CLASSIC ENTERPRISES LTD., BHIWADI V. JCIT, Alwar

ITA 808/JPR/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4874 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 27-11-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Assessee Lawyers: KRANTI MEHTA
• Keywords: Bad and doubtful debts

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 808/JP/2014 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2010-11 M/S CLASSIC ENTERPRISES LTD. A(6) C- INDUSTRIAL AREA, KAHRANI BHIWADI EXTEN.,BHIWADI, ALWAR CUKE VS. JT. COMMISSIONER OF INCOME TAX, RANGE-2, ALWAR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCC 1503 C VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI KRANTI MEHTA (CA) JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROSHANTA MEENA (J CIT ) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 26.10.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 21/12/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A), ALWAR DATED 26.09.2014 WHEREIN THE ASSESSEE HAS TA KEN FOLLOWING GROUNDS OF APPEAL: (I) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A). ALWAR ERRED IN SUSTAINING THE ADDITION OF COMMISSION OF RS. 4,40,820/- PAID GENUINELY BY THE APPELLANT TO TWO NON-RESIDENCE P ARTIES ON THE GROUND THAT TDS SHOULD HAVE BEEN DEDUCTED FROM THIS AMOUN T EVEN WHEN THE PROVISIONS OF DEDUCTION OF TDS WERE NOT APPLICABLE IN THIS CASE. ACCORDINGLY THE REASONABLE AND GENUINE COMMISSION O F RS. 4,40,820/- DESERVES TO BE ALLOWED AND THE DISALLOWANCE MADE B Y THE AO DESERVES TO BE DELETED. ITA NO. 808/JP/14 M/S CLASSIC ENTERPRISES LTD. VS. JCIT, RANGE-2, ALW AR. 2 (II) THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A). ALWAR ERRED IN SUSTAINING THE ADDITION OF FDR INTEREST IN COME OF RS.4,35,333/- EVEN WHEN THE INTEREST INCOME STANDS ALREADY TAXED AND SUSTENANCE OF THIS ADDITION HAS RESULTED IN DOUBLE TAXATION. ACC ORDINGLY THE ADDITION OF RS.4,35,333/- DESERVES TO BE DELETED. (III) THAT UNDER THE FACTS AND CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A). ALWAR ERRED IN SUSTAINING THE DISALLOWANCE OF GENUINE BAD DEBTS OF RS. 21,283/- EVEN WHEN THE AMOUNT WAS ALLOWABLE UNDER THE PROVI SIONS OF IT ACT. ACCORDINGLY THE DISALLOWANCE OF RS. 21,283/- DESERV ES TO BE DELETED. 2. IN RESPECT OF GROUND NO.1 OF THE ASSESSEES APPEAL, BRIEFLY THE FACTS OF THE CASE ARE THAT A DISALLOWANCE OF RS. 4,40,820/- HAS BEEN MADE BY THE AO U/S 40(A)(IA) OF THE IT ACT ON ACCOUNT OF NON DEDUC TION OF TDS U/S 195 OF THE ACT ON COMMISSION PAID TO TWO FOREIGN PARTIES. UND ISPUTEDLY, THE COMMISSION HAS BEEN PAID TO TWO FOREIGN PARTIES OUTSIDE INDIA ON ACCOUNT OF SALES ORDERS PROCURED BY THEM FOR THE ASSESSEE. THE ORDERS WERE OBTAINED BY THEM FROM OUTSIDE INDIA AND NO SERVICES HAVE BEEN RENDERED BY THEM IN INDIA. PAYMENTS HAVE ALSO BEEN MADE OUTSIDE INDIA. UNDER THE PROVI SIONS OF SECTION 5 AND SECTION 9 OF THE ACT, THE SAID COMMISSION PAYMENT O N EXPORT SALES CANNOT BE HELD CHARGEABLE TO TAX IN INDIA. IN VIEW OF THAT, THE PROVISIONS OF SECTION 195 ARE NOT APPLICABLE AND THUS THE PROVISIONS OF SECTI ON 40(A)(IA) HAVE WRONGLY BEEN APPLIED BY THE AO. THE ADDITION THUS MADE UND ER SECTION 40(A)(IA) IS THUS DELETED AND GROUND OF APPEAL IS ALLOWED. 3. IN RESPECT OF GROUND NO.2 OF THE ASSESSEES APPEAL, AN ADDITION OF RS. 4,35,333/- HAS BEEN MADE BY THE AO ON ACCOUNT OF UNDER-STATEMENT OF INTEREST INCOME EARNED BY THE APPELLANT. THE DIFFE RENCE IN THE INTEREST INCOME DECLARED BY THE APPELLANT IN THE RETURN OF INCOME F ILED AND INTEREST INCOME SHOWN IN FORM 26AS OF THE INCOME TAX DEPARTMENT HAS BEEN ASSESSED BY THE AO AS INTEREST INCOME NOT DECLARED. THE APPELLANT H AS STATED THAT THERE WAS NO FDR WITH THE BANK OTHER THAN THE MARGIN MONEY AS PE R THE BALANCE SHEET OF THE APPELLANT AND THE AO HAS IMAGINARILY CALCULATED THE INTEREST INCOME OF RS. 4,35,333/-. IT WAS FURTHER SUBMITTED THAT AS FAR A S THE DIFFERENCE OF INTEREST INCOME AS PER FORM 16A AND AS SHOWN IN PROFIT AND L OSS ACCOUNT IS CONCERNED, IT IS SUBMITTED THAT TOTAL INTEREST OF RS. 34,96,51 5/- EARNED FROM BANK HAS BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT OVER A PERIOD OF SEVEN FINANCIAL YEARS I.E. FY 2006-07 TO FY 2012-13 AS AGAINST RS. 34,01,526/- AS PER FORM NO. 16A/FORM 26AS. HENCE AN EXCESS INTEREST OF RS. 94,989/- HAS BEEN ACCOUNTED FOR DURING THESE FINANCIAL YEARS. WE HAVE GIVEN A CAREFUL CONS IDERATION TO ALL OF THE ITA NO. 808/JP/14 M/S CLASSIC ENTERPRISES LTD. VS. JCIT, RANGE-2, ALW AR. 3 APPELLANTS CONTENTION. FROM THE PERUSAL OF MATERI AL AVAILABLE ON RECORD, IT IS NOTED THAT THE APPELLANT HAS SHOWN INTEREST INCOME OF RS 2,79,949 IN ITS PROFIT/LOSS ACCOUNT AS AGAINST RS 4,17,671 REFLECTE D IN FORM 26AS FROM CORPORATION BANK ON WHICH TDS OF RS 43,619 HAS BEEN DONE . IN THE RETURN OF INCOME, THE APPELLANT HAS CLAIMED CREDIT OF THE WHO LE OF SUCH TDS OF RS 43,619 WHICH IN TERMS OF SECTION 199 OF THE ACT, IMPLIEDLY MEANS THAT THE CORRESPONDING INCOME HAS BEEN OFFERED TO TAX AND WH ERE THE SAME IS NOT OFFERED TO TAX, IT SHOULD BE BROUGHT TO TAX IN THAT YEAR. THERE CANNOT BE A SITUATION WHERE THE CREDIT FOR TDS IS MADE IN ONE Y EAR AND INCOME IS OFFERED TO TAX IN ANOTHER YEAR. IN VIEW OF THAT, IN THE INSTA NT CASE, WHERE THE APPELLANT HAS EARNED INTEREST INCOME ON FDR PLACED WITH CORPO RATION BANK AND AN AMOUNT OF RS 2,79,949 HAS ONLY BEEN OFFERED TO TAX, AN ADDITION TO EXTENT OF RS 1,37,722 (RS 4,17,671 LESS RS 2,79,949) HAS RIGHTLY BEEN MADE BY THE AO. THE APPELLANT THEREFORE GETS RELIEF OF RS 2,79,949 WHIC H HAS ALREADY BEEN OFFERED TO TAX AND ADDITION TO THAT EXTENT IS DELETED. THE GROUND OF APPEAL IS THUS PARTLY ALLOWED. 4. IN GROUND NO.3 OF ASSESSEES APPEAL, AN ADDITION OF RS. 21,283/- HAS BEEN MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF BAD DE BTS. THE APPELLANT HAS SUBMITTED THAT THE AMOUNTS ARE SMALL AND ARE NOT RE COVERABLE FROM VARIOUS PARTIES AND HAVE THUS BEEN WRITTEN OFF. THE LD CIT (A) HAS GIVEN A FINDING THAT MOST OF THESE PAYMENTS CLAIMED AS BAD DEBTS HAVE BE EN SHOWN IN THE BOOKS AS EXCESS PAYMENT MADE FOR PURCHASE OF CONSUMABLE S TORES, FREIGHT OUTWARDS, STAFF ADVANCE ETC. IT IS THUS NOT IN DISPUTE THAT T HESE EXCESS PAYMENTS ARE TOWARDS VARIOUS EXPENDITURE PERTAINING TO THE BUSIN ESS OF THE APPELLANT AND THUS THE TEST OF BUSINESS EXPEDIENCY IS SATISFIED. FURTHER, THE SAME HAVE BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS DURING THE YEA R UNDER CONSIDERATION. IN OUR VIEW, SUCH WRITTEN OFF OF SUNDRY BUSINESS ADVAN CES ARE IN THE COURSE OF CARRYING ON THE BUSINESS OF THE ASSESSEE AND ARE AL LOWABLE IN THE HANDS OF THE ASSESSEE. THE GROUND OF APPEAL IS THUS ALLOWED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21/12 /2016. SD/- SD/- (KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 808/JP/14 M/S CLASSIC ENTERPRISES LTD. VS. JCIT, RANGE-2, ALW AR. 4 JAIPUR DATED:- 21/12/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S CLASSIC ENTERPRISES LTD. ALWAR 2. IZR;FKHZ@ THE RESPONDENT- THE JCIT RANGE-2, ALWAR 3. VK;DJ VK;QDR@ CIT ALWAR 4. VK;DJ VK;QDRVIHY@ THE CIT(A) ALWAR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.808/JP/2014) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR.