ASSESSE A ND HENCE, HE WAS ELIGIBLE TO CLAIM THE SAME. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SO FAR AS REGARDING THE BAD DEBTS CLAIM IS CONCERNED, WE FIND STRENGTH IN THE ARGUMENTS OF LD. AR THAT THE ONLY R EQUIREMENT TO CLAIM THE BAD DEBTS IS THAT THE SAME ARE WRITTEN OFF AS RECOVERAB LE IN THE BOOKS OF ACCOUNTS AND THE ASSESSEE NEED NOT PROVE THAT THE DEBTS, IN FACT, HAVE BECOME ACTUALLY BAD. HOWEVER, SUCH WRITE OFF COULD BE CLAIMED BY AS SESSEE ONLY IF REVENUE ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 4 QUA THOSE BAD DEBTS WAS OFFERED TO TAX IN THE YEAR OF W RITE OFF OR IN EARLIER YEARS. THE LD. AR COULD NOT CONCLUSIVELY PROVE THIS POINT DURING PROCEEDING BEFORE US AND MERELY STATED THAT THESE WERE SUNDRY DEBTORS WRITTEN OFF. THEREFORE, IN PRINCIPLE, WHILE HOLDING THAT THE BAD DEBTS CLAIM OF THE ASSESSEE WAS ALLOWABLE, BEING WRITTEN OFF AS IRRECOVERABLE I N THE BOOKS OF ACCOUNTS, WE RESTORE THE MATTER BACK TO THE FILE OF AO FOR LIMIT ED PURPOSE OF VERIFYING WHETHER THE REVENUE QUA THOSE DEBTS WAS OFFERED TO TAX EITHER IN IMPUGNED AY OR IN EARLIER AY. THE ASSESSEE IS DIRECTED TO SU BSTANTIATE HIS CLAIM IN THIS REGARD BEFORE LD. AO FAILING WHICH THE AO SHALL BE AT LIBERTY TO ADJUDICATE THE SAME ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. THE FIRST GROUND OF ASSESSEES APPEAL STANDS ALLOWED FOR STATISTICAL PU RPOSES. 5. REGARDING RENTAL PAYMENTS, WE FIND NO ILLEGALITY IN DIRECT PAYMENT BY ASSESSEE TO THE AUTHORITY ON BEHALF OF THE LESSOR U NDER AN ORAL AGREEMENT. HOWEVER, THE PAYMENT BY ASSESSEE ON BEHALF OF LESSO R CONSTITUTES RENTAL INCOME IN THE HANDS OF THE LESSOR. THEREFORE, IF THE LESS OR HAS OFFERED THE SAME IN HIS RETURN OF INCOME, THE ASSESSEES CLAIM GAINS STRENGTH AND BECOMES ADMISSIBLE. THEREFORE, THIS MATTER IS ALSO RESTORED BACK TO THE FILE OF LD. AO TO VERIFY WHETHER THE STATED ENTITY HAS OFFE RED THE IMPUGNED PAYMENTS MADE BY THE ASSESSEE IN HIS RETURN OF INCOME OR NOT . IF YES, THEN THE CLAIM OF THE ASSESSEE BECOMES ADMISSIBLE. THE ASSESSEE IS AL SO DIRECTED TO PROVIDE NECESSARY DOCUMENTS IN THIS REGARD AND SUBSTANTIATE HIS CLAIM FAILING WHICH THE LD. AO SHALL BE AT LIBERTY TO DECIDE THE SAME I N ACCORDANCE WITH LAW. THIS GROUND OF ASSESSEES APPEAL ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 5 6. IN NUTSHELL, THE ASSESSEES APPEAL STANDS ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH APRIL, 2017. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 28 .04.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. $. , . , / DR, ITAT, MUMBAI 6. /0 / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 6 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.7457/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 3(3) ROAD.NO. 609, 6 TH FLOOR AAYAKAR BHAVAN M.K.ROAD MUMBAI 400 020 / VS. TEXOOL LIMITED 6 JENKINS HOUSE HENRY ROAD COLABA MUMBAI 400005 ! ./ ./PAN/GIR NO. AAACT-1453-B ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !# / APPELLANT BY : DR. A.K.NAYAK, LD. DR $%!# / RESPONDENT BY : SHRI BALDEV U. IDNANI, LD. AR C O R R I G E N D U M 1. IT IS NOTICED THAT CERTAIN UNFORESEEN TYPOGRAPHI CAL ERRORS HAVE OCCURRED IN THE ABOVE ORDER PASSED BY THE CO-ORDINA TE BENCH OF TRIBUNAL ON 28/04/2017 WHICH ARE BEING SOUGHT TO BE RECTIFIE D BY WAY OF THIS CORRIGENDUM. ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 7 2. THE RELEVANT MODIFICATIONS IN THE ABOVE ORDER AR E CARRIED OUT AS UNDER:- (A) PARA-4 LINE-4 OF THE ORDER READ AS FOLLOWS: SAME ARE WRITTEN OFF AS RECOVERABLE IN THE BOOKS . THE SAME IS REPLACED BY FOLLOWING WORDS:- ..SAME ARE WRITTEN OFF AS IRRECOVERABLE IN THE B OOKS. (B) LAST LINE OF PARA-4 OF THE ORDER READ AS FOLLOW S: ASSESSEES APPEAL STANDS ALLOWED FOR STATISTIC AL PURPOSES. THE SAME IS REPLACED BY FOLLOWING WORDS:- REVENUES APPEAL STANDS ALLOWED FOR STATISTICA L PURPOSES. (C) LAST LINE OF PARA-5 OF THE ORDER READ AS FOLLOW S: GROUND OF ASSESSEES APPEAL ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. THE SAME IS REPLACED BY FOLLOWING WORDS:- GROUND OF REVENUES APPEAL ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. (D) PARA-6 OF THE ORDER READ AS FOLLOWS: THE ASSESSEES APPEAL STANDS ALLOWED FOR STATIS TICAL PURPOSES THE SAME IS REPLACED BY FOLLOWING WORDS:- THE REVENUES APPEAL STANDS ALLOWED FOR STATIST ICAL PURPOSES ITA NO.7457/M/2012 TEXOOL LIMITED ASSESSMENT YEAR:2009-10 8 SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02.05.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / !# 2. RESPONDENT / $%!# 3. THE CONCERNED CIT(A)/ +2 , 4. THE CONCERNED CIT / +2 5. DR B BENCH, ITAT, MUMBAI / $. , , . . . 6. GUARD FILE/ -0 % $ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.