Shriram Chits Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-3(1), Hyderabad

MA 107/Hyd/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4340 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-05-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Assessment Year: 2016-2017
• Appeal Filed On: 15-12-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Y.V.S.T. SAI
• Keywords: Bad and doubtful debts

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “B”, HYDERABAD BEFORE SHRI RAMA KANTA PANDA, ACCOUNTANT MEMBER & SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER M.A. No.107/HYD/2021 (Arising out of ITA No.975/Hyd/2019) Assessment Year: 2016-17 Shriram Chits Private Limited, Hyderabad [PAN: AAFCS4916D] Vs Dy.Commissioner of Income Tax, Circle-3(1), Hyderabad (Applicant) (Respondent) Assessee by: Shri K.C.Devdas, Revenue by: Shri Y.V.S.T.Sai, CIT-DR Date of hearing: 13/05/2022 Pronouncement on: 13/05/2022 ORDER PER K. NARASIMHA CHARY, JM: By way of this Miscellaneous Application, assessee seeks rectification of certain discrepancies that are crept in the order dt.17/08/2021 in ITA No.718/Hyd/2019 for AY.2016-17. 2. Grievance of assessee is fore folded and these form the basis for assessee, seeking rectification of the order. Those are: MA No.107/Hyd/2021 Page 2 of 8 i. The cause title in the common order dt.17/08/2021 in ITA Nos.718/Hyd/2019 and 975/Hyd/2019, though refer to both the appeal numbers, the description of the parties is given only in respect of ITA No.718/Hyd/2019 but in respect of ITA No.975/Hyd/2019 it was left blank; ii. Vide paragraph No.5 of the common order, ITAT was referring to the observations of the learned CIT(A) but by inadvertence, paragraph No.3 of the assessment order was extracted in stead of paragraph No.9 of the Ld.CIT(A)’s order; iii. At paragraph No.6, it was mentioned that Ld.CIT(A) granted relief to the assessee to the extent of 95% only in respect of bad debt claim pertaining to the running and terminated cheques; whereas inasmuch as the learned AO himself allowed the claim of the assessee on that aspect to the extent of 5% and in appeal, the Ld.CIT(A) granted relief in respect of the balance 95% thereby the assessee getting relief in its entirety. But the observations of the Tribunal would indicate that the Ld.CIT(A) granted relief only to the extent of 95% of the subject matter of appeal before him in respect of bad debts; and iv. Vide paragraph No.7 of the Tribunal’s order, the Tribunal was referring to the discretion of the Ld.CIT(A) on the aspect of commission on cancelled chits, but by inadvertence, the observations of the learned AO at paragraph No.4 in the assessment order were extracted instead of paragraph No.12 of the Ld.CIT(A)’s order. MA No.107/Hyd/2021 Page 3 of 8 3. Adverting to these four discrepancies, Ld.AR submitted that in order to give quietus to the issue, in the interest of justice, the mistakes may be rectified. 4. We had heard Ld.DR on this aspect. Ld.DR fairly submitted that these mistakes are typographical mistakes apparent on the face of record and could be rectified. Both the counsel submitted before us that (i) the cause title has to be in full; (ii) at paragraph Nos.5 & 7 of the Tribunal’s order in the place of the extract of paragraph Nos.3& 4 of learned AO’s observations, paragraph Nos.9 & 12 of the Ld.CIT(A)’s order have to be substituted; (iii) and so also the deletion of the sentence “It rather emerges that the Ld.CIT(A) has granted relief to the assessee to the extent of 95% only (supra) than that its entirety” would serve the purpose and it could be done, without impairing the effect of the order. 5. In view of this factual position, we are inclined to accept the consensus reached by both the counsel and order that, - i. The cause title in respect of ITA No.975/Hyd/2019 (AY.2016-17) shall be read as follows: Dy.Commissioner of Income Tax, Circle-3(1), Hyderabad Shriram Chits Private Limited, Hyderabad [PAN: AAFCS4916D] ii. Paragraph No.5 shall be read as follows: “5. We advert to the Revenue’s first and foremost grievance pertaining to disallowance of bad debt qua running and terminated chits in alleged violation u/s.36(2) of the Income Tax MA No.107/Hyd/2021 Page 4 of 8 Act (in short ‘the Act’). We are taken to Ld.CIT(A)’s detailed discussion deleting the impugned bad debt disallowance as under: IX) Ground Nos.1(a) and 1(b) in appeal relate to claim of bad debts in term of running chits and terminated chits. Facts of the case, grounds of appeal, assessment order and submissions of the appellant were perused. The appellant company is running chit fund business in the state of AP through its various branches. The chit fund business is governed by Chit Fund Act, 1982 and rules framed there under. As per the provisions of Chit Fund Act, the relevant byelaws are registered with Registrar of Chits and after obtaining the certificate of commencement, the company conducts auctions. The minutes of proceedings of auction should be filed with Registrar of Chits. The activities of chit fund business can be better understood with an example .. For example, if there is a chit fund for Rs.1.00 lakh, there can be 50 members each contributing 2000 per month and chit can go on for 50 months. Auction is conducted on prescribed data after giving due intimation to the subscribers. If the auction of Rs. One lakh chit say for example Rs.75000, money is distributed as under: Commission of 5% to chit fund company - Rs. 5,000 Prized money to the successful bidder - Rs.75,000 Dividend - Rs.20,000 The dividend of Rs.20,000 will be distributed amongst 50 members, that works out to 400 per head. In next installment every subscriber will pay only Rs.1600 (2000-400) the same process will continue for 50 months. Sometimes the successful bidder, called prized subscribers, after received prize money, do not pay subsequent installments. Such amounts were written off as bad debts by the appellant. The Assessing Officer did not allow the above amounts on the ground that MA No.107/Hyd/2021 Page 5 of 8 i. The subscriptions/amount to be repaid by members towards future instalments is not a debt, especially within the meaning of AP Agricultural Indebtness (Relief) Act. ii. No debtor and creditor relationship exist between foreman and subscriber. iii. The debt is not part of income of previous year or any earlier previous years. iv. Chit fund business is not money lending business. However, the Assessing Officer allowed 5% of the above amounts being foreman commission as the same was offered as income either in current year or in earlier years. The identical issue was covered in favour of the appellant by the Hon'ble ITAT for AYs 1995-96 to 1999-00, 2002-03 to 2006-07, 2008-09, 2009-10 and 2010-11 (ITA No.809 & 1214/Hyd/2014, dated 29.10.2014), wherein it was held that such amounts are allowable u/s.37(1). Respectfully following the decision of Hon'ble ITAT these grounds of appeal are allowed. Further, vide MA.No.25/Hyd/2016 arising out of ITA.No.1187/ Hyd/2015 dated 08-08-2016, the Hon'ble ITAT, Hyderabad held on page-4 of the order as follows: “...........Respectfully following the said decision of the Hon'ble Madras High Court in the case of Shriram Chits and Investments Limited, we hold that the claim of the assessee for deduction of bad debts written off is also allowable alternatively as business loss u/ s.28(i). The relevant grounds of the assessee on this issue being grounds no.2 and 3 in its appeal are accordingly allowed." Considering the facts and circumstances of the instant case, ground nos.1(a) and 1(b) are covered by the decision of the Hon'ble ITAT and hence, Ground Nos. 1(a) and 1(b) are allowed”. MA No.107/Hyd/2021 Page 6 of 8 iii. Paragraph No.6 shall be read as follows: “6. Both the learned representatives are fair enough in informing us that this tribunal’s orders have already decided the very issue in assessee's favour qua its bad debt claim pertaining to running and terminated cheques. We do not notice any distinction on facts or law qua the same. We therefore follow the above detailed reasoning mutatis mutandis to affirm the CIT(A) findings on the issue of running and terminated cheques as well. iv. Lastly, paragraph No.7 of the order, which read as follows: “7. We proceed further and notice that the factual position is no different qua the latter twin issues of commission on cancelled chits and related payments of Rs.1,88,32,411 and Rs.4,04,56,377; respectively wherein the tribunal’s orders have upheld the assessee's claim on both the counts. Learned CIT(A)’s detailed discussion qua foregoing second issue reads as under : XII) Ground No.1(e) in appeal relates to taxing of a sum as commission on cancelled chits when it was said to be not accrued to the appellant. Facts, issues and circumstances of the instant case were seen. The appellant had been recognizing the income on commission on cancelled cheques in the year when the amounts were actually paid to removed subscribers. The similar issue came up before the Hon'ble ITAT in a consolidated order dated 29.04.2016 arid the claim of the appellant was upheld by the Hon'ble ITAT, Hyderabad. The reference to Hon'ble ITAT, Hyderabad has been made by the appellant in submissions which has been extracted supra. Considering the facts, issues and circumstances of the instant case, Ground No. 1 (e) in appeal is allowed”. MA No.107/Hyd/2021 Page 7 of 8 6. In all other respects, original order remains. 7. In the result, the MA is allowed in above terms. Order pronounced in the open court on this the 13 th day of May, 2022 Sd/- Sd/- (RAMA KANTA PANDA) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER TNMM Hyderabad, Dated: 13/05/2022 MA No.107/Hyd/2021 Page 8 of 8 Copy forwarded to: 1. Shriram Chits Private Limited, 3-6-478, 3 rd Floor, Anand Estates, Opp.Indian Bank, Liberty Road, Hyderabad. 2. Dy.Commissioner of Income Tax, Circle-3(1), Hyderabad. 3. CIT(Appeals)-3, Hyderabad. 4. Pr.CIT-3, Hyderabad. 5. DR, ITAT, Hyderabad 6. GUARD FILE TRUE COPY ASSISTANT REGISTRAR ITAT, HYDERABAD