ITO, Ward - 2(2), Kolkata, Kolkata V. M/s. L.C.C. Infotech Limited, Kolkata

ITA 950/KOL/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3183 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-06-2013
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 04-06-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 07-05-2010
• Court: TRIBUNAL
• Department Lawyers: K N JANA
• Section: 43B

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [ () . .. . . .. . , ,, , , ! ' #!' ' #!' ' #!' ' #!', ,, , ] ]] ] [BEFORE HONBLE SRI N.S.SAINI AM & HONBLE SRI M AHAVIR SINGH, JM] !% !% !% !% /ITA NO.950/KOL/2010 #& '(/ ASSESSMENT YEAR : 2005-06 (*+ / APPELLANT ) - - ( -.*+ /RESPONDENT) D.C.I.T., CIRCLE-2, M/S.L.C.C.INFOTECH LTD. KOLKATA -VERSUS- KOLKATA (PAN:AACCA 2580 J) *+ / 0 / FOR THE APPELLANT: SHRI K.N.JANA, SR.DR -.*+ / 0 / FOR THE RESPONDENT: SHRI SUBHASH AGARWAL, ADVOCATE 1 2 / 3 /DATE OF HEARING : 13.06.2013 4' / 3 /DATE OF PRONOUNCEMENT : 21.06.2013 5 / ORDER PER SHRI N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-I, KOLKATA DATED 02.02.2010. 2. GROUND NO.1 OF THE APPEAL IS DIRECTED AGAINST T HE ORDER OF THE LD. CIT(A)IN DELETING THE ADDITION OF RS.5,40,618/- MADE BY THE AO ON ACCOUNT OF UNACCOUNTED EARNING IN FOREIGN EXCHANGE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBS ERVED THAT FROM NOTE 1.8 APPENDED TO THE STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31 ST MARCH, 2005 BY THE AUDITOR OF THE COMPANY THAT A SUM OF US$ 12,428/- R ECEIVABLE HAD NOT BEEN CREDITED IN THE PROFIT AND LOSS ACCOUNT. SINCE THE COMPANY IS F OLLOWING MERCANTILE SYSTEM OF ACCOUNTING IN RESPECT OF REVENUE RECOGNITION THERE WAS NO REASON THAT SUCH ACCRUED INCOME SHOULD NOT BE OFFERED FOR TAX. CONSEQUENTLY HE MADE ADDITION TO THE INCOME OF THE ASSESSEE AT CLOSING RATE OF EXCHANGE AS ON 31.0 3.2005 THEREBY MADE ADDITION OF RS.5,40,618/- IT A NO.950/KOL/2010 DCIT,CIRCLE-2, KOLKATA VS M/S.L.C.C.INFOTECH.LTD . A.YR.2005-06 2 3.1. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE SUBMITTED THAT THE SAID RECEIVABLE AMOUNT OF US$ 12,428/- WAS DOUBTFUL DEBT AND AS SUC H THE BOARD OF DIRECTORS VIDE A RESOLUTION PASSED IN THE MEETING DECIDED NOT TO ACC OUNT FOR THE SAID AMOUNT IN THE FINANCIAL YEAR 2004-05 BUT TO SHOW THE SAME ONLY IN THE YEAR OF RECEIPT. IT WAS ALTERNATIVELY SUBMITTED THAT THE SAID DEBT COULD NO T BE RECOVERED IN ANY SUBSEQUENT YEAR TILL THE DATE OF HEARING BEFORE THE LD. CIT(A) . THUS EVEN IF THE ADDITION OF RS.5,40,618/- WAS MADE AS INCOME OF THE ASSESSEE IN A.YR. 2005-06 THE SAME AMOUNT SHOULD SIMULTANEOUSLY BE ALLOWED DEDUCTION U/S 36(1 )(VII)AS BAD DEBT IN THAT YEAR. 3.2. ON APPEAL THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO ON THE GROUND T HAT THERE IS NO REASONS THAT THE AMOUNT RS.5,40,618/- NOT RECEIVED BY THE ASSESSEE S HOULD NOT BE TREATED AS BAD DEBT. 4. THE LD. DR SUPPORTED THE ORDER OF THE AO. 5. THE LD. AR OF THE ASSESSEE REITERATED THE SUBMIS SIONS MADE BEFORE THE LOWER AUTHORITIES. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT IN THE INSTANT CASE THE ASSESS EE HAD NO ACCOUNTED INCOME FOR US $12,428/-THE ASSESSEE WAS FOLLOWING MERCANTILE SYST EM OF ACCOUNTING IN RESPECT OF ALL REVENUE RECOGNITION AND THEREFORE THE SAID SUM HAD TO BE ACCOUNTED BY THE ASSESSEE AS ITS INCOME ACCRUED ACCORDING TO THE METHOD OF ACCOU NTING FOLLOWED BY HIM. THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT WAS NOT REC EIVED BY IT TILL THE DATE OF HEARING BEFORE THE LD. CIT(A) AND THEREFORE IF THE INCOME W AS CONSIDERED BY THE AO THEN SIMULTANEOUSLY HE HAS TO ALLOW DEDUCTION FOR THE SA ME AMOUNT AS BAD DEBT AND THEREFORE THE SAME WOULD BECOME REVENUE NEUTRAL. WE DO NOT FIND ANY FORCE IN SUCH ARGUMENT OF THE LD. AR. ACCORDING TO THE METHOD OF ACCOUNTING THE ASSESSEEE SHOULD HAVE ACCOUNTED FOR US$ 12,428/- AND THEREFORE THE A O WAS FULLY JUSTIFIED IN ADDING THE SAME TO THE INCOME OF THE ASSESSEE. THE CLAIM F OR BAD DEBT FOR THE SAID AMOUNT COULD HAVE BEEN MADE BY THE ASSESSEE IN THE YEAR IN WHICH IT WOULD HAVE ACTUALLY IT A NO.950/KOL/2010 DCIT,CIRCLE-2, KOLKATA VS M/S.L.C.C.INFOTECH.LTD . A.YR.2005-06 3 WRITTEN OFF THE SAID AMOUNT WHICH IN ANY CASE WOULD HAVE HAPPENED IN THE SUBSEQUENT ASSESSMENT YEARS AND NOT IN THE PRESENT YEAR OF CON SIDERATION. WE THEREFORE FIND THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE AD DITION MADE BY THE AO FOR THE REASON THAT THE AMOUNT HAS BECOME BAD DEBT . HENCE WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE BACK TO THE FILE OF THE AO FOR ADJUDICA TION AFRESH AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. GROUND NO.1 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.2 OF THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A) IN RESTRICTING THE DISALLOWANCE ON ACCOUNT OF TOUR AND TRAVELING EXPENSES TO RS.91,778/- AS AGAINST RS.9,17,783/- DISALLOWED BY THE AO. 8. THE BRIEF FACTS OF THE CASE ARE THAT THE AO OBSE RVED THAT THE ASSESSEE HAS DEBITED RS.36,71,133/- UNDER THE HEAD TOUR AND TRAV ELING EXPENSES. NO BREAK UP OF DETAILS WERE PROVIDED FOR THIS AMOUNT. THE AO THERE FORE MADE AN ESTIMATED DISALLOWANCE OF 25% OF THE EXPENSES CLAIMED AND MAD E AN ADDITION OF RS.9,17,783/- TO THE INCOME OF THE ASSESSEE. 8.1. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE S UBMITTED THAT THE AO HIMSELF HAS ACCEPTED THAT THE COMPANY HAS SEVERAL FRANCHISE OUT LETS IN REMOTE SUB-URBAN CENTERS AND REQUIREMENT OF TRAVEL TO SUCH CENTERS WAS BUSIN ESS NEED OF THE ASSESSEE COMPANY. HE ALSO SUBMITTED THAT DUE TO PAUCITY OF TIME AS TH E DETAILS WERE REQUISITIONED AT THE END ONLY THE SAME COULD NOT BE SUBMITTED BEFORE THE AO. ACCORDINGLY IT WAS SUBMITTED THE DISALLOWANCE MADE @25% OF THE EXPENSE S CLAIMED WAS EXCESSIVE. 8.2. ON APPEAL THE LD. CIT(A) RESTRICTED THE DISALL OWANCE TO 10% OF RS.9,17,783/- WHICH WAS 25% OF THE TOTAL EXPENDITURE OF RS.36,71, 133/-. 9. THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 10%OF 25% OF THE EXPENSES OF RS.31, 71,33/- DISALLOWED BY THE AO. IT A NO.950/KOL/2010 DCIT,CIRCLE-2, KOLKATA VS M/S.L.C.C.INFOTECH.LTD . A.YR.2005-06 4 10. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE S UPPORTED THE ORDER OF THE LD. CIT(A). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD CLAIMED EXPENSES OF RS.36,71,133/- UNDER THE HEAD TOUR AND TRAVELING EXPENSES. IN ABSENCE OF DETAILS PROVIDED BY THE ASS ESSEE DURING THE ASSESSMENT PROCEEDINGS THE AO MADE AN ESTIMATED DISALLOWANCE O F 25% OF THE EXPENSES CLAIMED. ON APPEAL THE LD. CIT(A) RESTRICTED THE DISALLOWANC E TO 10% OF 25% OF THE EXPENSES OF RS.36,71,133/-. THE REVENUE IS IN APPEAL AGAINST THE RESTRICTION OF THE DISALLOWANCE AND THE SUBMISSION OF THE LD. DR IS THAT THE DISALL OWANCE SHOULD HAVE BEEN RESTRICTED TO 10% OF THE TOTAL EXPENSES OF RS.36,71,133/-. WE FIND FORCE IN THE SUBMISSION OF THE LD DR. WE THEREFORE MODIFY THE ORDER OF THE LD. CIT (A) AND DIRECT THE AO TO RESTRICT THE DISALLOWANCE OUT OF TOUR AND TRAVELING EXPENSES TO 10% OF THE EXPENSES OF RS.36,71,133/-. THUS THIS GROUND OF APPEAL OF THE R EVENUE IS ALLOWED AS ABOVE. 12. GROUND NO.3 OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD.CIT(A) IN DELETING THE DISALLOWANCE OF RS.51,000/- MADE U/S 4 3B OF THE IT ACT ON ACCOUNT OF PF DISALLOWED BY AO U/S 2(24)(X) READ WITH SECTION 36( I)(VA) OF THE IT ACT. 13. THE BRIEF FACTS OF THE CASE ARE THAT THE AO DIS ALLOWED DELAYED CONTRIBUTION TO PROVIDENT FUND OF RS.51,000/- U/S 43B OF THE IT ACT IN THE COMPUTATION OF INCOME WHICH WAS DELETED ON APPEAL BY THE LD. CIT(A) BY OB SERVING THAT THE PAYMENT OF PROVIDENT FUND WAS MADE BY AUGUST, 2006 AND THEREFO RE SECTION 43B OF THE ACT ARE NOT APPLICABLE. 14. THE LD. DR RELIED ON THE ORDER OF THE AO WHEREA S THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A). 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE F IND THAT IT IS A SETTLED POSITION OF LAW THAT NO DISALLOWANCE FOR PROVIDENT FUND AND ESI CON TRIBUTION CAN BE MADE IF THE SAID IT A NO.950/KOL/2010 DCIT,CIRCLE-2, KOLKATA VS M/S.L.C.C.INFOTECH.LTD . A.YR.2005-06 5 CONTRIBUTION WAS PAID BY THE ASSESSEE BEFORE THE DU E DATE OF FILING OF THE RETURN U/S 139(1) OF THE IT ACT. OUR VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF. CIT VS ALOM ENTRUSIONS LTD. ( 2009) 319 ITR 306 (SC) NONE OF THE LOWER AUTHORITIES HAVE GIVEN THE EXACT DATE OF DEPOSIT OF PROVIDENT FUND CONTRIBUTION BY THE ASSESSEE. THEREFORE WE RESTORE THIS ISSUE TO THE FILE OF THE AO FOR PROPER VERIFICATION AND THEREAFTER ADJUDICATE THE I SSUE AFRESH AS PER LAW AFTER ALLOWING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT THE APPEAL OF THE REVENUE IS PART LY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE COURT ON 21.06.2013. SD/- SD/- [ .' #!' , ] [ .., ,, , ] [MAHAVIR SINGH ] [N.S.SAINI] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (3 3 3 3) )) ) DATE: 21.06.2013. R.G.(.P.S.) 5 / -##6 76'8- COPY OF THE ORDER FORWARDED TO: 1. M/S.L.C.C.INFOTECH LTD., P-16,CIT RD, KOL-700014. 2 D.C.I.T., CIRCLE-2, KOLKATA 3 . CIT KOLKATA 4. CIT (A)-I, KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. .6 -#/ TRUE COPY, 51/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES