Phyto Chem(India)Limited, Hyderabad V. DCIT, Hyderabad

ITA 853/HYD/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53822 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-04-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Business income; Bad and doubtful debts; Assessment record

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A. NO. 853/HYD/2010 (ASSESSMENT YEAR : 2006-07) M/S. PHYTO CHEM (INDIA) LTD. HYDERABAD PAN: AABCP2294H VS. DCIT CIRCLE-16(3) HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 1029/HYD/2010 (ASSESSMENT YEAR : 2006-07) DCIT CIRCLE-16(3) HYDERABAD VS. M/S. PHYTO CHEM (INDIA) LTD. HYDERABAD PAN: AABCP2294H APPELLANT RESPONDENT ASSESSEE BY: SHRI V. SIVA KUMAR REVENUE BY: SHRI B.V. PRASAD REDDY DATE OF HEARING: 0 9 .1 2 .2011 DATE OF PRONOUNCEMENT: O R D E R PER CHANDRA POOJARI, AM: THE APPEAL BY THE ASSESSEE AND THE CROSS APPEAL BY THE REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A )-V, HYDERABAD DATED 14.5.2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ISSUE HEREIN IS WITH REGARD TO DISALLOWANCE OF BAD DEBTS OF RS. 35,00,523. 3. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE CLAI MED BAD DEBTS AMOUNTING TO RS. 69,52,842 IN THE PROFIT AND LOSS A/C. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER ISSUED A I.T.A. NOS. 853 & 1029/HYD/2010 M/S. PHYTO CHEM (INDIA) PVT. LTD. ========================== 2 SHOW-CAUSE LETTER TO THE ASSESSEE ASKING IT TO FURN ISH DETAILS OF THE BAD DEBTS ALONG WITH COPIES OF LETTERS WHICH WERE C LAIMED TO HAVE BEEN WRITTEN OFF. THE ASSESSING OFFICER ALSO ASKED HIM AS TO WHAT WERE THE EFFORTS MADE TO RECOVER THE OUTSTANDING BA LANCES. THE ASSESSEE FILED THE RELEVANT DETAILS. AFTER ANALYSI NG THE SAME, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT MOST OF THE DEBTS WERE NOT BAD. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF RS. 63,43,516 OUT OF THE TOTAL CLAIM OF RS. 69,52,842. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE CIT(A) DISAL LOWED THE BAD DEBTS TO THE TUNE OF RS. 35,00,522 OUT OF THE DISAL LOWANCE OF RS. 63,43,516. AGAINST THIS BOTH THE ASSESSEE AND THE REVENUE ARE IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND ALSO PERUSED THE MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE AS SESSEE RELIED ON THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF T RF LTD. VS. CIT (190 TAXMAN 391) (SC) WHEREIN IT WAS HELD THAT AFTER 1.4.1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT DEBT, IN FACT, HAS BECOME IRRECOVERABLE, IT IS ENOUGH BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. SAM E VIEW HAS BEEN TAKEN BY THE HIGH COURT OF BOMBAY IN THE CASE OF DI T (INTL. TAXATION) VS. OMAN INTERNATIONAL BANK SAOG (184 TAX MAN 314) (BOM). I.T.A. NOS. 853 & 1029/HYD/2010 M/S. PHYTO CHEM (INDIA) PVT. LTD. ========================== 3 5. HOWEVER, THE LEARNED DR RELIED ON THE ORDER OF THE BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF EMBASSY CLASS IC PVT. LTD. VS. ACIT [007 ITR (TRIB) 0287] WHEREIN IT WAS HELD THAT DELAY IN PAYMENT OF DEBT CANNOT BE CONSIDERED AS BAD DEBT UN LESS IT HAS BECOME BAD DEBT. IN OUR OPINION IN THE PRESENT CAS E, THE ASSESSEE HAS ALREADY WRITTEN OFF THE DEBTS AS BAD IN ITS BOO KS OF ACCOUNT. THE TRANSACTIONS RELATING TO 45 PARTIES HAVE TAKEN PLACE BETWEEN THE FINANCIAL YEAR 1996-97 TO 2002-03 WHICH IS EVID ENT FROM THE ASSESSMENT RECORDS. BEING SO, JUST BECAUSE THE ASS ESSEE HAS TAKEN FOLLOW UP ACTION FOR RECOVERY, IT CANNOT BE C ONSIDERED AS GOOD DEBT AND IN THE PRESENT CASE THE ASSESSEE HAS ALREADY WRITTEN OFF ALL THESE DEBTS AS BAD DEBTS AND THE SAME HAS T O BE ALLOWED AS DEDUCTION WHILE COMPUTING BUSINESS INCOME OF THE AS SESSEE. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. NOW COMING TO THE REVENUE APPEAL, THE REVENUE FILED THIS APPEAL OPPOSING THE RELIEF GRANTED BY THE CIT(A). SINCE THE ASSESSEE APPEAL IS ALLOWED, THE APPEAL OF THE REVEN UE STANDS DISMISSED AS INFRUCTUOUS. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AN D THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON _26 TH DECEMBER, 2011. SD/- SD/- SD/- (H.S. SIDHU) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 26 TH DECEMBER, 2011 I.T.A. NOS. 853 & 1029/HYD/2010 M/S. PHYTO CHEM (INDIA) PVT. LTD. ========================== 4 COPY FORWARDED TO: 1. M/S. PHYTO CHEM (INDIA) LTD., 8 - 3 - 319/8/11, SAI SARADHI NAGAR, YELLAREDDYGUDA, HYDERABAD. 2. DY. COMMISSIONER OF INCOME - TAX, CIRCLE - 16(3), HYDERABAD. 3. THE CIT(A) - V , HYDERABAD . 4. THE CIT - I V , HYDERABAD. 5. THE DR B BENCH, ITAT, HYDERABAD TPRAO