Mather & Platt Pumps Limited, Pune v. ACIT, Circle-9, Pune

ITA 1000/PUN/2012 | 2007-2008
Pronouncement Date: 28-10-2013 | Result: Allowed

Appeal Details

RSA Number 100024514 RSA 2012
Assessee PAN AABCD3568L
Bench Pune
Appeal Number ITA 1000/PUN/2012
Duration Of Justice 1 year(s) 5 month(s) 10 day(s)
Appellant Mather & Platt Pumps Limited, Pune
Respondent ACIT, Circle-9, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2013
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 28-10-2013
Date Of Final Hearing 03-09-2013
Next Hearing Date 03-09-2013
Assessment Year 2007-2008
Appeal Filed On 18-05-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 351/PN/2009 (ASSESSMENT YEAR 2005-06) MATHER & PLATT PUMPS LTD. GREAVES COMPOUND MUMBAI PUNE ROAD CHINCHWAD PUNE 411019 .. APPELLANT PAN NO.AABCD 3568L VS. ADDL. CIT RANGE-9 PUNE .. RESPONDENT ITA NO. 368/PN/2009 (ASSESSMENT YEAR 2005-06) ADDL. CIT CIRCLE-9 PUNE .. CROSS OBJECTOR VS. MATHER & PLATT PUMPS LTD. CHINCHWAD WORKS MUMBAI PUNE ROAD CHINCHWAD PUNE 411019 PAN NO.AABCD 3568L .. APPELLANT IN THE APPEAL ITA NO. 302/PN/2010 (ASSESSMENT YEAR 2006-07) DCIT CIRCLE-9 PUNE .. APPELLANT VS. MATHER & PLATT PUMPS LTD. GREAVES COMPOUND MUMBAI PUNE ROAD CHINCHWAD EAST PUNE 411019 .. RESPONDENT PAN NO.AABCD 3568L ITA NO. 1000/PN/2012 (ASSESSMENT YEAR 2007-08) MATHER & PLATT PUMPS LTD. GREAVES COMPOUND MUMBAI PUNE ROAD CHINCHWAD PUNE 411019 .. APPELLANT PAN NO.AABCD 3568L VS. ADDL. CIT RANGE-9 PUNE .. RESPONDENT ASSESSEE BY : SHRI SH. NANIWADEKAR REVENUE BY : SHRI ADARSH KUMAR MODI DATE OF HEARING : 03-09-2013 DATE OF PRONOUNCEMENT : 28-10-2013 2 ORDER PER R.K. PANDA AM : ITA NO.351/PN/2009 AND ITA NO.368/PN/2009 ARE CROSS APPEALS AND ARE DIRECTED AGAINST THE ORDER DATED 31-12-2008 OF THE CIT(A)-III PUNE RELATING TO ASSESSMENT YEAR 2005-06. ITA NO.302/P N/2010 FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12-11-2 009 OF THE CIT(A)-V PUNE RELATING TO ASSESSMENT YEAR 2006-07. ITA NO.1 000/PN/2012 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 13 -02-2012 OF THE CIT(A)- V PUNE RELATING TO ASSESSMENT YEAR 2007-08. FOR T HE SAKE OF CONVENIENCE ALL THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. ITA NO.351/PN/2009 (BY ASSESSEE) (A.Y. 2005-06) : 2. GROUND OF APPEAL NO.1 BY THE ASSESSEE READS AS U NDER : 1. THE LEARNED C.I.T.(A) ERRED ON FACTS AND IN LA W IN UPHOLDING DISALLOWANCE OF WRITE-OFF OF OBSOLETE AND SLOW-MOVING INVENTORY OF RS.68 31 255/- AS PER CONSISTENT PRACTICE FOLLOWED BY T HE COMPANY. IN ANY CASE HE FAILED TO APPRECIATE THAT THE OPENING STOCKS HAVE ALSO BEEN VALUED AT WRITTEN DOWN VALUE AND CORRESPONDING RELIEF SHOULD HAVE BEEN GRANTED BY HIM. 2.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING ERECTION AND COMM ISSIONING OF PUMPS ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS T HE ASSESSING OFFICER NOTED THAT THE ASSESSEES INVENTORY OF RS.10 42 07 527/- AS ON 31-03-2005 HAS BEEN ARRIVED AT AFTER REDUCING AN AGGREGATE AM OUNT OF PROVISION OF RS.68 31 255/- ON ACCOUNT OF SLOW MOVING INVENTORY THE DETAILS OF WHICH ARE AS UNDER : 3 PROVISION FOR WRITE OFF/DOWN OF RAW MATERIAL RS.42 6 6 540/- PROVISION FOR WRITE OFF/DOWN OF BROUGHT OUT ITEMS R S.12 18 267/- PROVISION FOR WRITE OFF/DOWN OF FINISHED GOODS RS.13 46 448/- ------------------- TOTAL RS.68 31 255/- ------------------- 2.2 ACCORDING TO THE ASSESSING OFFICER THE PROVISIO NS OF INCOME TAX ACT ALLOWS FOR VALUATION OF CLOSING STOCK OF INVENTORY EITHER AT COST OR MARKET VALUE. HE THEREFORE ASKED THE ASSESSEE TO CLARIF Y ALONGWITH SUPPORTING EVIDENCE TO JUSTIFY THE SAID PROVISIONS MADE. IT W AS SUBMITTED BY THE ASSESSEE THAT SUCH TYPE OF PROVISION FOR WRITE OFF/ DOWN OF INVENTORY HAS BEEN MADE AS PER THE CONSISTENT POLICY FOLLOWED BY THE ASSESSEE. AS PER THIS POLICY IF THE INVENTORY DOES NOT MOVE FOR MORE THAN 1 YEAR BUT LESS THAN 2 YEARS 50% OF ITS COST IS WRITTEN OFF AND IF THE INVENTORY DOES NOT MOVE FOR MORE THAN 2 YEARS THE ENTIRE COST OF INVENTORY IS WRITTEN OFF. 2.3 HOWEVER THE ASSESSING OFFICER WAS NOT SATISFIE D WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE NOTED THAT T HE PROVISIONS OF INCOME TAX ACT DO NOT ALLOW VALUATION OF INVENTORY AS PER INTERNAL POLICY/GUIDELINES OF AN ASSESSEE. SUCH CLOSING INV ENTORY HAS TO BE VALUED EITHER AT COST PRICE OR AT MARKET PRICE WHICHEVER IS LESS. THEREFORE IF AN ITEM OF INVENTORY IS BEING VALUED AT RS.NIL OR AT H ALF OF THE COST PRICE THE ASSESSEE SHOULD BE IN A POSITION TO SUBSTANTIATE IT S CLAIM THAT THE MARKET PRICE OF THE SAID ITEM IS NIL OR HALF OF THE COST P RICE AS THE CASE MAY BE. SINCE THE ASSESSEE DID NOT PRODUCE ANY DOCUMENTARY EVIDENCE TO SUGGEST THAT THE SAID ITEMS OF INVENTORY HAVE NIL MARKET V ALUE OR HALF OF THE COST PRICE AS THE CASE MAY BE THE ASSESSING OFFICER DISA LLOWED AN AMOUNT OF RS.68 31 255/-. 