M/s Mishra Dhatu Nigam Ltd., Hyderabad V. Addl. CIT, Hyderabad

ITA 982/HYD/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1387 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 07-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: B SATYANARAYANA MURTHY
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, J.M. AND SHRI B.R.BASKARAN, A.M. ITA NO.982/HYD/2010 (ASSESSMENT YEAR 2006-07) M/S. MISHRA DHATU NIGAM LTD., HYDERABAD ( PAN - AABAN 0301K ) V/S. ADDL. COMMISSIONER OF INCOME-TAX RANGE 16, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : S HRI B.SATYANARAYANA MURTHY RESPONDENT BY : S MT. AMISHA S.GUPT DATE OF HEARING 26.12 .2012 DATE OF PRONOUNCEMENT 04.01.2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 22.4.2010 PASSED BY THE LEARNED CIT(A) HYDERABAD AN D IT RELATES TO ASSESSMENT YEAR 2006-07. 2. THE SOLITARY ISSUE URGED IN THIS APPEAL RELATES TO THE CLAIM OF DEDUCTION OF RS.1,25,90,498 AS BAD DEBTS UNDER S.36 (2)(I) OF THE INCOME TAX ACT, 1961. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN B RIEF: THE ASSESSEE COMPANY ENTERED INTO AN AGREEMENT WITH M/S. A.P. GA S POWER CORPORATION LTD. FOR ALLOTMENT OF 8 MEGAWATTS OF POWER. AS PER THE SAID AGREEMENT, THE ITA NO.982/HYD/2010 M/S. MISHRA DHATU NIGAM LTD, HYDERABAD 2 ASSESSEE IS LIABLE TO PAY COMMITMENT CHARGES, IF IT DID NOT DRAW THE POWER ALLOTTED TO IT. ACCORDING TO THE ASSESSEE, DEFENCE RESEARCH DEVELOPMENT ORGANIZATION(DRDO) OF GOVERNMENT OF INDIA HAD INVES TED THROUGH THE ASSESSEE COMPANY IN A.P. GAS POWER CORPORATION LTD. (APGPCL) FOR ALLOTMENT OF 8 MEGAWATTS POWER AND IT WAS AGREED TO SHARE 4 M EGAWATTS EACH BY MIDHANI AND DRDO. AS PER THE SAID AGREEMENT ENTERE D INTO WITH DRDO, THE SHARES IN A.P. GAS POWER CORPORATION LTD., WAS PURC HASED BY THE ASSESSEE HEREIN. IT WAS SUBMITTED THAT APGPCL ALLOTTED POWE R SEPARATELY FOR THE ASSESSEE AND DRDO AND BILLING WAS ALSO DONE ACCO RDINGLY ON THE ASSESSEE AN DRDO SEPARATELY. SUBSEQUENTLY, APGPCL APPEARED TO HAVE TAKEN A POLICY DECISION TO ALLOCATE POWER ONLY TO ITS SHARE HOLDER S AND ACCORDINGLY THEY STOPPED ALLOCATING POWER SEPARATELY TO DRDO. SINCE THE POWER DRAWN BY THE ASSESSEE HEREIN WAS LESS THAN 8 MEGAWATTS OF POWER, APGPCL LEVIED COMMITMENT CHARGES FOR UNUTILISED PORTION OF POWER. THE ASSESSEE, IN TURN, SOUGHT REIMBURSEMENT OF SUCH CHARGES FROM DRDO AND, ACCORDING TO THE ASSESSEE, THE CLAIM IT MADE WITH DRDO WAS REDUCED FROM THE COMMITMENT CHARES AND ONLY THE NET AMOUNT WAS DEBITED TO PROFI T & LOSS ACCOUNT. EVEN THE CHIEF ENGINEER OF DRDO REFUSED TO REIMBURSE THE COMMITMENT CHARGES, AND HENCE, THE ASSESSEE CLAIMED THE SAME AS BAD DEB TS, AFTER WRITING OFF OF THE AMOUNT RAISED UPON DRDO. IT IS TO BE NOTED TH AT THE ASSESSEE SEEMS TO HAVE CLAIMED THE AMOUNT OF RS.125.90 LAKHS IN THE Y EAR 2004-05 RELEVANT TO ASSESSMENT YEAR 2005-06 AND ACCORDINGLY CREDITED TH E SAID AMOUNT IN THE ACCOUNTS RELATING TO THE ASSESSMENT YEAR 2005-06. S INCE THE REPLY FROM CHIEF ENGINEER OF DRDO WAS RECEIVED ON 3.6.2005, THE AMO UNT OF RS.125.90 LAKHS WAS WRITTEN OFF IN THE BOOKS IN THE YEAR RELEVANT T O ASSESSMENT YEAR 2006-07. 4. THE ASSESSING OFFICER DISALLOWED THE SAID CLA IM ON THE GROUND THAT THE ASSESSEE HAS NEVER THE AMOUNT WRITTEN OFF AS ITS INCOME IN ANY OF ITA NO.982/HYD/2010 M/S. MISHRA DHATU NIGAM LTD, HYDERABAD 3 THE YEARS. THE SAID VIEW WAS CONFIRMED BY THE CIT(A ) AND HENCE, THE ASSESSEE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE RECORDS. THERE IS NO DISPUTE WITH REGARD TO THE FA CT THAT THE ASSESSEE HAS CLAIMED THE AMOUNT OF RS.125.90 LAKHS AS BAD DEBTS UNDER S.36(2)(I) OF THE ACT, AND THE SAID SECTION READS AS UNDER-. NO SUCH DEDUCTION SHALL BE ALLOWED UNLESS SUCH DEB T OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DE BT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR, OR R EPRESENTS MONEY LENT IN THE ORDINARY COURSE OF THE BUSINESS OF BANKING O R MONEY-LENDING WHICH IS CARRIED ON BY THE ASSESSEE. ACCORDING TO THE ASSESSEE, THE IMPUGNED AMOUNT OF RS.125.90 LAKHS HAS BEEN CONSIDERED AS ITS INCOME BY REDUCING THE SAME AGAINST THE RELEVANT EXPENDITURE. THUS, ACCORDING TO THE ASSESSEE, ONL Y THE NET AMOUNT HAS BEEN DEBITED TO PROFIT & LOSS ACCOUNT INSTEAD OF DEBITIN G THE GROSS AMOUNT OF EXPENDITURE TO PROFIT & LOSS ACCOUNT AND CREDITING THE SAME ON THE CREDIT SIDE OF THE PROFIT & LOSS ACCOUNT THUS, ACCORDING TO TH E ASSESSEE, THE IMPUGNED AMOUNT OF RS.125.90 LAKHS WAS OFFERED AS INCOME IN THE YEAR RELEVANT TO ASSESSMENT YEAR 2005-06. HOWEVER, IT APPEARS THAT THE TAX AUTHORITIES HAVE ERRONEOUSLY TAKEN THE VIEW THAT THE ASSESSEE HAS NO T DECLARED THE IMPUGNED AMOUNT OF RS.120.90 LAKHS AS ITS INCOME. 6. A CAREFUL PERUSAL OF PROVISION OF S.36(2)(I) O F THE ACT SHOWS THAT THE AMOUNT SHOULD HAVE BEEN TAKEN INTO ACCOUNT IN C OMPUTING THE INCOME OF THE ASSESSEE. IN OUR VIEW, THE METHODOLOGY ADOPTED BY THE ASSESSEE TO REDUCE THE AMOUNT OF RELEVANT EXPENDITURE, WITH TH E CLAIM IT MADE WITH THE DRDO, IN FACT, RESULTS IN DECLARING THE SUM AS INCO ME OF THE ASSESSEE. HOWEVER, THIS FACTUAL ASPECT NEEDS VERIFICATION AT THE END OF THE ASSESSING ITA NO.982/HYD/2010 M/S. MISHRA DHATU NIGAM LTD, HYDERABAD 4 OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) AND RESTORE THE MATTER TO THE F ILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE THE ISSUE AFRE SH AFTER CONSIDERING THE EXPLANATION GIVEN BY THE ASSESSEE, AND ALSO IN THE LIGHT OF THE DISCUSSION MADE HEREINABOVE. THE ASSESSING OFFICER SHALL ACCO RDINGLY DECIDE THIS ISSUE AFRESH IN ACCORDANCE WITH LAW AND AFTER GIVING REAS ONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 04.01.2013 SD/- SD/- ( ASHA VIJAYARAGHAVAN ) ( B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED/- 04 TH JANUARY, 2013 COPY FORWARDED TO: 1. M/S. MISHRA DHATU NIGAM LTD., C/O. M/S. VENUGOPAL & CHENOY, CHARTERED ACCOUNTANTS, DOOR NO.4-1-889/167/ 2, TILAK ROAD, HYDERABAD 500 001 2. 3. 4. 5. ADDL COMMISSIONER OF INCOME - TAX, RANGE 16, HYDERABAD COMMISSIONER OF INCOME-TAX(APPEALS) V, HYDERABAD COMMISSIONER OF INCOME-TAX IV, HYDERABAD DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S.