The DCIT, Kollam V. M/s.Transworld Hire Purchase India Ltd, Kollam

ITA 960/COCH/2005

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3929 (ITAT-COCHIN)
• Duration Of Justice: 11 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 18-04-2017
• Assessment Year: 1999-2000
• Appeal Filed On: 14-09-2005
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Keywords: Bad and doubtful debts
• Section: 143(3); 260A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER I.T.A. NO. 960 /COCH/2 0 05 ASSESSMENT YEAR : 1999 - 2000 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. VS. M/S. TRANSWORLD HIRE PURCHASE INDIA LTD., BEACH ROAD, KOLLAM. [PAN:AAACT 6404G] (REVENUE - APPELLANT) (ASSESSEE - RESPONDENT) REVENUE BY SHRI A. DHANARAJ, SR. DR ASSESSEE BY NONE DATE OF HEARING 20 / 0 4 / 201 7 DATE OF PRONOUNCEMENT 21 ST /04/2017 O R D E R PER GEORGE GEORGE K.,JUDICIAL MEMBER: THE HONBLE HIGH COURT OF KERALA IN I.T.A. NO. 1441 OF 2009 (JUDGMENT DATED 23/08/2016) HAD REMITTED THIS CASE TO THE TRIBUNAL. THE HONBLE HIGH COURT DIRECTED THE TRIBUNAL TO CONSIDER EXPLANATION 1 TO S ECTION 36(1)(VII) OF THE I.T. ACT, WHILE DISPOSING OF THE CASE AFRESH. THE RELEVA NT FINDING OF THE HONBLE HIGH COURT READS AS FOLLOWS: READING OF THE AFORESAID CONCLUSIONS OF THE TRIBUN AL WOULD SHOW THAT WHILE ARRIVING AT ITS CONCLUSION, THE TRIBUNAL HAS NOT AD VERTED TO THE STATUTORY PROVISIONS PARTICULARLY EXPLANATION 1. THEREFORE, WE ARE UNABLE TO SUSTAIN THE ORDER PASSED BY THE TRIBUNAL, AND ARE OF THE VIEW T HAT THE MATTER IS REQUIRED TO BE REMITTED FOR FRESH CONSIDERATION. ACCORDINGLY, SETTING ASIDE THE ORDER PASSED I.T.A. NO.960/COCH/2005 2 BY THE TRIBUNAL IN I.T.A. NO. 960/COCH/2006, THE MA TTER IS REMITTED TO THE TRIBUNAL FOR FRESH CONSIDERATION WITH NOTICE TO THE PARTIES. 2. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS A NON BANKING FINANCIAL COMPA NY ENGAGED IN THE BUSINESS OF LEASING, HIRE PURCHASE FINANCE AND MONEY LENDING. THE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT WAS COMPLETED VIDE ORDER DATE D 24/12/2003. THE ASSESSING OFFICER IN THE SAID ORDER HAD ADDED A SUM OF RS.9,0 2,904/- WHICH WAS CLAIMED BY THE ASSESSEE AS BAD DEBTS WRITTEN OFF. THE ASSESSIN G OFFICER HELD THAT THIS IS NOTHING BUT ONLY A PROVISION FOR BAD AND DOUBTFUL DEBTS AND IN VIEW OF EXPLANATION 1 TO SECTION 36(1)(VII) OF THE I.T. ACT, THE SAME CANNOT BE ALLOWED AS A DEDUCTION. 3. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. THE CI T(A) VIDE ORDER DATED 31/03/2005 ALLOWED THE APPEAL OF THE ASSESSEE AND D ELETED THE ABOVE ADDITION. THE RELEVANT OBSERVATION OF THE CIT(A) READS AS FOL LOWS: .IN THE INSTANT CASE, THE APPELLANT HAS DEBITED P L A/C WITH BAD DEBIT AS CORRESPONDING CREDIT ENTRY MADE IN THE PROVISION FO R BAD DEBT A/C. HENCE THE CONDITION U/S. 36(1)(VII) AND EXPLANATION THEREOF H AVING BEEN FULFILLED, THE APPELLANT IS ELIGIBLE FOR DEDUCTION. I.T.A. NO.960/COCH/2005 3 4. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVE NUE FILED AN APPEAL BEFORE THE TRIBUNAL. THE TRIBUNAL VIDE ITS ORDER DATED 28/01/2 008 DISMISSED THE APPEAL OF THE REVENUE AND CONFIRMED THE CIT(A)S ORDER. 5. THE REVENUE FILED FURTHER APPEAL U/S. 260A OF THE I.T. ACT BEFORE THE HONBLE HIGH COURT OF KERALA. THE HONBLE HIGH COURT REMIT TED THE ISSUE BACK TO THE TRIBUNAL. THE HONBLE HIGH COURT DIRECTED THE TRIB UNAL TO CONSIDER THE RELEVANT STATUTORY PROVISIONS, IN PARTICULAR, EXPLANATION 1 T O SECTION 36(1)(VII) OF THE I.T. ACT. 6. PURSUANT TO THE JUDGMENT OF HONBLE HIGH COURT , THE PRESENT APPEAL WAS TAKEN UP FOR HEARING ON 20/04/2017. NONE APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF A NOTICE BEING SERVED AND THE CONCERNED ASSESSING OFFICER INFORMING THE MD OF THE ASSESSEE OF THE POSTING OF THE CASE. 7. THE LD. DR SUBMITTED THAT IT IS ONLY THE PROVI SION FOR BAD AND DOUBTFUL DEBTS WHICH IS CLAIMED FOR DEDUCTION U/S. 36(1)(VII) OF T HE I.T. ACT AND IN VIEW OF EXPLANATION 1 TO THE SAID SECTION, THE PROVISION CAN NOT BE ALLOWED AS A DEDUCTION. 8. I HAVE HEARD THE LD. DR AND PERUSED THE MATER IAL ON RECORD. THE BALANCE SHEET FILED ALONG WITH THE RETURN FOR THE YEAR ENDI NG 31/03/1999 SHOWED THE I.T.A. NO.960/COCH/2005 4 PROVISION OF NON PERFORMING ASSETS AT RS.36,14,959/ -. THE CORRESPONDING FIGURE AS ON 31/03/1998 WAS RS.6,68,992/-. THUS THERE IS AN INCREASE IN THE LIABILITY DURING THE YEAR AMOUNTING TO RS.29,45,967/-. THE A SSESSING OFFICER ON EXAMINATION OF THE ACCOUNT COPIES HAD NOTICED THAT THE ASSESSEE HAD DEDUCTED THE FOLLOWING ITEMS IN ITS P&L ACCOUNT:- (1) PROVISION FOR DOUBTFUL ASSETS : 4,77,784/- (2) PROVISION FOR SUBSTANDARD ASSETS : 15,98,948/- (3) BAD DEBTS WRITTEN OFF : 9,02,904 /- 29,79,636/- IT WAS FURTHER NOTICED BY THE ASSESSING OFFICER THA T THE P&L ACCOUNT WAS CREDITED WITH AN AMOUNT OF RS.33,669/- AS SUBSTANDARD PROVIS ION REVERSED WHICH WAS DEDUCTED FROM THE INCOME COMPUTED. THE ASSESSEE HAD ALSO ADDED BACK THE PROVISION FOR DOUBTFUL DEBTS AND PROVISION FOR SUB STANDARD ASSETS AMOUNTING TO RS.4,77,784/- AND RS.15,98,948/- RESPECTIVELY. THE REFORE, IT WAS CLEAR THAT BAD DEBTS WRITTEN OFF AT RS.9,02,904/- AND DEBITED IN T HE P&L ACCOUNT WAS OUT OF THE PROVISION MADE DURING THE RELEVANT PREVIOUS YEAR. THE EXPLANATION TO SEC. 36(1)(VII) READS AS FOLLOWS: EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, ANY BAD DEBT OR PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE SHALL NOT INCLUDE ANY PROVISION FOR BAD AND DOUBTFUL DEBTS MADE IN THE AC COUNTS OF THE ASSESSEE. 8.1 IN THE INSTANT CASE, IT IS CLEAR WHAT IS WRI TTEN OFF AS BAD DEBTS U/S. 36(1)(VII), IS ONLY PROVISION FOR BAD DEBTS. IN VI EW OF EXPLANATION TO SEC. 36(1)(VII), THE PROVISION FOR BAD AND DOUBTFUL DEBT S CANNOT BE ALLOWED AS A I.T.A. NO.960/COCH/2005 5 DEDUCTION. MOREOVER THE ACCOUNTING ENTRY SHOW THAT THE ASSESSEE HAD DEBITED TO THE P&L ACCOUNT OF BAD DEBTS AND HAD CREDITED TH E SAME TO PROVISION FOR NPA ACCOUNT. UNLESS THE PARTYS ACCOUNT IS DEBITED SPEC IFICALLY, IT CANNOT BE STATED THAT THERE IS ACTUAL WRITING OFF BAD DEBTS. THEREFO RE, THE ORDER OF THE CIT(A) IS REVERSED AND THAT OF THE ASSESSING OFFICER IS SUSTA INED ON THIS ISSUE. IT IS ORDERED ACCORDINGLY. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS ALLOWED. PRONOUNCED IN THE O PEN COURT ON 21 ST -04-2017. SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER PLACE: KOCHI DATED: 21 ST APRIL, 2017 GJ COPY TO: 1. M/S. TRANSWORLD HIRE PURCHASE INDIA LTD., BEACH ROAD, KOLLAM. 2. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, KOLLAM. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS), TRIVAND RUM. 4. THE COMMISSIONER OF INCOME-TAX,TRIVANDRUM. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGIS TRAR) I.T. A.T., COCHIN