Sri Srilekha Hire Purchase Finance Limiited, (Now Shriram Overseas Finance Limited), Secunderabad V. ACIT., Cir-3(1), Hyderabad, Hyderabad

ITA 927/HYD/2004

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5820 (ITAT-HYDERABAD)
• Duration Of Justice: 5 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 01-10-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS
• Assessee Lawyers: CHAITANYA KUMAR SRI S RAMA RAO
• Keywords: Depreciation; Bad and doubtful debts
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI G.C. GUPTA, VICE PRESIDENTAND SHRI AKBER BASHA, ACCOUNTANT MEMBER ITA NO.1277/HYD/03 : ASST. YEAR 2000- 01 ITA 927/HYD/2004 : ASST. YEAR 2001-02 SRILEKHA HIRE PURCHASE FINANCE VS DCIT/ACIT, CI R-3(1), LTD., SECUNDERABAD. HYDER ABAD. (APPELLANT) (RESPONDENT) ITA 1044/HYD/02 AND ASST. Y EAR 1996-97 ITA 967/HYD/04 ASST . YEAR 2001-02 DCIT, CIR-3(1), HYDERABAD. (ASSESSEE ) VS SRILEKHA HIRE PURCHASE FINANCE LTD., SECUNDERABAD. (RESPONDENT) ASSESSEE BY : SRI CHAITANYA KUMAR FOR SRI S. RAMA RAO DEPARTMENT BY : SMT. NIVEDITA BISWAS O R D E R PER AKBER BASHA, ACCOUNTANT MEMBER THESE FOUR APPEALS, TWO BY THE ASSESSEE AND TWO BY THE DEPARTMENT ARE DIRECTED AGAINST SEPARATE ORDERS PASSED BY THE LEARNED CIT (A)-IV, HYDERABAD RELATING TO THE ASSESSMENT YEARS 1 996-97,2000- 2 01 AND 2001-02 SINCE COMMON ISSUES ARE INVOLVED, THESE AR E HEARD TOGETHER AND DISPOSED OFF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HEREIN IS A COMPANY CARRYING ON BUSINESS IN FINANCE AND LEASING. FOR THE SAKE OF BREVITY, FACTS ARE TAKEN FROM THE RECORDS OF 2000-01. THE ASSESSEE F ILED ITS RETURNS OF INCOME DECLARING NIL INCOME AS PER NORMAL PRO VISIONS OF THE ACT AND RS.10,53,451/- AS PER SECTION 115JA OF THE ACT. THE ASSESSING OFFICER ISSUED NOTICES U/S 148 AND COMPLETED THE ASSESSMENTS U/S 143(3) READ WITH SECTION 147 OF THE ACT. WHILE DOING SO, THE ASSESSING OFFICER RESTRICTED THE DEPRECIATION ON HEAVY DUTY VEHICL ES GIVEN ON LEASE TO 25% AS AGAINST 40% CLAIMED. THE ASSESSING OFFICER MADE A DDITIONS ON THIS ACCOUNT FOR THE OTHER YEAR UNDER CONSIDERATION ALSO. AGAINST THE SAID ORDER, THE ASSESSEE WENT IN APPEAL BEFORE THE CIT ( A). THE CIT (A) AFTER CONSIDERING THE RELEVANT FACTS AND ORDERS OF THE A SSESSING OFFICER, ALLOWED THE APPEALS OF THE ASSESSEE IN PART. AGGRIEVED BY THE ORDER OF THE CIT (A), THE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1277/HYD/03-(ASSESSEE'S APPEAL ) FOR THE ASST. YEAR 2000-01:- 3. GROUND NOS. 1 AND 8 ARE GENERAL IN NATURE AND THE Y DO NO REQUIRE ANY ADJUDICATION. 4. GROUND NO.2 IS WITH REGARD TO THE ACTION OF ASSESSING OFFICER IN RESTRICTING THE DEPRECIATION TO 25% AS AGAINST THE CLAI M MADE BY THE ASSESSEE AT 40%. WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE 3 DECISION OF TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSM ENT YEAR 1995-96 IN ITA NO.1035/HYD/2002 DATED 29-9-2004 IN PARA-5, IT WAS HELD AS FOLLOWS: ' RIVAL SUBMISSIONS HEARD AND RELEVANT ORDERS READ. ULTIMATELY WHEN THE ASSESSEE CONCLUDED ITS SUBMISSIONS THAT TH E ASSESSEE IS IN LEASING BUSINESS AND IF AT ALL, THE MATTER MA Y BE REMITTED TO THE ASSESSING OFFICER TO VERIFY THE END USER AND AL SO AS TO WHETHER OR NOT IT IS A FACT THAT IN THE OTHER YEAR THE CIT(A) ALLOWED DEPRECIATION AT 40%, THE REVENUE HAS NO OBJ ECTION FOR SUCH SETTING ASIDE TO THE ASSESSING OFFICER. IN TH IS VIEW OF THE MATTER, I REMIT THE ISSUE TO THE FILE OF THE ASSESS ING OFFICER HIMSELF FOR A DECISION DE NOVO AFTER GIVING OPPORTU NITY OF BEING HEARD TO THE ASSESSEE AND DULY CONSIDERING ANY REL EVANT STAND OR MATERIAL THAT MAY BE RELIED UPON IN SUPPORT OF I TS CONTENTIONS AS WELL AS IN THE LIGHT OF THE CASE LAWS RELIED UPO N BY THE ASSESSEE BESIDES VERIFYING, AS SUBMITTED BY THE ASS ESSEE, THE END USER AS WELL AS THE ALLOWANCE OF DEPRECIATION A T 40% BY THE CIT(A) IS ONE OF THE ASSESSMENT YEARS.' RESPECTFULLY FOLLOWING THE ABOVE, WE RESTORE THE MATTE R TO THE FILE OF ASSESSING OFFICER WHO SHALL EXAMINE THE ISSUE IN ACCORDANCE WI TH LAW AFTER DULY CONSIDERING THE RELEVANT STAND OR MATERIAL THAT MAY BE RELIED UPON BY THE ASSESSEE IN SUPPORT OF ITS CONTENTIONS. HENCE THIS GROUND OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE S. 5. THIRD AND FOURTH GROUNDS OF APPEAL ARE REGARDING DISALLOWANCE OF AMOUNT DEBITED TO PROFIT AND LOSS A/C OF RS.12,81,113 R EPRESENTING LEASE EQUALIZATION FUND AND PROVISION MADE TOWARDS NP A OF RS.2,05,214. DURING THE COURSE OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE FURNISHED BEFORE US A COPY OF THE TRIBUNAL ORDER IN THE CASE OF M/S SHRAVANI FINANCIAL SERVICES PVT. LTD IN ITA NOS. 714 AND 715/HYD/04 DATED 29-12-2005 AND SUBMITTED THAT THE SAI D ORDER OF THE TRIBUNAL WAS DECIDED IN FAVOR OF THE ASSESSEE ON BOTH TH E ISSUES. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE 4 ISSUE RELATING TO DISALLOWANCE OF LEASE EQUALIZATION CH ARGES, IS COVERED AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN T HE CASE OF CHANDANA LEAPHIN FINANCE LTD VS. DCIT IN ITA NOS.343 TO 345/HYD/2002 FOR THE ASSESSMENT YEARS 96-97 TO 98-99. WE FIND THAT WITH RESPECT TO DISALLOWANCE OF LEASE EQUALIZATION CHAR GES, ON GOING THROUGH THE ORDER OF THE TRIBUNAL IN CHANDANA LEAPH IN FINANACE LIMITED (SUPRA), WE FIND THAT THE TRIBUNAL HAD DISTINGUISHED THE CASE OF THE ASSESSEE HEREIN FROM THE CASE OF CHANDANA (SUPRA) AND HAD TAKEN A CONTRARY VIEW. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH IN THE ASSESSEE'S OWN CASE, WE DECIDED THE ISSU E IN FAVOR OF THE ASSESSEE. WITH REGARD TO THE ISSUE OF DISALLOWANCE OF PROVISION OF NPA, WE FIND THAT THE ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE APEX COURT IN THE CASE OF M/S. SOUTHE RN TECHNOLOGIES LTD VS. JCIT IN CIVIL APPEAL NO. 1337/2003 DATED 11T H JANUARY 2010. RESPECTFULLY FOLLOWING THE SAME, WE DECIDE THE ISSUE AGAI NST THE ASSESSEE. HENCE, THEREFORE, GROUND NO. 3 IS ALLOWED AND GR OUND 4 IS REJECTED. 6. GROUND NOS. 5,6 AND 7 ARE WITH REGARD TO DISALLOWA NCE OF PROVISION FOR INTEREST AND FINANCIAL CHARGES OF RS.38,334, DISALLOW ANCE OF THE PROVISION ON LEASE RENT OF RS.89,334 AND REJECTING THE CLAIM MADE AGAINST THE AMOUNT OF RS.7,10,000 TRANSFERRED TO THE GENERAL RESERVE AS PER THE DIRECTIONS OF THE RBI. IT IS AN UNDISPUTED F ACT THAT THE AFORESAID AMOUNTS ARE IN THE NATURE OF CREATION OF RE SERVE OR PROVISION. IT IS NOT AN OUTGO FOR THE BUSINESS AND THE SAME ARE CAN NOT BE SAID THAT THE AMOUNT REPRESENTS AN ACTUAL EXPENDITURE INCURRED R ELATING TO THE BUSINESS. IT IS NEITHER ALLOWABLE EXPENDITURE NOR REA L EXPENDITURE. THE EXPENDITURE WHICH IS DEDUCTIBLE FOR INCOME TAX PURPOSES I S ONE WHICH IS 5 EITHER ACTUALLY PAID OR PROVIDED FOR TOWARDS THE LIAB ILITY ACTUALLY EXISTING AT THE TIME, BUT PUTTING ASIDE THE MONEY WHICH MAY BE COME EXPENDITURE ON THE HAPPING OF AN EVENT IS NOT EXPEND ITURE. THE APEX COURT HELD IN THE CASE OF CIT VS. MALAYALAM PLANTATION S LTD REPORTED IN 53 ITR 140 RELIED ON BY THE CIT[A] IS VERY MUCH APPLI CABLE TO THE CASE UNDER CONSIDERATION. IN THAT CASE, IT WAS HELD THAT THE EXPENDITURE IS NOT ALLOWABLE UNLESS IT IS LAID OUT OR EXPENDED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN VIEW OF THE AB OVE, WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORIT IES, HENCE, GROUND NO.5 TO 7 ARE REJECTED. ITA NO.927/HYD/04-(ASSESSEE'S APPEAL ) FOR THE ASST. YEAR 2001- 02 7. GROUND NO.1 IS IN GENERAL AND NO ADJUDICATION IS REQUIRED. 8. GROUND NO. 2 IS WITH REGARD TO THE ACTION OF ASSESSIN G OFFICER IN RESTRICTING THE DEPRECIATION TO 25% AS AGAINST THE CL AIM MADE BY THE ASSESSEE AT 40%. IN VIEW OF OUR FINDING AT PARA 4 ABO VE, THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WHO SHALL E XAMINE THE ISSUE IN ACCORDANCE WITH LAW AFTER DULY CONSIDERING THE RELEVA NT STAND OR MATERIAL THAT MAY BE RELIED UPON BY THE ASSESSEE IN SUP PORT OF ITS CONTENTIONS. HENCE THIS GROUND OF THE ASSESSEE IS TREATED A S ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO. 3 IS WITH REGARD TO THE DISALLOWANCE OF AMOUNT DEBITED TO THE LEASE EQUALIZATION FUND. IN VIEW OF OUR FINDINGS AT PARA 5 6 ABOVE, WE DECIDE THIS ISSUE IN FAVOR OF THE ASSESSEE. HENCE , THE GROUND RAISED BY THE ASSESSEE IS ALLOWED. 10. GROUND NOS.4, 5 AND 6 ARE WITH REGARD TO DISALLO WANCE OF PROVISIONS MADE TOWARDS NPA, INTEREST PROVISION ON NPA A ND AMOUNT TRANSFERRED TO RESERVE FUND AS PER RBI GUIDELINES RESPECT IVELY. IN VIEW OF OUR FINDING IN PARA 6 ABOVE, WE DECIDE THESE ISSUES A GAINST THE ASSESSEE AND IN FAVOR OF THE REVENUE. HENCE, GROUNDS 4 TO 6 ARE DISMISSED. ITA NO.1044/HYD/02- (REVENUE'S APPEAL ) FOR THE ASST. YEAR 1996-97 11. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE IN THIS APPEAL IS WHETHER THE ASSESSING OFFICER IS RIGHT IN MAKING ADDITION ON ACCOUNT OF INCOME NOT RECOGNIZED ON NPA. WE FIND THAT CIT [A] DIRECTED THE ASSESSING OFFICER TO DELETE THESE ADDITIONS WITH THE CO NDITION THAT THE ASSESSING OFFICER MAY TAKE APPROPRIATE ACTION CONSEQUENT TO THE DECISION OF THIS TRIBUNAL. WE DO NOT FIND ANY GRIEVANCE CAUSED TO THE REVENUE ON ACCOUNT OF THIS. HENCE, WE CONFIRM THE ORDERS OF THE FI RST APPELLATE AUTHORITY IN THIS REGARD. GROUND RAISED BY THE REVEN UE IS DISMISSED. ITA NO.967/HYD/04-(REVENUE'S APPEAL ) FOR THE ASST. YEAR 2001- 02 12. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE I N THIS APPEAL RELATES TO THE DELETION OF THE DISALLOWANCE ON ACCOUNT O F BAD DEBTS BY THE CIT(A). THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE 7 ORDERS OF THE ASSESSING OFFICER AND RELIED ON THE DECISION OF THE DELHI ITAT IN THE CASE OF DCIT V. INDIA THERMIT CORPORATION LTD. REPORTED IN 56 ITD 307 (DEL). WE FIND THAT THE CIT(A) ALLOWED THE BAD DEBTS CLAIMED BY THE ASSESSEE ON THE GROUND THAT THE ASSESSEE ACTU ALLY WRITTEN OFF THE ACCOUNTS AS BAD DEBTS IN ITS BOOKS OF ACCOUN T AND HOLDING THAT AFTER THE AMENDMENT OF PROVISIONS OF SEC.36(1)(V II) OF THE ACT, IT IS NOT REQUIRED TO PROVE EACH ITEM OF ACCOUNT HAVING BECO ME BAD. MERE WRITE-OFF IN THE BOOKS OF ACCOUNT IS SUFFICIENT FOR ALLO WING BAD DEBTS. WE AGREE WITH THE FINDINGS OF THE CIT(A) IN VIEW OF THE DECISION OF THE BOMBAY SPECIAL BENCH OF THE TRIBUNAL WHICH WAS LATER AF FIRMED BY THE HONOURABLE BOMBAY HIGH COURT IN THE CASE OF DCIT V. OMA N INTERNATIONAL BANK REPORTED IN 100 ITD 285 (BOM) (S B). HENCE, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT (A) AN D THEREFORE HIS ORDER IS CONFIRMED. 13. IN THE RESULT, ALL THE APPEALS BY THE ASSESSEE ARE P ARTLY ALLOWED AND THAT OF THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 03-03-2010. SD/- (G.C. GUPTA) SD/- (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEMBER DT/-3RD MARCH, 2010 8 COPY FORWARDED TO: 1. SRILEKHA HIRE PURCHASE & FINANCE LTD., 10-3-56/1, E AST MARREDPALLY, SECUNDERABAD. 2. DCIT, CIR-3(1), HYDERABAD. 3. CIT, AP, HYDERABAD. 4. CIT (A) IV, HYDERABAD. 5. THE D.R., ITAT, HYDERABAD. JMR