Vadilal Enterprises Ltd., Ahmedabad V. The ACIT.,Circle-8, Ahmedabad

ITA 853/AHD/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60417 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SAPORKAR
• Keywords: Business expenditure; Bad and doubtful debts
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT ME MBER I.T.A. NO.853/AHD/2012 A. Y. 2008-09 VADILAL ENTERPRISES LTD. VADILAL HOUSE, SHRIMALI SOCIETY, NAVRANGPUPRA, AHMEDABAD-380009 PAN-AABCV0988J APPELLANT VS. ASST. COMMISSIONER OF INCOME TAX, RANGE-8 AHMEDABAD RESPONDENT DEPARTMENT BY : SHRI VINOD TANWANI, SR. D.R. ASSESSEE BY : SHRI S.N. SAPORKAR, A.R. DATE OF HEARING : 09.05.2012 DATE OF PRONOUNCEMENT : 25.05.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATED 10.02.2012, PASSED IN APPEAL NO.CIT (A) XIV/AC.CIR.- 8/191/10-11. 2. THE ASSESSEE HAS TAKEN FOLLOWING EFFECTIVE GROU ND OF APPEAL:- THE LD. COMMISSIONER (APPEAL) ERRED IN CONFIRMING THE ACTION OF THE A.O. IN DISALLOWING PROVISION FOR DOUBTFUL ADVANCES OF R S.7,12,000/- ON THE GROUND THAT THE SAID AMOUNT IS MERE PROVISION FOR DOUBTFUL ADVANCES. 3. THE A.O. WHILE MAKING THIS ADDITION HAS OBSERVE D AS UNDER:- ITA NO.853/AHD/2012 , A.Y. 2008-09 2 DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD DEBITED RS.712000/- AS PROVISIONS FOR DOUBTFUL DEBT S AND ADVANCES. THE PROVISIONS BEING IN THE NATURE OF A CONTINGENT LIABILITY, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY DISALLOWANCE SHOU LD NOT BE MADE. THE ASSESSEE VIDE LETTER DATED 16.12.2010 FURNISHED THE REPLY. THE REPLY OF THE ASSESSEE HAS BEEN DULY CONSIDERED. AS HAS BEEN HELD BY VARIOUS JUDICIAL DECISIONS A LIABILITY WHICH IS ONLY CONTINGENT IN NATURE AND IS NOT AN ASCERTAINED LIABILITY IS NO T ALLOWABLE AS THE BUSINESS EXPENDITURE. RELIANCE IN THIS REGARD IS P LACED UPON THE FOLLOWING DECISIONS: RAJASTHAN STATE MINES AND MINERALS LTD. VS. CIT(RAJ ) 208 ITR 1010 T.N. SMALL INDUSTRIES DEV. CORPN. VS. CIT(MAD) 242 ITR 122 ALEMBIC CHEMICAL WORKS LTD. VS. DCIT (GUJ)266 ITR 4 7 SHREE SAJJAN MILLS LTD VS. CIT (1985) 156 ITR 585 ( SC) INDIAN MOLASSES CO. (P) LTD. VS. CIT (1959)37 ITR 6 6 (SC) MAHADEO GANGAPRASAD VS. SECOND ITO (1966) 61 ITR 38 4 (BOM) MYSORE LAMP WORKS LTD. VS. CIT (1990) 52 TAXMAN 96 CIT VS. GEMINI CASHEW SALES CORP. (1967) 65 ITR 643 (SC) 4. BEFORE LD. CIT(A) THE ASSESSEE RELIED ON THE FO LLOWING WRITTEN SUBMISSIONS:- YOUR ASSESSEE HAS MADE PROVISIONS FOR DOUBTFUL ADV ANCES OF RS.7,12,008/-. DURING THE COURSE OF BUSINESS, Y OUR ASSESSEE HAS MADE VARIOUS ADVANCES AS PER THE ATTACHED ANNEXURE A ATTACHED HEREWITH FOR THE PURPOSE OF BUSINESS. THE BREAK UP OF THE SAME ARE AS UNDER: 1. DEPOSIT FOR TENDER : RS.2,37,168/- THE COMPANY HAS FILED VARIOUS TENDER WITH GOVERNMEN T AND CENTRAL GOVERNMENT FOR ICE CREAM SUPPLY. AFATER THE CONSTANT FOLLOW UP TO RECOVERED THE AMOUNT BY WAY O F REFUND NO SUCH REFUND RECEIVED TILL DATE AND RESULT ED MANAGEMENT HAS DECIDED TO MAKE PROVISION FOR DOUBTF UL ADVANCES. 2. SECURITY DEPOSIT : RS.3,86,607/- THE COMPANY HAS GIVEN VARIOUS DEPOSIT FOR THE BUSIN ESS PURPOSE, BUT HOWEVER DUE TO SOME DISPUTES, THE SAID DEPOSIT COULD NOT REFUND TILL DATE AND MANAGEMENT H AS DECIDED TO MAKE PROVISIONS FOR DOUBT FULL ADVANCES. 3. STAFF ADVANCE : RS.88,000/- THE COMPANY HAS GIVEN ADVANCE FOR TRAVELING TO THE EMPLOYEE FOR THE OFFICIAL WORK PURPOSE. BUT THE SA ME HAS NOT CLEARED THEIR ADVANCE NOR GIVEN ANY VOUCHER WIT H ITA NO.853/AHD/2012 , A.Y. 2008-09 3 SUPPORTING TO SETTLE THE ADVANCE AND LEFT THE SERVI CES. RESULTED THE MANAGEMENT HAS DECIDED TO MAKE PROVISI ON FOR DOUBT FULL ADVANCES. 4. CONTRACTORS : RS.233/- CONTRACTORS, WHO HAS GIVEN ADVANCES TO MEET EXPENDI TURE LIKE DIESEL, REPAIRS ETC., WHO HAS NOT SUBMITTED TH E DETAILS AND LEFT THE WORK WITHOUT THE SETTLED THE TRIP. RE SULTED THE AMOUNT PROVIDED AS DOUBT FULL ADVANCES. FROM THE ABOVE MENTIONED FACTS, IT IS VERY CLEAR TH AT THE PROVISION IS ASCERTAINED AND PROVIDED AS DOUBT FULL ADVANCES, WHICH IS ALLOWABLE BUSINESS EXPENDITURE U/S. 37(1) OF THE I. T. ACT, 1961. 5. LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSE SSEE OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER A ND THE SUBMISSION FILED BY THE APPELLANT. THE APPELLANT H AS CLAIMED THE DEDUCTION ON ACCOUNT OF PROVISION FOR DOUBTFUL DEBT S AND ADVANCES. THE A.O. HELD THAT THE PROVISION WAS CON TINGENT IN NATURE AND NOT AN ASCERTAINED LIABILITY AND, THEREF ORE, DISALLOWED THE CLAIM AS BUSINESS EXPENDITURE. THE APPELLANT H AS SUBMITTED THAT ALL THE ITEMS ARE ASCERTAINED AND, THEREFORE, THE EXPENDITURE IS ALLOWABLE U/S.37(1) OF THE ACT. AN EXAMINATION OF THE DETAILS SHOW THAT THE PROVISI ONS THAT HAVE BEEN WRITTEN OFF BY THE APPELLANT ARE DEPOSIT FOR TENDER, SECURITY DEPOSIT, STAFF ADVANCE AND ADVANCES GIVEN TO CONTRACTORS. IT IS SEEN THAT NONE OF THE ITEMS OF EXPENDITURE AR E IN THE NATURE OF ASCERTAINED LIABILITY. THE DEPOSIT THAT HAS GIVE N FOR TENDER WERE WITH THE GOVERNMENT AND CENTRAL GOVERNMENT DEPARTME NT, AND THEREFORE, IT CANNOT BE SAID THAT THE AMOUNT CANNOT BE RECOVERED. SIMILARLY, THE SECURITY DEPOSIT AND STAFF ADVANCE A LSO ARE IN THE NATURE WHICH CANNOT BE SAID THAT THE SAME CANNOT BE RECOVERED AND, THEREFORE, THE PROVISION WAS MADE. THE ACTION OF THE APPELLANT WAS, THEREFORE, NOT JUSTIFIED. THE CLAIM OF SUCH KIND OF PROVISIONS CANNOT BE MADE AS DEDUCTION. THE APPELL ANT COULD HAVE WRITTEN THE SAME AS BAD DEBTS WHICH HAS NOT BE EN DONE BY HIM AS THE APPELLANT HAS NOT CLEARLY GIVEN UP THE H OPE OF RECOVERY. IN VIEW OF THESE FACTS AND CIRCUMSTANCES , THE DISALLOWANCE MADE BY THE A.O. IS UPHELD AND THE GRO UND OF APPEAL IS DISMISSED. AGGRIEVED BY THIS ORDER NOW THE ASSESSEE IS IN APP EAL BEFORE US. ITA NO.853/AHD/2012 , A.Y. 2008-09 4 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORDS, WE FIND THAT SIMILAR ISSUE WAS DECIDED BY US IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN ITA NO.3307 OF 2011 WHEREIN WE HAVE DELETED THE ADDITI ON AND ALLOWED THE APPEAL OF THE ASSESSEE. FOR THE REASONS GIVEN IN THAT ORDER THE ADDITION OF RS.7,12,000/- IS HEREBY DELETED. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 25.05.201 2 SD/- SD/- (ANIL CHATURVEDI) ( D.K. TYAGI) ACCOUNTANT MEMBER JU DICIAL MEMBER TRUE COPY - 25 /05/2012 N.K. CHAUDHARY, SR. P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. ! '# / CONCERNED CIT 4. ! '# - / CIT (A) 5. $%& , ! !' , / DR, ITAT, AHMEDABAD 6. &() *+ / GUARD FILE. BY ORDER/ , , / -! ! !' ,