M/S APURVA DEVELOPERS PVT LTD., MUMBAI V. DCIT 12 (1)(1), MUMBAI

ITA 7980/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 3977 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 26-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BRAJENDRA KUMAR
• Keywords: Business income; Bad and doubtful debts; Commercial expediency
• Section: 37; 201; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA (AM) & SHRI AMARJIT SINGH (JM) I.T.A. NO. 7980/MUM/2019 (ASSESSMENT YEAR 2015-16) APURVA DEVELOPERS PVT.LTD. CENTRUM HOUSE, 8 TH FLOOR PLOT NO.5445A, VILLAGE KURLA, CST ROAD KALINA, SANTACRUZ(E) MUMBAI-400 098 PAN : AAACA8270F VS. DCIT - 12(1)(1 ) ROOM NO.223, 2 ND FLOOR AAYKAR BHAWAN M.K.ROAD MUMBAI-400 020 ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY NONE DEPARTMENT BY SHRI BRAJENDRA KUMAR DATE OF HEARING 1 2 .07 .2021 DATE OF PRONOUNCEMENT 05 .10 .2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-20 DATED 23.10.2019 AND PERTAINS TO ASSESSMENT YEAR 20 15-16. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT-A HAS ERRED IN CONFIRMING DISALLOWANCE OF BAD-DEBTS CLAIMED BY THE ASSESSEE 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT-A HAS ERRED IN CONFIRMING DISALLOWANCE OF BAD-DEBTS IGNOR ING THE FACTS THAT UNDERLYING ADVANCES WERE GIVEN IN COURSE OF BUSINESS AND FOR REASONS OF COMMERCIAL EXPEDIENCY. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED CIT-A HAS ERRED IN NOT ADMITTING THE ADDITIONAL GROUND OF APP EAL TO ALLOW CLAIM OF BAD-DEBTS UNDER SECTION 37 OF THE IT ACT, 1961. ITA NO.7980/MUM/2019 2 3. BRIEF FACTS OF THE CASE ARE THAT THE IN THE PROFIT AND LOSS ACCOUNT THE APPELLANT CLAIMED EXPENDITURE OF RS.5,33,24,853/- BEING DEB TS WRITTEN OFF. THE DETAILS ARE AS UNDER: SR. NO. NAME OF THE PARTY AMOUNT (IN RS.) 1 PRIDE HILL DEVELOPERS PRIVATE LIMITED 3,00,00,000 2 DX TECHNOLOGIES 94,50,000 3 SADGURU ESTATE PRIVATE LIMITED 35,78,500 4 SINDHUDURG TRADERS PRIVATE LIMITED 1,02,96,353 IN RESPECT OF THE DEBTS WRITTEN OFF PERTAININ G TO DX TECHNOLOGIES, SADGURU ESTATE PRIVATE LIMITED AND SINDHUDURG TRADERS PRIVATE LIMI TED, THE APPELLANT SUBMITTED THAT THOSE RECEIVABLES WERE OUTSTANDING FOR LAST 6 YEARS . THE APPELLANT FURTHER SUBMITTED THAT IT WAS UNABLE TO TRACE THOSE 3 PARTIES. AS PER PARA 3.2 OF THE ASSESSMENT ORDER, THE APPELLANT SUBMITTED COPY OF FINANCIAL STATEMENTS/SC HEDULE FOR AY 2009-10 WHEREIN THE DEBTS PERTAINING TO THOSE 3 PARTIES WERE SHOWN AS 'ADVANCES AGAINST PROPERTIES' UNDER THE HEAD 'LOANS AND ADVANCES'. ACCORDING TO T HE AO, IT WAS NOT POSSIBLE TO ASCERTAIN WHETHER THOSE AMOUNTS WERE ACTUALLY OFFER ED FOR TAXATION IN ANY OF THE EARLIER ASSESSMENT YEARS FROM THE DOCUMENTS. IN VIE W OF THE ABOVE, THE AO DISALLOWED APPELLANT'S CLAIM OF BAD DEBTS WRITTEN O FF IN RESPECT OF THOSE THREE PARTIES (DX TECHNOLOGIES, SADGURU ESTATE PRIVATE LIMITED AN D SINDHUDURG TRADERS PRIVATE LIMITED) AGGREGATING TO RS. 2,33,24,853/ REGARDING THE SUM WRITTEN OFF IN RESPECT OF PRIDE HILL DEVELOPERS PVT. LTD., THE APPELLANT SUBMITTED BEFORE THE AO THAT IT HAD S OLD A PROPERTY FOR A TOTAL CONSIDERATION OF RS. 17,50,00,000/-; THAT UNDER A M EMORANDUM OF UNDERSTANDING ITA NO.7980/MUM/2019 3 ENTERED BY AND BETWEEN THE APPELLANT AND PRIDE HILL DEVELOPERS PVT. LTD., A SUM OF RS.3,00,00,000/- WAS RETAINED BY THE PRIDE HILL DEV ELOPERS PVT. LTD. PENDING COMPLIANCE WITH CERTAIN TERMS AND CONDITION; THAT D URING A.Y. 2006-07, THE APPELLANT HAD INCLUDED THE ENTIRE AMOUNT OF RS. 17,50,00,000/ - IN ITS INCOME FOR THE YEAR AS PER THE TERMS OF THE MOU; THAT THE SUM OF RS.3,00,00,00 0/- WAS RECEIVABLE FROM PRIDE HILL DEVELOPERS PVT. LTD.; THAT THE SUM OF RS. 3,00 ,00,000/-WAS WRITTEN OFF DURING THE RELEVANT PREVIOUS YEAR. THE AO REJECTED THE APPELLA NT'S CLAIM. THE RELEVANT PORTION OF THE ASSESSMENT ORDER IS REPRODUCED BELOW: I HAVE CONSIDERED THE SUBMISSION OF THE ASSESSEE BUT DO NOT FOUND TENABLE DUE TO THE FOLLOWING REASONS: (I) THE ASSESSEE SOLD BANDRA LAND ON A. Y. 2006-07 IN RESPECT OF WHICH THE ASSESSEE IS CLAIMING BAD DEBTS OF RS. 3,00,00,000/- IN RESPECT OF PRIDE HILL DEVELOPERS PVT. LTD. HOWEVER, ASSESSEE ITSELF MENTI ONED THAT AS PER THE TERMS OF THE MOU THE AMOUNT OF RS.3,00,00,000/- IS ONLY PAYABLE WHEN THE ASSESSEE WILL OBTAIN A CERTIFICATE FROM MAHARASHTRA COASTAL ZONE MANAGEMENT AUTHORITY THAT THE SAID PROPERTY IS NOT WITHIN CRZ ZONE THAT ALSO WITHIN 6 MONTHS FROM THE CONVEYANCE. FURTHER, ON GOING THROUGH THE MOU IT IS NOTICED THAT THE DATE OF DEED OF CONVEYAN CE WAS 12.08.2005. THEREFORE, IN AY 2006-07 ITSELF ASSESSEE KNOWS THAT THE AMOUNT OF RS.3,00,00,000/- IS NOT PAYABLE BY THE PRIDE HILL D EVELOPERS PVT LTD. IT IS ALSO GOT VERY MUCH CLEAR FROM THE FACT THAT THE LET TER FROM CRZ AUTHORITIES REJECTING THE CLAIM OF THE ASSESSEE IS DATED AUGUST 2005 ONLY. BUT THE ASSESSEE NEITHER CLAIMED THE BAD DEBTS ON THE CORRE SPONDING PERIOD NOR IN THE LATER YEAR TILL 2014-15. HOWEVER, ASSESSEE HAS NOT SUBMITTED ANY EXPLANATION IN THIS REGARD WHY IT HAS NOT CLAIMED T HE IMPUGNED BAD DEBTS DURING THE PERIOD A.Y. 2006-07 TO A.Y. 2014-15. FUR THER, AS PER THE ITA NO.7980/MUM/2019 4 PROVISIONS OF LIMITATION ACT 1963, THE CLAIM OF THE ASSESSEE OF RS.3,00,00,000/- AGAINST THE PRIDE HILL DEVELOPERS PVT LTD. IT IS ALSO NOT LEGALLY ENFORCEABLE. (II) IN THE A YS 2015-16 THE ASSESSEE CLAIMED THE B AD DEBTS OF RS.3,00,00,000/- IN RESPECT OF PRIDE HILL DEVELOPERS PVT. LTD. FOR WHIC H IT HAS NOT GIVEN ANY REASON. HOWEVER, ON GOING THROUGH THE SUBMISSION IT IS NOTI CED THAT IN LAST MANY YEARS ASSESSEE HAS NOT OFFERED ANY BUSINESS INCOME. BUT T HIS YEAR THE ASSESSEE HAS SOLD THE LAND DEVELOPMENT RIGHTS OF REDSTONE PROJECTS AT BENGALURU AND RECEIVED LONG TERM CAPITAL GAIN. THAT IS THE ONLY REASON FOR CLAI MING OF BAD DEBTS IN THIS YEAR THUS THE CURRENT YEAR BUSINESS LOSS WILL BE SET OFF AGAINST CURRENT YEAR LONG TERM CAPITAL GAIN. IF THE ASSESSEE HAD EARLIER CLAIMED B USINESS LOSS/BAD DEBTS THAN AS PER THE . PROVISIONS OF I.T. ACT, 1961 THE CARRY FORWA RDED BUSINESS LOSS IS NOT ADJUSTABLE AGAINST THE LONG TERM CAPITAL GAIN FOR A .Y. 2015-16. THEREFORE, ASSESSEE WAITED FOR THE TIME WHEN IT RECEIVES THE L ONG TERM CAPITAL GAIN LAND DEVELOPMENT RIGHTS OF REDSTONE PROJECTS AT BENGALUR U AND CLAIMED THE BAD DEBTS. THE ASSESSEE THUS TRIES TO EVADE THE LEGITIMATE TAX ON LONG TERM CAPITAL GAIN BY CLAIMING BAD DEBTS IN THE CONCERNED YEAR. THEREFORE , IT IS THE CLEAR TACTICS FROM THE SIDE OF THE ASSESSEE TO REDUCE ITS INCOME AND CLAIM THE LOSS. THE DUTY OF THE ASSESSING OFFICER IS NOT ONLY ASSESSED THE INCOME O F THE ASSESSEE BUT ALSO LIFT THE CORPORATE VEIL IN RESPECT OF TAXATION. ACCORDINGLY, THE CLAIM OF BAD DEBTS OF RS. 3,00,00,000/- IN RESPECT OF PRIDE HILL DEVELOPERS P RIVATE LIMITED FOR THE A. Y. 2015-16 IS DISALLOWED AND ADDED BACK TO THE TOTAL I NCOME OF THE ASSESSEE.' 4. UPON ASSESSEES APPEAL LD.CIT(A) DELETED THE D ISALLOWANCES BY HOLDING AS UNDER:- IN RESPECT OF DX TECHNOLOGIES, SADGURU ESTATE PRI VATE LIMITED AND SINDHUDURG TRADERS PRIVATE LIMITED, I FIND THAT THE SUMS WRITTEN OFF REPRESENTED ITA NO.7980/MUM/2019 5 ADVANCES GIVEN TO THOSE PARTIES AGAINST PROPERTIES. THUS, IT IS CLEAR THAT THOSE DEBTS DID NOT ARISE FROM ANY SALES MADE BY THE APPELLANT TO THOSE PARTIES. THIS MEANS THAT THOSE AMOUNTS WERE NOT TAKEN INTO CONSIDERATION IN THE COMPUTATION OF THE APPELLANT'S INCOME IN ANY EARLIER YEAR. THEREFORE, CONDITION LA ID DOWN IN SECTION 36(2) IS NOT SATISFIED IN THIS CASE. SECTION 36(2) READS AS UNDE R: '(I) NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR REPR ESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY -LENDING WHICH IS CARRIED ON BY THE ASSESSEE;' THE APPELLANT'S RELIANCE ON THE ORDER OF THE HON'B LE ITAT MENTIONED IN PARAGRAPH 4.3.1 ABOVE IS MISPLACED BECAUSE IN THAT CASE THE ISSUE BEFORE THE ITAT WAS ALLOWABILITY OF INTEREST EXPENDITURE AND NOT BA D DEBTS. 4.4,3 IN VIEW OF THE FACTS AND CIRCUMSTANCE MENTION ED ABOVE, THE BAD DEBTS CLAIMED BY THE APPELLANT IN RESPECT OF DX TECHNOLOGIES, SAD GURU ESTATE PRIVATE LIMITED AND SINDHUDURG TRADERS PRIVATE LIMITED ARE NOT ALLOWABL E. ACCORDINGLY, I CONFIRM DISALLOWANCE OF RS.2,33,24,853/-. AS REGARDS THE BAD DEBT CLAIMED BY THE APPELLANT I N RESPECT OF PRIDE HILL DEVELOPERS PRIVATE LIMITED, THERE IS NO DISPUTE THA T THE SUM WAS TAKEN INTO