ACIT, Chandigarh V. M/s Punjab State Warehousing Corporation, Chandigarh

ITA 977/CHANDI/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2351 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T M SINGLA
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 977/CHD/2011 ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE 2(1), V M/S PUNJAB STATE WAREHOUSING CHANDIGARH. CORPORATION, CHANDIGARH. PAN: AABCP-7825J (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI AKHILESH GUPTA RESPONDENT BY : SHRI T.M.SINGLA DATE OF HEARING : 11.04.2013 DATE OF PRONOUNCEMENT : 17.04.2013 ORDER PER HARI OM MARATHA,JM THIS APPEAL OF THE REVENUE FOR A.Y. 2007-08 IS DIRE CTED AGAINST THE ORDER OF LD. CIT(APPEALS) DATED 08.07.2 011. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR A.Y. 2007-08 ON 31.10.2007 DECLARING TOTAL INCOME OF RS.1,26,40,92, 088/-. THE ASSESSEE CORPORATION HAS NETWORK OF 150 WAREHOUSES, 262 PROCUREMENT CENTRES AND TWO CONTAINER FREIGHT STATI ONS AND THREE INLAND CONTAINER DEPOTS. THE ASSESSEE COMPAN Y IS MAINLY ENGAGED IN THE ACTIVITIES OF STORAGE AND PROCUREMEN T OF FOODGRAINS IN THE STATE OF PUNJAB, ON BEHALF OF THE GOVERNMENT OF INDIA AND FCI. AFTER CONSIDERING THE RELEVANT INFORMATION/DOCUMENTS, THE AO HAS FINALIZED INCOME OF THE 2 ASSESSEE BY DETERMINING TOTAL LOSS OF RS.71,93,70,0 48/-. IN FIRST APPEAL, A PART RELIEF HAS BEEN GIVEN TO THE A SSESSEE. 3. AGAINST THE SUSTAINED ADDITIONS, THE ASSESSEE HA S FILED THE SECOND APPEAL BY RAISING FOLLOWING TWO GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(APPEALS) IN APPEAL NO. 395/09-10 HAS ERRED IN D ELETING ADDITION OF RS.4,31,99,373/- MADE ON ACCOUNT OF DISALLOWANCE OF WRITTEN OFF BAD DEBTS RECOVERABLE FROM CONWARE. . 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(APPEALS) IN APPEAL NO. 395/09-10 HAS ERRED IN D ELETING ADDITION OF RS.3,88,32,240/- MADE ON ACCOUNT OF NOTIONAL INT EREST RECOVERABLE FROM CONWARE. 4. THE FACTS, APROPOS THE FIRST GROUND ARE THAT ON PERUSAL OF THE PROFIT & LOSS ACCOUNT, IT WAS REVEALED THAT THE ASSESSEE HAS WRITTEN-OFF RS.4,31,99,373/- ON ACCOUNT OF RECOVERA BLE FROM CONWARE. THE AO WANTED THE ASSESSEE TO FURNISH THE RECORDS AND DETAILS REGARDING THIS CLAIM. IT WAS REPLIED T HAT THE CORPORATION HAD DECIDED TO WRITE-OFF THE INTEREST F ROM PUNJAB STATE CONTAINER & WAREHOUSING CORPORATION AMOUNTING TO RS.2377.97 LACS IN A PHASED MANNER OF FOUR YEARS. THE CORPORATION WAS HOLDING A PROVISION OF RS.650.00 LA CS AND AFTER NETTING OFF THE RECOVERABLE, AN AMOUNT OF RS.431.99 LACS HAS BEEN CHARGED TO PROFIT & LOSS ACCOUNT DURING THE YE AR. HOWEVER, AN AMOUNT OF RS.10 CRORES HAS BEEN RECOVER ED FROM CONWARE WHICH HAS BEEN ACCOUNTED FOR AS INCOME OF T HIS YEAR, AS PER THE POLICY OF THE MANAGEMENT. AFTER CONSIDE RING THIS SUBMISSION OF THE ASSESSEE, THE AO HAS OBSERVED THA T THE ASSESSEE HAS ITSELF ADMITTED AN AMOUNT OF RS.10 CRO RES TO BE RECOVERABLE FROM CONWARE DURING THE YEAR WHICH IS E XISTING 3 BUSINESS ENTITY AND HAS SHOWN PROFIT. THUS, THIS A MOUNT CANNOT BE SAID TO BE NON-RECOVERABLE. THEREFORE, T HE AO HAS NOT ALLOWED WRITE-OFF OF RS.4,31,99,373/-. ON THE C ONTRARY, LD. CIT(APPEALS) HAS ALLOWED THIS CLAIM OF THE ASSESSEE ON THE REASONING THAT IF ANY ASSESSEE WRITES-OFF ANY SUM A S BAD DEBT, OF ANY AMOUNT WHICH WAS INCURRED DURING THE COURSE OF ASSESSEE'S BUSINESS, THE SAME HAS TO BE ALLOWED IN VIEW OF THE PROVISIONS OF THE ACT AND THE LATEST DICTUM OF THE HON'BLE APEX COURT. MOREOVER, AFTER THE ASSESSEE COMPANY DECIDE D TO WRITE- OFF THE AMOUNT IN QUESTION PERTAINING TO INTEREST I N A PHASED MANNER IN FOUR YEARS, IT HAS BEEN ALREADY ALLOWED B Y THE AO IN FIRST THREE YEARS. THUS, THERE IS NO REASON WHY TH E REMAINING PART SHOULD NOT BE ALLOWED IN THE FOURTH YEAR ON TH E PARITY OF REASONING. ACCORDINGLY, IN OUR CONSIDERED OPINION, LD. CIT(APPEALS) HAS CORRECTLY DELETED THIS ADDITION. THEREFORE, GROUND NO.1 OF REVENUES APPEAL CANNOT BE ALLOWED. 5. THE FACTS OF GROUND NO.2 ARE THAT THE ASSESSEE H AS SHOWN AN AMOUNT RECOVERABLE FROM CONWARE AT RS.43199 LACS BUT NO INTEREST ON ACCRUAL BASIS HAS BEEN SHOWN IN THE PRO FIT & LOSS ACCOUNT. AS PER THE AO, ASSESSEE SHOULD HAVE DECLA RED THE INTEREST ACCRUED ON THIS LOAN BECAUSE THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFO RE, THE AO MADE ADDITION OF INTEREST @ 12% PER ANNUM, WHICH CO MES TO RS.1,03,67,850/- IN ADDITION TO RS.2,84,64,390/-, W HICH IS INTEREST PAID BY CONWARE AND DECLARED BY THE ASSESS EE. THE LD. CIT(APPEALS) HAS DISALLOWED THIS ADDITION ON TH E BASIS OF THE DECISION OF HON'BLE ITAT CHANDIGARH BENCH, RENDERED VIDE PARA NO.8 & 9 OF ITS ORDER DATED 23.09.2009 PASSED IN CO 4 NO.26/CHD/2009 AND ITA NO. 301/CHD/2009. NOW THE R EVENUE IS IN APPEAL. 6. SINCE, UNDENIABLY THIS ISSUE STANDS COVERED IN F AVOUR OF THE ASSESSEE BY THE DECISION OF THIS VERY BENCH, WE DO NOT FIND ANY MERIT IN THIS GROUND OF REVENUES APPEAL. THIS GROUND IS LIKELY TO BE DISMISSED. ACCORDINGLY, BOTH THE GROU NDS OF THIS APPEAL STAND DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH APRIL,2013. SD/- SD/- (N.K.SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17 TH APRIL,2013. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH