ACIT, Circle-2(1), Hyderabad V. M/s Karvy Stock Broking Limited, Hyderabad

ITA 922/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77865 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PADMAJA
• Assessee Lawyers: P MURALIKRISHNA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.922/HYD/2013 ASSESSMENT YEAR 2009-2010 THE ACIT-2(1), HYDERABAD VS. M/S. KARVY STOCK BROKING LTD. HYDERABAD 500 034. PAN AABCK-5190K APPELLANT RESPONDENT REVENUE BY: MS. PADMAJA ASSESSEE BY: MR. P. MURALIKRISHNA DATE OF HEARING: 29.04.2014 DATE OF PRONOUNCEMENT: 29.04.2014 O R D E R PER B. RAMAKOTAIAH, AM: THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-III, HYDERABAD DATED 05.03.2013 FOR THE A.Y. 2009-2010 ON THE ISSUE OF ALLOWANCE OF BAD DEB TS CLAIMED. REVENUE CONTENDS THAT CIT(A) ERRED IN HOLDING THAT THE ASSESSEE DOES NOT HAVE TO ESTABLISH THAT THE DEBT H AD INDEED BECOME BAD AND FURTHER ERRED IN HOLDING THAT BAD DE BTS WRITTEN OFF ARE ALLOWABLE. IT WAS ALSO CONTENDED TH AT ASSESSEE HAS NOT FURNISHED ANY DOCUMENTARY EVIDENCE IN SUPPO RT OF ITS BAD DEBTS CLAIMED NOR ANY MATERIAL WAS FURNISHED TH AT THESE BAD DEBTS ARE PART OF INCOME OF PREVIOUS YEARS OF A SSESSEE- COMPANY. 2. BRIEFLY STATED, ASSESSEE IS ENGAGED IN THE BUSI NESS OF STOCK AND SHARE BROKING AND DISTRIBUTION OF FINA NCIAL PRODUCTS. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS, A.O. 2 ITA.NO.922/HYD/2013 M/S. KARVY STOCK BROKING LTD. HYDERABAD FOUND OUT THAT ASSESSEE HAD WRITTEN OFF BAD DEBTS O F AN AMOUNT OF RS.73,47,605/-. ASSESSEE EXPLAINED THAT T HERE ARE LARGE NUMBER OF DEBTORS WHO OWED VERY SMALL AMOUNTS AND HAD NOT BEEN PAYING THE SAME. ACCORDINGLY, THEY HAD WRITTEN OF THE SAME AS BAD DEBTS. ASSESSEE FURNISHED COMPLETE DETAILS OF AMOUNTS WRITTEN OFF AND A.O. STATES THAT ON GOING T HROUGH THE SAME FOUND THAT BAD DEBTS BELOW VALUE OF RS.1000/- PERTAINS TO ABOUT 9000 CLIENTS. FURTHER, REMAINING BAD DEBTS WERE ALSO HUGE IN NUMBER. BUT, HE DID NOT ALLOW THE AMOUNT WR ITTEN OFF HOLDING THAT ASSESSEE HAS NOT FURNISHED ANY DOCUMEN TARY EVIDENCE LIKE CLAIM OF INVOICES TO THE ABOVE PARTIE S, WRITING LETTERS, IF ANY, ETC., 2.1. BEFORE THE LD. CIT(A), IT WAS CONTENDED THAT ASSESSEE HAD INDEED WRITTEN OFF THE SMALL AMOUNTS W HICH ARE AVAILABLE IN THE BOOKS AND A.O. WAS NOT CORRECT IN HOLDING THAT EVIDENCES ARE REQUIRED TO ESTABLISH THAT THE AMOUNT HAVE BECOME BAD. IT WAS ALSO FURTHER INFORMED THAT SMALL AMOUNTS ARE FINANCIALLY UNVIABLE TO ENFORCE THE COLLECTION AND SOMETIMES CLIENTS CHANGES THEIR ADDRESSES. SO, IT I S VERY DIFFICULT TO LOCATE THE CLIENTS ALSO AS COMPARED TO THE AMOUNTS THEY OWE. THEREFORE, MANAGEMENT TOOK A DECISION TO WRITE OFF THE BAD DEBTS. 3. LD. CIT(A) CONSIDERING THE FACTS AND EVIDENCES AND RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT 323 ITR 397 HELD THAT ASSESSEE DOE S NOT HAVE TO ESTABLISH THAT THE DEBT HAD INDEED BECOME BAD. T HERE IS NO DOUBT THAT ASSESSEE HAD WRITTEN OFF THE AMOUNTS IN THE BOOKS OF ACCOUNTS. ACCORDINGLY, HE HELD THAT THERE IS NOT HING TO HOLD THAT THE BAD DEBTS WRITTEN OFF ARE NOT ALLOWABLE. H E ALSO 3 ITA.NO.922/HYD/2013 M/S. KARVY STOCK BROKING LTD. HYDERABAD FOLLOWED THE DECISION OF THE JURISDICTIONAL HIGH CO URT IN THE CASE OF CIT VS. SIRPUR PAPER MILLS LTD. 334 ITR 656 . 4. AFTER HEARING THE RIVAL CONTENTIONS, WE ARE OF THE OPINION THAT THERE IS NO NEED TO DIFFER FROM THE FI NDINGS OF THE LD. CIT(A) BOTH ON FACTS AND AS WELL AS ON LAW. IN FACT, THE GROUNDS RAISED BY THE REVENUE ARE MISLEADING. WHEN THE LAW ITSELF WAS AMENDED W.E.F. 01.04.1989 AND THE SAME W AS ANALYSED AND UPHELD BY THE HONBLE SUPREME COURT, I T IS SURPRISING THAT REVENUE IS STILL RAISING THE GROUND S THAT ASSESSEE HAS TO ESTABLISH THE THAT DEBT HAD INDEED BECOME BAD. AS RIGHTLY HELD BY THE HONBLE SUPREME COURT, IF THE BAD DEBTS ARE WRITTEN OFF IN THE BOOKS OF ACCOUNTS THAT IS SUFFICIENT TO ALLOW THE CLAIM. MOREOVER, A.O. HIMSELF HAS STAT ED IN THE ORDER THAT HE HAS PERUSED DETAILS OF BAD DEBTS AND NOTED THAT VALUE BELOW RS.1000/- PERTAIN TO ABOUT 9000 CLIENTS AND THE REMAINING BAD DEBTS ARE ALSO HUGE IN NUMBER, WHAT S ORT OF EVIDENCE IS REQUIRED BY THE A.O. HAS NOT BEEN SPECI FIED, BUT, GROUND NO.3 WAS RAISED STATING THAT ASSESSEE HAS NO T FURNISHED ANY DOCUMENTARY EVIDENCE. WE ARE UNABLE E VEN TO AGREE WITH THE GROUNDS RAISED BY THE REVENUE. BE TH AT AS IT MAY, THERE IS NO MERIT IN REVENUES CONTENTIONS. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.04.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 29 TH APRIL, 2014 VBP/- 4 ITA.NO.922/HYD/2013 M/S. KARVY STOCK BROKING LTD. HYDERABAD COPY TO : 1. ACIT, CIRCLE 2(1), HYDERABAD. 2. M/S. KARVY STOCK BROKING LTD. 46, AVENUE 4, STRE ET NO.1, BANJARA HILLS, HYDERABAD 500 034.. 3. CIT(A)-III, HYDERABAD 4. CIT-II, HYDERABAD 5. D.R. ITAT, B BENCH, HYDERABAD.