CONSIDERATION IN THE COMPUTATION OF THE APPELLANT'S INCOME FOR THE AY 2006-07. THE AO HAS NOT ALSO DISPUTED THE FACT THAT THE APPELLAN T HAD WRITTEN OFF THE SAID SUM IN ITS BOOKS OF ACCOUNTS. THE AO'S CONTENTION THAT THE APP ELLANT COULD HAVE WRITTEN OFF THE DEBT IN ANY OF THE INTERVENING ASSESSMENT YEARS (AY 2007-08 TO AY 2014-15); THAT THE APPELLANT HAD WRITTEN OFF THE SUM IN THE AY 201 5-16 SO THAT THE RESULTING LOSS CAN BE SET OFF AGAINST THE CAPITAL GAIN EARNED BY THE A PPELLANT DURING THE PREVIOUS YEAR 2015-16; THAT THE APPELLANT CANNOT BE ALLOWED TO WR ITE OFF THE BAD DEBT WITH A VIEW TO MINIMISING ITS TAX LIABILITY. THE CONTENTION OF THE AO, IN MY VIEW IS NOT CORREC T. THERE IS NOTHING WRONG IN TAX PLANNING PER SE. IT IS FOR THE ASSESSEE TO D ECIDE WHEN THE BAD DEBT IS TO BE WRITTEN OFF. THEREFORE, IF THE ASSESSEE WRITES OFF A BAD DEBT WITH A VIEW TO MINIMISING ITS LIABILITY, NO FAULT CAN BE FOUND WITH THE ASSES SEE. IT IS NOT THE AO'S CASE THAT THE APPELLANT HAS DISGUISED ANY TRANSACTION OR USED ANY UNFAIR MEANS TO/COLOURABLE DEVICE TO MINIMISE ITS TAX LIABILITY. THE AO HAS MERELY QUESTIONED THE 'TIMING' OF THE WRITING OFF OF THE BAD DEBT. IN MY VIEW AO CANNOT DICTATE TO THE ASSESSEE WHEN TO WRITE OFF A BAD DEBT. IN MY VIEW, IN THIS CASE THE APPELLANT WAS WELL WITHIN ITS RIGHT TO WRITE OFF THE BAD DEBT DURING T HE P.Y. 2014-15. THE CONDITIONS NECESSARY FOR ALLOWING BAD DEBTS ARE SATISFIED IN T HIS CASE. THEREFORE IN MY VIEW, THE ITA NO.7980/MUM/2019 6 DISALLOWANCE OF RS. 3,00,00,000/- IS NOT SUSTAINABL E. ACCORDINGLY I DIRECT THE AO TO DELETE THE ADDITION OF RS. 3,00,00,000/-. 5. AGAINST THE ABOVE ORDER, ASSESSEE HAS FILED AP PEAL. NO APPEAL BY THE REVENUE HAS BEEN BROUGHT TO OUR NOTICE. 6. WE HAVE HEARD THE LD. DR. NONE APPEARED. 7. WE FIND THAT ON THE IMPUGNED ISSUE OF BAD DEB T, IT IS THE ASSESSEES GROUND THAT IT HAS RAISED AN ADDITIONAL GROUND BEFORE LD.CIT(A) T HAT THE CLAIM MAY BE CONSIDERED U/S. 37 OF THE I.T.ACT. 8. WE NOTE THAT THE ASSESSEES PLEA DESERVES CONS IDERATION. THE DENIAL OF ASSESSEES CLAIM AS BAD DEBT IS ON THE PLEAS THAT AO HAS NOT BEEN ABLE TO FIND OUT WHETHER CONCERNED INCOME WAS EARLIER OFFERED OR NOT AND THA T THE AMOUNT WAS LYING IN ADVANCES. HENCE, THIS ALTERNATIVE CLAIM TO CONSID ER IT AS BUSINESS LOSS DESERVES ADJUDICATION. 9. HENCE, WE REMIT THE ISSUE TO THE FILE OF LD.CI T(A) TO ADJUDICATE THE SAID ADDITIONAL GROUND FILED BEFORE HIM. 10. IN THE RESULT, ASSESSE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 05 .10.202 1. SD/- SD/- (AMARJIT SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 05 /10/2021 THIRUMALESH, SR.PS ITA NO.7980/MUM/2019 7 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. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) ITAT, MUMBAI