4 2.4 BEFORE CIT(A) IT WAS SUBMITTED THAT DUE TO TECH NOLOGICAL ADVANCES SOME MODELS HAVE BECOME REDUNDANT AND THE MATERIALS /SPARES FOR THESE PUMPS CEASED TO HAVE ANY MARKET END USE AND THUS DO NOT HAVE ANY REALISABLE VALUE. IT WAS SUBMITTED THAT THE COMPAN Y CARRIES OUT A DETAILED ANALYSIS OF SUCH SLOW-MOVING AND OBSOLETE INVENTORY AND WRITES OFF THEIR VALUE IN THE BOOKS IN ORDER TO PRESENT A TRUE AND F AIR VIEW OF ITS STATE OF AFFAIRS. THE PRACTICE IS BEING FOLLOWED SINCE LAST SO MANY YEARS. IT WAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAS CO NSIDERED ONLY THE DIMINUTION IN THE VALUE OF CLOSING STOCK. HOWEVER HE FAILED TO APPRECIATE THAT THE CLOSING STOCK OF SLOW MOVING PARTS WERE IN CLUDED IN THE OPENING STOCK AS WELL WHICH WAS SIMILARLY VALUED AT THE WR ITTEN DOWN VALUE. VARIOUS DECISIONS WERE ALSO BROUGHT TO THE NOTICE O F THE CIT(A) TO SUPPORT THE CLAIM OF THE ASSESSEE. IT WAS ALTERNATIVELY ARG UED THAT THE WRITE DOWN OF RS.68 31 255/- IS THE CUMULATIVE WRITE DOWN OVER TH E YEARS AND DOES NOT RELATE TO THIS YEAR ALONE. THIS YEAR THE WRITE DOW N OF OPENING INVENTORY AT RS.36 58 089/- WAS REVERSED AND THEREFORE THE WRITE DOWN OF RS.68 31 255/- WAS MADE. THEREFORE THE ADDITION IF AT ALL CAN BE MADE TO THE EXTENT OF RS.31 73 166/-ONLY. 2.5 HOWEVER THE LD.CIT(A) WAS ALSO NOT CONVINCED W ITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE AD DITION MADE BY THE ASSESSING OFFICER BY HOLDING AS UNDER : 6.3. THE SUBMISSION HAS BEEN CONSIDERED AND IS FOUND TO BE DEVOID OF ANY MERIT. AS HAS RIGHTLY BEEN OBSERVED BY THE ASSESSING OFFI CER THE PROVISIONS OF INCOME-TAX LAW REQUIRE VALUATION OF INVENTORY AT COST OR MARKET PRICE WHICHEVER IS LOWER. THE ASSESSEE MAY FOLLOW ANY ACCOUNTI NG POLICY FOR THE VALUATION OF ITS CLOSING STOCK PROFITS FOR THE PURPOSE OF COMPUTING THE INCOME CHARGEABLE TO TAX HAVE TO BE WORKED OUT BY VALUING THE INVENTORY AT COST OR MARKET PRICE WHICHEVER IS LOWER. ALTHOUGH TH E ASSESSEE HAS WRITTEN DOWN THE PARTS WHICH HAVE NOT MOVED FOR MORE THAN TW O YEARS AND MORE THAN THREE YEARS BY 50% AND 100% RESPECTIVELY NEITHE R AT THE ASSESSMENT STAGE NOR BEFORE ME IT HAS BEEN ABLE TO SHOW THAT THE MARKET VALUE OF THESE 5 PARTS -CAME DOWN TO SUCH EXTENT. THEREFORE THE ACCOU NTING POLICY FOLLOWED BY THE ASSESSEE FOR THE PURPOSE OF VALUATION OF INVENTOR Y CANNOT BE SAID TO BE IN CONSONANCE WITH THE PROVISIONS OF LAW AND HENCE THE TREATMENT GIVEN BY THE ASSESSEE IN RESPECT OF THE VALUATION OF STOCK BECO MES UNACCEPTABLE. FURTHER THE APPELLANT'S CONTENTION THAT THE OPENING INVENTORY ALSO WAS WRITTEN DOWN BY RS.36 58 089/- IN THE LAST YEAR AND T HEREFORE THE DISALLOWANCE SHOULD BE RESTRICTED TO RS.31 73 166/- ONL Y DOES NOT APPEAR TO HAVE ANY FORCE. IT NEEDS TO BE APPRECIATED THAT NO D ISALLOWANCE ON ACCOUNT OF WRITE DOWN OF INVENTORY WAS MADE IN THE LAST YEAR AND THEREFORE THE VALUE OF THE CLOSING STOCK OF THE LAST YEAR HAS TO BE T AKEN AS THE VALUE OF THE OPENING STOCK OF THIS YEAR. THEREFORE THE ASSESSING OFFI CER IS HELD TO BE JUSTIFIED IN DISALLOWING ASSESSEE'S CLAIM OF WRITE DOWN OF INVENTORY. HIS ACTION IN DOING SO IS UPHELD AND THE DISALLOWANCE IS CO NFIRMED. 2.6 THE LD.COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT THE ASSESSEE IS A LISTED COMPANY AND THE ACCOUNTS ARE AUDITED UNDER VARIOUS STATUTORY PROVIS IONS SUCH AS INCOME TAX ACT COMPANIES ACT CENTRAL EXCISE AND CUSTOMS ACT ETC. THE ASSESSEE IS CONSISTENTLY FOLLOWING THE METHOD OF VALUATION OF C LOSING STOCK WHICH WAS ACCEPTED IN THE PAST AND NO SUCH ADDITION/DISALLOWA NCE WAS MADE. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RIECO INDUSTRIES LTD. VS. ACIT AND VICE-VERSA VIDE ITA NO.1389/PN/2006 AND ITA NO.157/PN/2010 AND ITA NO.55/PN/2007 ORDER DATED 25-01-2012 FOR A.Y. 2003-04 HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE ON A CCOUNT OF NON-MOVING STOCK. 2.7 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). 3. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSEE IN THE INSTANT CASE HAD MADE 6 PROVISION OF RS.68 31 255/- ON ACCOUNT OF SLOW-MOVI NG INVENTORY WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND UPHELD BY THE CIT(A) ON THE GROUND THAT THE VALUATION OF INVENTORY HAS TO BE MA DE EITHER AT COST OR MARKET PRICE WHICHEVER IS LESS. WE FIND THE CIT(A) WHILE UPHOLDING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER HAS FURT HER OBSERVED THAT THE ASSESSEE AT NO POINT OF TIME WAS ABLE TO SHOW THAT THE MARKET VALUE OF THESE PARTS HAVE COME DOWN TO SUCH AN EXTENT. FROM THE V ARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK AS WELL AS FROM T HE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) WE FIND NOTHING IS COMING OUT AS TO WHAT HAPPENS WHEN SOMETHING IS SOLD OUT OF SUCH SLOW MOV ING /OBSOLETE STOCK. IT IS ALSO NOT KNOWN AS TO HOW LONG THE ASSESSEE HE LD SUCH OBSOLETE STOCK IN THE ACCOUNTS AND THE TREATMENT OF THE SAME. UNDER THESE FACTS AND CIRCUMSTANCES OF THE CASE WE DEEM IT PROPER TO RES TORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE O NE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE WITH EVIDENCE TO HIS S ATISFACTION REGARDING THE BASIS OF THE VALUATION OF THE INVENTORY THE PERIOD OF HOLDING OF SUCH INVENTORY IN THE STOCK THE TREATMENT OF SALE IF A NY OUT OF SUCH STOCK. THE AO SHALL ALSO VERIFY THE PAST RECORDS AND THE TREAT MENT IF ANY GIVEN IN THE PAST IN SCRUTINY ASSESSMENTS. GROUND OF APPEAL NO. 1 BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 4. GROUND OF APPEAL NO.2 BY THE ASSESSEE READS AS U NDER : 2. THE LEARNED C.I.T.(A) ERRED ON FACTS AND IN LA W IN UPHOLDING DISALLOWANCE OF PROVISION FOR SITE EXPENSES AMOUNTING TO RS.12 22 279/- ON THE GROUND THAT THE PROVISION IS MADE ON AN AD-HOC BASIS. HE FAILED TO APPR ECIATE THAT THE PROVISION BEEN MADE ACCURATELY AND IN ACCORDANCE WITH THE MET HOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE. HE FAILED TO APPREC IATE THE FACTS IN PROPER PERSPECTIVE. 7 4.1 FACTS OF THE CASE IN BRIEF ARE THAT THE EXPEN DITURE CLAIMED ON ACCOUNT OF SITE EXPENSES OF RS.84 32 230/- INCLUDES PROVISION MADE AT RS.12 22 279/-. IN ABSENCE OF FURNISHING OF THE DE TAILS REGARDING THE BASIS FOR THIS PROVISION THE ASSESSING OFFICER DISALLOWE D THE SAME AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4.2 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE COM PANY HAS SECURED CONTRACTS FROM RAJASTHAN URBAN INFRASTRUCTURE DEVEL OPMENT PROJECT FOR SUPPLY ERECTION AND COMMISSIONING OF WATER PUMPS A T THEIR SITE IN RAJASTHAN. THE CORRESPONDING REVENUE HAS BEEN ACCO UNTED FOR DURING THE YEAR. THE PROVISION FOR THE CORRESPONDING EXPENSES WAS MADE AS PER METHOD OF ACCOUNTING NORMALLY FOLLOWED AND PAYMENTS FOR THESE EXPENSES HAVE BEEN ACTUALLY MADE IN THE SUCCEEDING YEAR. IT WAS SUBMITTED THAT THE COMPANY HAS MADE THE PROVISION ACCURATELY AND NO AD HOCISM IS INVOLVED AT ALL. FURTHER THE CORRESPONDING REVENUE HAS ALSO B EEN BOOKED AND OFFERED FOR TAX AND UNDER THE MATCHING CONCEPT AND RELEVANT ACCOUNTING STANDARDS THE PROVISION IS FULLY ALLOWABLE. 4.3 HOWEVER THE CIT(A) WAS ALSO NOT CONVINCED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE SAME ON THE GROUND THAT THE ASSESSEE COULD NOT SPELL OUT THE BASIS ON WHICH THE PROVISION HAS BEEN MADE WHICH COULD BE CONSIDERED AS REASONABLE. 4.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 5. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER 8 BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE SAM PLE COPIES OF THE BILLS PLACED IN THE PAPER BOOK RELATING TO SITE EXPENSES WE FIND ALL THE BILLS PRODUCED RELATE TO FEBRUARY AND MARCH 2006 ON THE B ASIS OF ORDERS DATED 08-04-2005 AND 12-05-2005. THUS THE DATE OF PLACE MENT OF THE ORDER FOR THE MATERIAL IS AFTER THE END OF THE FINANCIAL YEAR AND THE RAISING OF THE BILL BY THE RESPECTIVE PARTIES ARE ALSO AFTER THE END OF THE ACCOUNTING YEAR. WE THEREFORE DO NOT FIND ANY MERIT IN THE ARGUMENTS O F THE LD. COUNSEL FOR THE ASSESSEE THAT THE PROVISION FOR THE CORRESPONDING E XPENSES WAS MADE AS PER THE METHOD OF ACCOUNTING NORMALLY FOLLOWED. FROM T HE VARIOUS DETAILS FURNISHED IN THE PAPER BOOK IT IS CLEAR THAT THE E XPENDITURE RELATING TO THE SUBSEQUENT YEAR HAS BEEN BOOKED IN THE CURRENT YEAR UNDER THE HEAD PROVISION FOR SITE EXPENSES. WE THEREFORE DO N OT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) ON THIS ISSUE AND UPHOLD TH E SAME. THIS GROUND BY THE ASSESSEE IS ACCORDINGLY DISMISSED. 6. GROUND OF APPEAL NO.3 BY THE ASSESSEE READS AS U NDER : 3. THE LEARNED C.I.T.(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.24 00 000/- BEING SECURITY DEPOSITS WITH CUSTOMERS ADJ USTED AND/OR BECOMING IRRECOVERABLE. HE FAILED TO APPRECIATE THA T THE LOSS IS A REAL LOSS INCURRED DURING NORMAL COURSE OF BUSINESS AND IS FULLY ALLOWABLE U/S 28 OR SEC. 37 OF SEC. 36(1)(VII) AS THE CASE MAY BE. 6.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE HAS CLAIMED DEDUCTION ON ACCOUNT OF WRITE OFF OF DOUBTFUL DEPOSITS/ADVANC ES FOR AN AMOUNT OF RS.3 40 98 565/- WHICH INCLUDED AN AMOUNT OF RS.24 00 000/- IN RESPECT OF SECURITY DEPOSITS ADJUSTED BY CUSTOMERS. ON BEING QUESTIONED BY THE AO IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT REPRE SENTED SECURITY DEPOSITS AGAINST PURCHASE OF TENDER DOCUMENTS WHICH MANY TI MES ON PLACEMENT OF ORDER BY THE CUSTOMER IS CONVERTED INTO PRODUCT PE RFORMANCE GUARANTEE 9 MONEY. THIS MONEY BECOMES DUE TO THE C OMPANY AFTER SUCCESSFUL PERFORMANCE OF THE PUMPS SUPPLIED FOR A SPECIFIED PERIOD. IT WAS EXPLAINED THAT IN CERTAIN CASES DUE TO UNS ATISFACTORY PERFORMANCE OF THE PRODUCT/PROJECTS THESE AMOUNTS ARE WITHHELD BY THE CUSTOMERS. THE ASSESSEE CONTENDED THAT SUCH LOSSES OCCUR DURING NO RMAL BUSINESS OPERATIONS AND ARE FULLY ALLOWABLE. 6.2 THE ASSESSING OFFICER OBSERVED THAT ONE OF THE CONDITIONS FOR CLAIMING AN ALLOWANCE ON ACCOUNT OF BAD DEBTS U/S 3 6(1)(VII) OF THE ACT WAS THAT THE ASSESSEE SHOULD HAVE TAKEN INTO ACCOUN T IN COMPUTING ITS INCOME OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YE AR. IN ORDER TO EXAMINE IF THIS CONDITION IS SATISFIED IN THE CASE OF THE ASSE SSEE THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH DETAILS AND SUPPOR TING EVIDENCES OF THE CONTRACTS FOR WHICH THE SAID SECURITY DEPOSITS WERE GIVEN THE NATURE OF UNSATISFACTORY PERFORMANCE NOTICED BY ITS CLIENTS E TC. HOWEVER THE ASSESSEE COULD NOT FURNISH THE REQUISITE DETAILS. ACCORDINGLY THE ASSESSING OFFICER HELD THAT ASSESSEES CLAIM OF DEDUCTION IN RESPECT OF THE AMOUNT OF RS.24 00 000/- WAS NOT ALLOWABLE AS PER PROVISIONS OF SECTION 36(1)(VII). ACCORDINGLY HE ADDED THIS AMOUNT TO THE INCOME OF THE ASSESSEE. 6.3 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THESE D EPOSITS WERE KEPT IN NORMAL COURSE OF BUSINESS AND WERE NOT FOR ACQUIRIN G ANY CAPITAL ASSET. IN TENDER BUSINESS THE COMPANY IS REQUIRED TO PAY A SECURITY DEPOSIT AGAINST PURCHASE OF TENDER DOCUMENTS AND ON PLACEMENT OF OR DER BY THE CUSTOMER MANY TIMES SAME IS CONVERTED INTO A PRODUCT PERFORM ANCE GUARANTEE MONEY. THIS MONEY BECOMES DUE TO THE COMPANY AFTER SUCCESSFUL 10 PERFORMANCE OF THE SUPPLIED PUMPS FOR A SPECIFIED P ERIOD. IN CERTAIN CASES THESE SECURITY DEPOSITS ARE WITHHELD BY THE CUSTOME RS DUE TO UNSATISFACTORY PERFORMANCE AND ARE NOT PAID TO THE COMPANY. IT MAY BE APPRECIATED THAT THE COMPANY IS UNDER A CONTRACTUAL BINDING TO KEEP SUCH SECURITY DEPOSITS FOR SECURING THE ORDERS. THUS THESE ARE IN NORMAL C OURSE OF BUSINESS AND LOSS THEREOF IS AN ALLOWABLE BUSINESS LOSS U/S 28 O F THE ACT. 6.4 HOWEVER THE CIT(A) WAS ALSO NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE SAME BY HOLDIN G AS UNDER : 9.3 AFTER CAREFUL CONSIDERATION I FIND NO MERIT IN THE CONTENTION OF THE APPELLANT. ADMITTEDLY THE CLAIM OF WRITE OFF OF SE CURITY DEPOSITS IS NOT ALLOWABLE U/S.36(1)(VII) OF THE I.T. ACT. THE APPEL LANT HAS CLAIMED THAT THE AMOUNT OF RS.24 00 000/- IS ALLOWABLE AS LOSS U/S 28 OF T HE IT. ACT AS THE DEPOSITS WERE KEPT IN THE NORMAL COURSE OF BUSINESS. HOW EVER FOR AN AMOUNT TO BE CLAIMED AS LOSS U/S 28 OF THE I.T. ACT IT NEEDS TO BE ESTABLISHED BY THE ASSESSES THAT THE AMOUNT HAS ACTUALLY BECOME IRREC OVERABLE AND EVEN AFTER ADEQUATE EFFORTS HAVING BEEN MADE IN THIS REGA RD THERE IS NO CHANCE OF RECOVERY OF THE AMOUNT. IN THE PRESENT CASE NOT TO SP EAK OF THE FACT OF MAKING ANY EFFORTS TO FOLLOW UP THE RECOVERY THE ASSE SSEE HAS NOT BEEN ABLE EVEN TO FURNISH THE DETAILS OF SUCH SECURITY DEPOSITS. UN DER THESE CIRCUMSTANCES THE CLAIM OF DEDUCTION IN RESPECT OF T HE WRITE OFF OF THE AMOUNT OF RS.24 00 000/- DOES NOT APPEAR TO BE ACCEPT ABLE. THEREFORE I FIND NO REASON TO MAKE ANY INTERFERENCE IN THE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF RS 24 00 000/-. THE SAME IS CONF IRMED. 6.5 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 6.6 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME ARGUMENTS AS MADE BEFORE THE AO AND THE CIT(A). REFERRING TO TH E DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF JWALA PRASAD RA DHAKISHAN VS. CIT REPORTED IN 79 ITR 530 HE SUBMITTED THAT SECURITY D EPOSIT GIVEN TO THE MILLS MANUFACTURING CLOTH AT THE REQUEST OF THE SOLE SELL ING AGENTS OF MILLS WITH WHOM THE ASSESSEE ENTERED INTO AGREEMENT TO PURCHAS E ENTIRE CLOTH MANUFACTURED BY THE MILL WHICH WAS SUBSEQUENTLY WRI TTEN OFF DUE TO NO 11 BUSINESS ACTIVITY WAS ALLOWED AS A TRADING LOSS BEI NG LOSS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. 6.7 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND WHILE SUPPORTING THE ORDER OF CIT(A) SUBMITTED THAT SUCH SECURITY DEPOSIT CAN BE ALLOWED AS A BUSINESS LOSS. HOWEVER IT IS THE YEA R OF ALLOWABILITY THAT IS MATERIAL. FURTHER THE ASSESSEE HAS NOT GIVEN FULL DETAILS. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES. PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE DECISION RELIED ON BY THE LD. AR. SECURITY DEPOSIT WHICH H AS BEEN WRITTEN OFF AS IRRECOVERABLE IN OUR OPINION CAN BE ALLOWED AS BUS INESS LOSS. HOWEVER IN THE INSTANT CASE THE ASSESSEE HAS NOT GIVEN THE FUL L DETAILS OF THE AMOUNT OF SECURITY DEPOSIT NAME OF THE PARTY WITH WHOM SUCH DEPOSIT WAS MADE WHETHER ANY AMOUNT HAS SUBSEQUENTLY BEEN REFUNDED WHETHER THE PERIOD OF THE CONTRACT IS OVER OR NOT ETC. CONSIDERING THE T OTALITY OF THE FACTS OF THE CASE WE DEEM IT PROPER TO RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPPORTUNI TY TO THE ASSESSEE TO FURNISH FULL DETAILS AND SATISFY TO THE SATISFACTIO N OF THE ASSESSING OFFICER REGARDING ALLOWABILITY OF SUCH CLAIM IN THE IMPUGNE D ASSESSMENT YEAR. WE HOLD AND DIRECT ACCORDINGLY. THIS GROUND BY THE AS SESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 8. GROUND OF APPEAL NO.4 BY THE ASSESSEE READS AS U NDER : 4. THE LEARNED C.I.T.(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF WRITE-OFF OF IRRECOVERABLE ADVANCES G IVEN TO M/S.MATHER & PLATT FIRE SERVICES LIMITED AMOUNTING TO RS.2 45 21 333/-. HE FAILED TO APPRECIATE THE NATURE OF ADVANCES AND THE CIRCUMSTANC ES UNDER WHICH THE 12 ADVANCES WERE WRITTEN OFF. HI PARTICULAR HE FAILED T O APPRECIATE THAT THE ADVANCES WERE GIVEN IN THE BUSINESS INTERESTS OF THE ASSESSEE AND THE WRITE- OFF IS FULLY ALLOWABLE U/S 28. HE FAILED TO APPRECIAT E THE FACTS AND CIRCUMSTANCES IN PROPER PERSPECTIVE. 8.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE COMPANY HAD CLAIMED DEDUCTION OF AN AMOUNT OF RS.2 45 21 333/- BEING WR ITE OFF OF ADVANCES GIVEN TO M/S MATHER & PLATT FIRE SYSTEMS LTD. (MPFS L) AS BAD DEBTS. ON BEING QUESTIONED BY THE AO THE ASSESSEE VIDE ITS R EPLY DATED 06-12-2007 SUBMITTED AS UNDER WHICH HAS BEEN REPRODUCED BY THE AO AT PARA 8.4 OF HIS ORDER : IN THIS REGARD WE HAVE ALREADY GIVEN A DETAILED NOT E WHICH IS ON RECORD. TO PUT IT BRIEFLY BOTH THE ASSESSEE COMPANY (MPPL) AND M/ S MOTHER & PLATT FIRE SYSTEMS LTD. (MPFSL) WERE EARLIER DIVISIONS OF M/S MATHER & PLATT (INDIA) LTD. (MPIL). AFTER THE DEMERGER OF MPIL BO TH MPPL AND MPFSL BECAME INDEPENDENT COMPANIES. AS PER THE DEMERGER SCHE ME ALL THE ASSETS/LIABILITIES OF PUMP & VALVE BUSINESS WENT WITH MPPL AND THOSE OF FIRE SECURITY DIVISION WENT WITH MPFSL. THE ASSETS WHIC H CAME TO MPPL MAINLY INCLUDED CHINCHWAD WORKS WHICH WERE GIVEN AS SECURITY FOR ALL THE BANKING FACILITIES ENJOYED BY ERSTWHILE MPIL. SINCE M PFSL DID NOT HAVE ANY FIXED ASSETS ON THEIR OWN THE BANKERS REFUSED TO EXTEND ANY BANKING FACILITY TO MPFSL. HOWEVER MPFSL WAS ASSIGNED RELATED BANK LIA BILITIES INCLUDING BANK GUARANTEES. THESE BG' FOR MPFSL JOBS WERE ISSUED F ROM THE BANKING FACILITIES GIVEN TO MPIL AGAINST ITS ASSETS AS SECURITIES. AS A CONSEQUENCE OF DEMERGER THESE VERY ASSETS BECAME THE ASSETS OF MPPL AND THEREFORE THE BANKERS INSISTED THAT ALL THESE BG'S WILL BE CONSIDERED A S MPPL'S LIABILITY TILL THESE ARE 'FULLY REPAID. SINCE THESE FACILITIES WERE SE CURED ON MPPL'S ASSETS MPPL HAD NO OPTION BUT TO TAKE ON ALL THE RESPONSIBIL ITY IN RESPECT OF ALL THE FUND BASED AND NON-FUND BASED LIABILITIES OF MPFSL. THE BANK GUARANTEES WERE ISSUED TO MPFSL CUSTOMERS (ERSTW HILE MPIL CUSTOMERS) FOR PENDING JOBS. IN ORDER THAT THE GUARANT EES ARE NOT REVOKED BY THE CUSTOMERS IT WAS COMPELLING FOR MPPL TO ENSURE THAT MPFSL IS FINANCIALLY SUPPORTED AND THE PENDING ORDERS ARE EXE CUTED. THE SITUATION BECOME MORE COMPELLING AS MPFSL'S FINANCIAL POSITION STARTED DETERIORATING AND THERE WERE FEW INSTANCES WHERE CUSTOMERS ENCASHED TH E GUARANTEES AND MPPL HAD TO MAKE THE PAYMENT GOOD TO BANKS. ALSO NON EXECUTION OF ORDER BY MPFSL DIRECTLY AFFECTED MPPLS NAME IN THE MARKET AND THERE WAS A DANGER OF CASCADING REPERCUSSIONS ON MPPL. IT WAS TH EREFORE IN UTMOST BUSINESS INTEREST OF MPPL THAT MPFSL IS FINANCIALLY SUPP ORTED. THUS IT MAY BE SEEN THAT IT WAS UNDER MOST EXTREME AN D UNCONTROLLABLE CIRCUMSTANCES AND KEEPING SHEER BUSINESS INTEREST IN MIND THAT MPPL HAD TO FINANCIALLY SUPPORT MPFSL. THE CIRCUMSTANCES GIVING RISE TO THE ADVANCES HAS BEEN E XPLAINED BRIEFLY ABOVE. FOR JUSTIFICATION OF WRITE-OFF LEGAL GROUND S AND RELEVANT CASE-LAW WE HAVE ALREADY SUBMITTED A DETAILED NOTE WHICH MAY KIN DLY BE REFERRED. 13 8.2 HOWEVER THE AO WAS NOT SATISFIED WITH THE ABOV E. HE OBSERVED THAT DEDUCTION AS PER PROVISIONS OF SECTION 36(1)(VII) O N ACCOUNT OF BAD DEBTS COULD BE ALLOWED ONLY IF THE AMOUNT WRITTEN OFF I S PROPER DEBT OR PART THEREOF. IN THE OPINION OF THE ASSESSING OFFICER THIS CONDITION WAS NOT SATISFIED IN THE CASE OF THE ASSESSEE COMPANY IN TH E LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF M/S. A.V. THOM AS & CO. LTD. 48 ITR 67. THE ASSESSING OFFICER FURTHER OBSERVED THA T THE CONDITION ENVISAGED U/S 36(2) THAT THE DEBT OR PART THEREOF I S TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE OF THE PREVIOU S YEAR IN WHICH THE AMOUNT OF SUCH DEBT OR PART THEREOF IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR WAS ALSO NOT SATISFIED IN THE CASE OF THE ASSE SSEE SINCE THE AMOUNT OF RS.2 45 21 333/- REPRESENTED ONLY ADVANCE GIVEN TO M/S MPFSL AND THEREFORE THE QUESTION OF TAKING INTO ACCOUNT IN C OMPUTATION OF INCOME OF THE ASSESSEE FOR ANY PREVIOUS YEAR DID NOT ARISE. A CCORDINGLY THE ASSESSING OFFICER DISALLOWED ASSESSEE'S CLAIM OF DEDUCTION OF RS 2 45 21 333/- AS BAD DEBTS WRITTEN OFF AND MADE ADDITION TO THE INCOME A CCORDINGLY. 8.3 IN APPEAL THE LD. CIT(A) WAS ALSO NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSEE AND UPHELD THE AD DITION MADE BY THE AO BY HOLDING AS UNDER : 10.3 AFTER CAREFUL CONSIDERATION I FIND NO STRENGT H IN THE CONTENTION OF THE APPELLANT. FIRSTLY AS HELD BY TH E AO ON ACCOUNT OF NON- FULFILMENT OF THE CONDITION ENVISAGED U/S.36(2) OF TH E I.T. ACT THE ASSESSEES CLAIM OF WRITE OFF OF THE AMOUNT OF RS.2 45 21 333/- IS NOT ALLOWABLE U/S.36(1)(VII) OF THE I.T. ACT. COMING TO APPELLANT S CLAIM OF EXPENDITURE AS REVENUE IN NATURE AND FULLY ALLOWABLE U/S 28 AS LOSS IN CURRED IN THE NORMAL COURSE OF THE BUSINESS I FIND THAT THE FACTS OF THE CASE DO NOT SUPPORT THE CONTENTION OF THE APPELLANT. THERE CAN BE NO DENIAL OF THE FACT THAT THE ASSESSEE COMPANY MPPL AND THE OTHER COMPANY MPFSL ARE I N DISTINCT AND DIFFERENT BUSINESS AND THERE ARE NO BUSINESS DEALINGS BETW EEN THE TWO. AS 14 SUCH THE ADVANCES OF RS.2 45 21 333/- GIVEN BY MPPL T O MPFSL CANNOT BE SAID TO BE GIVEN IN THE NORMAL COURSE OF ASSESSEE'S BUSINESS . THEREFORE IT CANNOT CONSIDERED AS LOSS INCURRED IN THE NORMAL COURSE OF ASSESSEE'S BUSINESS. FURTHER SINCE THE OUTGOING OF RS.2 45 21 333/ - HAS NOT OCCURRED IN DOING THE BUSINESS IT DOES NOT BEAR THE CHARACTER OF A REVENUE LOSS AND FOR THE SAME REASON THE RATIO OF THE JUDGEMENT OF HON'BL E SUPREME COURT IN THE CASE OF CIT VS. MYSORE SUGAR WORKS LTD. 46 ITR 649 (AS RELIED UPON BY THE APPELLANT) IS NOT APPLICABLE IN THE PRESENT CASE. MORE OVER WITHOUT PREJUDICE TO THE AFORESAID THE APPELLANT HAS BROUGHT NOTHING O N RECORD TO SHOW THAT THE AMOUNT OF RS.2 45 21 333/- HAS ACTUALLY ASSUMED THE CHARACTER OF LOSS WHICH IS IRRECOVERABLE. UNDER THESE CIRCUMSTANCES THE DISALLOWANCE OF RS.2 45 21 333/- IN RESPECT OF THE WRITE OFF OF ADVAN CES GIVEN TO MPFSL IS HELD TO BE JUSTIFIED AND IS ACCORDINGLY CONFIRMED. 8.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US. 8.5 THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS AS MADE BEFORE THE AO AND THE CIT(A). REFERRING TO TH E DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ANOTHER VS. RUDRA INDUSTRIAL AND COMMERCIAL CORPORATION REPORTED IN 244 CTR 304 HE SUBMITTED THAT UNDER SOMEWHAT SIMILAR CIRCUMSTANCES THE HONBLE HI GH COURT HAS ALLOWED THE PAYMENT MADE TO BANK AS A GUARANTOR FOR LOAN TO SUBSIDIARY COMPANY AS AN ALLOWABLE BUSINESS EXPENDITURE. HE SUBMITTED TH AT THE FINANCIAL POSITION OF MPFSL WAS WORSENING AND IT WAS AFFECTING THE REP UTATION OF MPPL DUE TO ENCASHMENT OF BANK GUARANTEE BY SOME OF THE CUST OMERS. THE ASSESSEE AS A PRUDENT BUSINESS MAN CHOSE TO GIVE THE ADVANCE WHICH HAS SUBSEQUENTLY BEEN WRITTEN OFF. HE ACCORDINGLY SUBM ITTED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE AMOUNT CLAI MED SHOULD BE ALLOWED AS BUSINESS LOSS U/S.28. 8.6 THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HAND HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). HE S UBMITTED THAT THE ASSETS OF THE ASSESSEE COMPANY WERE ONLY KEPT AS SECURITY BUT PRIMARILY THE 15 LIABILITY WAS OF MPFSL. FINANCIAL ASSISTANCE WAS E XTENDED TO PREVENT MPFSL FROM COMMITTING DEFAULT ON ENCASHMENT OF GUA RANTEE BY THE CUSTOMERS. HE SUBMITTED THAT BOTH THE COMPANIES AR E DISTINCT ENTITIES AND IT WAS NOT A CONTRACTUAL OR OTHERWISE THE LIABILITY OF THE ASSESSEE COMPANY. HE SUBMITTED THAT THE PAYMENT OF ADVANCE TO THE COM PANY WAS A SELF ACQUIRED RESPONSIBILITY WHICH WAS MORE IN NATURE OF GRATIS OR APPLICATION OF INCOME. FURTHER ANY LIABILITY OR EXPENDITURE ON A CCOUNT DEMERGER OR REORGANIZATION IS OF CAPITAL IN NATURE AND NOT ALLO WABLE AS REVENUE EXPENDITURE. HE SUBMITTED THAT THE ASSESSEE COMPAN Y WAS NOT IN BUSINESS OF MONEY LENDING AND HAS NO BUSINESS DEALINGS WITH MPFSL AND THE MONEY WAS NOT ADVANCED IN CAPACITY OF TRADER FOR SUPPLY OF GOODS OR SERVICES. THE MONEY ADVANCED TO MPFSL IS MERELY TO BAIL OUT A COMPANY FOR OTHER CONSIDERATIONS WHICH HAS NO CONNECTION WITH CARRYIN G OUT OF BUSINESS AND CANNOT BE SAID TO BE INCIDENTAL TO CARRYING OUT OF BUSINESS. ALTHOUGH MPFSL AND ASSESSEE COMPANY HAVE SAME MANAGEMENT BUT NO CORRESPONDING INCOME WAS OFFERED IN MPFSL AS BUSINE SS INCOME. 8.7 REFERRING TO THE DECISION OF HONBLE DELHI HIG H COURT IN THE CASE OF LOGITRONICS PVT. LTD. REPORTED IN TS-54-HC-2011 (DE LHI) HE SUBMITTED THAT WAIVER OF WORKING CAPITAL LOAN/TRADING LOANS ARE TA XABLE AS BUSINESS INCOME. WITHOUT PREJUDICE TO THE ABOVE HE SUBMITTE D THAT ADVANCES GIVEN ARE CAPITAL IN NATURE. REFERRING TO PAGE 47 OF THE PAPER BOOK HE SUBMITTED THAT THE BANK GUARANTEE WAS ONLY FOR RS.41 75 312/- AND IN WORST SCENARIO ONLY THIS AMOUNT COULD HAVE BEEN RECOVERED FROM THE ASSETS OF THE COMPANY IN CASE OF NON RECOVERY FROM ASSETS OF MPFSL. AS AG AINST THIS THE ASSESSEE COMPANY HAS ADVANCED RS.2 45 21 333/- TO MPFSL. HE NCE TRANSACTIONS ARE NEITHER ADMISSIBLE AS BAD DEBT NOR ADMISSIBLE A S BUSINESS LOSS. 16 8.8 THE LD. DEPARTMENTAL REPRESENTATIVE ALSO RELIED ON THE FOLLOWING DECISIONS WITH HEAD NOTES FILED IN HIS WRITTEN SUBM ISSION : 1. CIT V. CHANDULAL KESHAVLAL & CO. [1960] 38 ITR 6 01 (SC) : PURPOSE SHOULD NOT BE TO FOSTER BUSINESS OF SOMEBODY ELSE OR FOR SOME IMPROPER OR OBLIQUE PURPOSE OUTSIDE THE COURSE OF BUSIN ESS - IF THE EXPENSE IS INCURRED FOR FOSTERING THE BUSINESS OF ANOTHER ONLY OR IS MADE BY WAY OF DISTRIBUTION OF PROFITS OR IS WHOLLY GR ATUITOUS OR FOR SOME IMPROPER OR OBLIQUE PURPOSE OUTSIDE THE COURSE OF BUSINESS THEN THE EXPENSE IS NOT DEDUCTIBLE - 2. SALEM MANGNESITE (P) LTD. VS. CIT (2010) 321 ITR 43 (BOM.) : BUSINESS INCOMEBUSINESS LOSSWRITE OFF OF LOAN ADVANCED T O SUBSIDIARYIN VIEW OF CONCURRENT FINDINGS OF AO CIT( A) AND THE TRIBUNAL THAT ASSESSEE COMPANY WAS NOT IN THE BUSINESS OF LENDING MONEY THAT MONEY WAS LENT TO ITS SUBSIDIARY COMPANY T O ENABLE THE SUBSIDIARY COMPANY TO CONSTRUCT A JETTY WHICH WAS CLEAR LY A CAPITAL ASSET OF THE SUBSIDIARY AND THAT THE LOAN GRANTED TO TH E SUBSIDIARY COMPANY DID NOT SPRING DIRECTLY FROM THE BUSINESS OF TH E ASSESSEE COMPANY OR WAS INCIDENTAL TO IT THE TRIBUNAL WAS COR RECT IN HOLDING THAT THE WRITE OFF OF RS. 4 58 500 BEING PART OF THE LOA N ADVANCED BY THE ASSESSEE TO ITS FULLY OWNED SUBSIDIARY COMPANY WAS NOT A LO SS INCIDENTAL TO THE BUSINESS OF THE ASSESSEE AND AS SUCH NOT ALLOWABLE 3. K.S. JANAKIRAM VS. CIT 45 ITR 430 (MAD) : BUSINESS EXPENDITUREBAD DEBTGUARANTEE FOR LOANASSESSEE WAS A FREIGHT BROKER TO VARIOUS SHIPPING LINES INCLUDING THE 'A 1 LINES LTDHIS BUSINESS AS A FREIGHT BROKER DID NOT INVOLVE HIS ENGAGIN G IN TRANSACTIONS LEADING TO LENDING MONIES FOR THE PURCHASE OF VESSELS BY OR ON BEHALF OF THE SHIPPING LINESCONNECTION BETWEEN A BUSINESS OF FREIGHT BROKERAGE AND THE BUSINESS INVOLVED IN SECURIN G ADVANCES TO THE SHIPPING LINES FOR THE PURPOSE OF PURCHASE OF VESSELS IS FAR TOO TENUOUS TO SUPPORT THE CLAIM THAT IT WAS INCIDENTAL TO THE BUSINESS OF FREIGHT BROKERAGENO CUSTOM AS SUCH HAS BEEN SET UPTRI BUNAL RIGHTLY CAME TO THE CONCLUSION ON THE MATERIALS BEFOR E IT THAT NO PART OF THE SUM ADVANCED WHICH WAS GUARANTEED BY THE ASSESSEE COU LD BE TREATED AS A BAD DEBT. HE ACCORDINGLY SUBMITTED THAT THE ORDER OF LD.CIT(A ) ON THIS ISSUE BE UPHELD. 9. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS 17 DECISIONS CITED BEFORE US. THE ONLY DISPUTE IN THE INSTANT CASE IS THE ALLOWABILITY OF AN AMOUNT OF RS.2 45 21 333/- ADVAN CED TO M/S. MPFSL AS BUSINESS LOSS U/S.28 OF THE I.T. ACT. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE COMPANY I.E. MPPL AND M/S. MPFSL WERE EAR LIER 2 DIVISIONS NAMELY FLUID DIVISION AND FIRE SERVICES DIVISION OF M/S. MATHER PLANT INDIA LTD. PRIOR TO REORGANISATION. THERE IS ALSO NO DISPUTE TO THE FACT THAT THE IMMOVABLE PROPERTIES WHICH CAME TO ASSESSEE COM PANY ON REORGANISATION WERE KEPT AS SECURITIES FOR EXTENDIN G BANK GUARANTEE TO BOTH DIVISIONS PRIOR TO REORGANISATION. THERE IS ALSO N O DISPUTE TO THE FACT THAT THE ASSESSEE COMPANY HAD GIVEN CERTAIN ADVANCES TO MPFSL AS FINANCIAL SUPPORT TO AVOID ENCASHMENT OF BANK GUARANTEE BY CU STOMERS OF MPFSL WHICH WERE SUBSEQUENTLY TREATED AS IRRECOVERABLE AN D WRITTEN OFF AS BAD DEBT/BUSINESS LOSS. IT IS THE SUBMISSION OF THE LD . COUNSEL FOR THE ASSESSEE THAT THE SAME SHOULD BE ALLOWED AS BUSINESS LOSS IN VIEW OF THE DECISION OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF RUDRA I NDUSTRIAL COMMERCIAL CORPORATION (SUPRA). HOWEVER WE FIND THE SAME IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THAT CASE ASSESSEE OFFERED ITS IMMOVABLE PROPERTY AS A SECURITY TO A BANK FOR THE LOAN BORRO WED BY ITS SISTER CONCERN. IN VIEW OF NON PAYMENT OF THE LOAN BANK FILED A SU IT FOR RECOVERY OF MONEY AGAINST THE SISTER CONCERN AS WELL AS THE ASSESSEE. THUS A DECREE WOULD HAVE BEEN PASSED AND THE MORTGAGED PROPERTY BELONGI NG TO THE ASSESSEE WOULD HAVE BEEN BROUGHT TO SALE TO RECOVER THE AMOU NT. VERY SAME PROPERTY WAS ALSO SUBJECT MATTER OF AN AGREEMENT BE TWEEN THE ASSESSEE AND A DEVELOPER AND THE ASSESSEE HAD UNDERTAKEN TO CON VEY A MARKETABLE TITLE TO THE PURCHASERS OF THE FLATS TO BE BUILT ON THE SAID PROPERTY. IF THE PROPERTY HAD BEEN SOLD ASSESSEE WOULD HAVE COMMITTED A BREA CH OF THE TERMS OF THAT 18 CONTRACT. UNDER THESE CIRCUMSTANCES THE ASSESSEE THOUGHT IT FIT TO DISCHARGE THE LOAN AND GET THE PROPERTY RELEASED. EVEN OTHER WISE ALSO IT WAS UNDER A LEGAL OBLIGATION TO DISCHARGE THE DEBT DUE TO THE B ANK. IT WAS THEREFORE HELD BY THE HONBLE COURT THAT THE ASSESSEE INCURRED THI S EXPENDITURE AS A PRUDENT BUSINESSMAN AND THEREBY SECURED THE RELEASE OF ITS PROPERTY AND IN TURN WAS ABLE TO MAKE OUT A MARKETABLE TITLE IN TER MS OF SAID PAYMENT AS A BUSINESS EXPENDITURE. WE FIND IN THE INSTANT CASE AS AGAINST THE GUARANTEE OF RS.41 75 312/- THE ASSESSEE HAS WRITTEN OFF THE AMOUNT OF RS.2 45 21 333/- ADVANCED TO MPFSL WHICH IN OUR OPI NION IS NOT JUSTIFIED. ADMITTEDLY THE ASSESSEE COMPANY WAS NOT IN BUSINES S OF MONEY LENDING NOR HAS ANY BUSINESS DEALINGS WITH MPFSL. THE AMOU NTS ADVANCED TO MPFSL WAS ONLY TO BAIL OUT THE COMPANY WHICH IS UND ER THE SAME MANAGEMENT. HOWEVER SINCE THE ASSETS OF THE COMPA NY WERE ALSO KEPT AS A SECURITY FOR EXISTING BANK GUARANTEE TO BOTH THE DI VISIONS AND SINCE THE AMOUNT OF BANK GUARANTEE IS ONLY FOR RS.41 75 312/- THEREFORE WE ARE OF THE CONSIDERED OPINION THAT IN WORST SCENARIO THIS AMOUNT COULD HAVE BEEN RECOVERED FROM ASSETS OF THE COMPANY IN CASE OF NON -RECOVERY FROM ASSETS OF MPFSL. WE THEREFORE ARE OF THE CONSIDERED OPI NION THAT AN AMOUNT OF RS.41 75 312/- ONLY AT BEST CAN BE ALLOWED AS DEDUC TION AS BUSINESS LOSS AND THE BALANCE AMOUNT HAS TO BE TREATED AS THE NA TURE OF CAPITAL ADVANCE OR GRATUITOUS PAYMENT OR APPLICATION OF INCOME WHICH H AS NO CONNECTION WITH CARRYING OUT BUSINESS OF THE ASSESSEE. WE ACCORDIN GLY PARTLY ALLOW THIS GROUND BY THE ASSESSEE. 10. GROUND OF APPEAL NO.5 BY THE ASSESSEE READS AS UNDER : 5. THE LEARNED C.I.T.(A) ERRED ON FACTS AND IN LAW IN UPHOLDING DISALLOWANCE OF RS.1 46 560/- BEING SUNDRY ADVANCES WRITTEN OFF. HE FA ILED TO APPRECIATE THAT 19 THE LOSS IS A REAL LOSS INCURRED DURING THE NORMAL COURSE OF BUSINESS AND IS FULLY ALLOWABLE U/S 28 OR SEC. 37 OR SEC. 36(1)(VII) AS THE C ASE MAY BE. 10.1 AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND FOR SMALLNESS OF THE AMOUNT FOR WHICH T HE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. ITA NO.368/PN/2009 ( BY REVENUE) (A.Y. 2005-06) : 11. GROUND OF APPEAL NO. 1 BY THE REVENUE READS AS UNDER ; ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT OF BANK GUARANT EE EXPENSES TREATING THEM IN TERMS OF EXPENSES INCURRED U/S.37 R.W.S.43B OF THE AC T WHEN NO BAD DEBTS HAVE ACTUALLY ARISED DURING THE YEAR. 11.1 FACTS OF THE CASE IN BRIEF ARE THAT DURING A SSESSMENT PROCEEDINGS IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSE SSEE HAD CLAIMED DEDUCTION OF AN AMOUNT OF RS.50 93 888/- BEING THE BANK GUARANTEE INVOKED BY THE CUSTOMS AUTHORITY AS BAD DEBTS. BEFORE THE ASSESSING OFFICER IT WAS EXPLAINED BY THE ASSESSEE THAT THIS BANK GUARANTEE WAS GIVEN BY THE ASSESSEE COMPANY AGAINST THE PERMISSION FROM THE CU STOMS DEPARTMENT TO IMPORT ELECTRIC MOTORS WITHOUT PAYING CUSTOM DUTY. THESE IMPORTED MOTORS WERE SUPPLIED TO A PROJECT HAVING SPECIAL STATUS. C ERTAIN CERTIFICATES FROM THE CUSTOMERS AGAINST SUPPLY OF THE SAID IMPORTED G OODS COULD NOT BE OBTAINED AND THEREFORE THE CUSTOMS DEPARTMENT ENCA SHED THE SAID BANK GUARANTEE FOR RECOVERY OF CUSTOM DUTY FROM THE ASSE SSEE COMPANY. IT WAS CLAIMED BY THE ASSESSEE THAT SINCE THIS WAS A NORMA L BUSINESS EXPENDITURE INCURRED DURING THE YEAR THE SAME WAS FULLY ALLOWA BLE. HOWEVER THE REQUISITE CONDITIONS FOR CLAIMING THE ALLOWANCE ON ACCOUNT OF BAD DEBTS AS 20 PER PROVISIONS OF SECTION 36(1)(VII) WERE NOT FULFI LLED. THE AO ACCORDINGLY DISALLOWED THE CLAIM OF DEDUCTION OF RS.1 50 93 888 /-. 11.2 BEFORE THE CIT(A) IT WAS SUBMITTED THAT THE A SSESSEE HAD GIVEN A BANK GUARANTEE TO THE CUSTOMS AUTHORITIES AGAINST T HE PERMISSION FROM THE CUSTOMS DEPARTMENT TO IMPORT CERTAIN ELECTRIC MOTOR S REQUIRED FOR A PROJECT HAVING SPECIAL STATUS. THUS THE GUARANTEE WAS IN LI EU OF CUSTOM DUTY PAYMENTS. UPON SUBMISSION OF CERTAIN CERTIFICATES F ROM THE CUSTOMERS THIS BANK GUARANTEE WAS TO BE CANCELLED AND RETURNED TO THE ASSESSEE. HOWEVER THE ASSESSEE COULD NOT OBTAIN THE CERTIFICATES FROM THE CUSTOMERS IN TIME AND AS SUCH THE GUARANTEE WAS ENCASHED BY THE CUSTOMS. THUS IN EFFECT THE CUSTOM DUTY WHICH WAS EARLIER WAIVED BY THE CUSTOMS AUTHORITIES HAS NOW BEEN PAID BY THE ASSESSEE. THE ELECTRIC MOTORS WER E A RAW MATERIAL FOR THE PROJECT EXECUTED BY THE ASSESSEE AND AS SUCH THE C USTOM DUTY IF PAID EARLIER CERTAINLY WOULD HAVE BEEN AN ALLOWABLE EXP ENDITURE. EVEN IF IT IS PAID NOW BY WAY OF ENCASHMENT OF THE GUARANTEE THE ALLOWABILITY WILL NOT SUFFER ESPECIALLY IN VIEW OF SEC. 37 AND SEC. 43B. THE A.O.'S RELIANCE ON SEC. 36(1)(VII) IS NOT ONLY WRONG BUT IS ALSO IRRE LEVANT. THE ASSESSEE NEVER CLAIMED THE DEDUCTION U/S 36(1)(VII) AS BAD DEBTS BUT HAS CATEGORICALLY SUBMITTED TO THE A.O. THAT 'SINCE THIS IS A NORMAL BUSINESS EXPENDITURE INCURRED DURING THE YEAR IT IS FULLY ALLOWABLE'. 11.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER : 8.4. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND I FIND MERIT IN IT. THE BANK GUARANTEE WAS IN LIEU OF THE CUSTOM DUTY PAYMENTS AND ITS ENCASHMENT TANTAMOUNTS TO PAYMENT OF CUSTOM DUT Y WHICH IS AN ALLOWABLE EXPENDITURE IN TERMS OF THE PROVISIONS OF SEC TION 37 R.W.S. 43B OF THE IT. ACT. ACCORDINGLY THE ASSESSING OFFICER IS DIREC TED TO DELETE THE 21 DISALLOWANCE OF RS.50 93 888/- ON ACCOUNT OF ENCASHMEN T OF BANK GUARANTEE. 11.4 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US 11.5 AFTER HEARING BOTH THE SIDES WE FIND NO INFIRM ITY IN THE ORDER OF THE LD.CIT(A). THE LD. DEPARTMENTAL REPRESENTATIVE COU LD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A) THAT THE BANK GUAR ANTEE WAS IN LIEU OF CUSTOMS DUTY PAYMENT. SINCE THE ORDER OF THE CIT(A ) ON THIS ISSUE IS BASED ON FACTS AND THE LD. DEPARTMENTAL REPRESENTATIVE WA S UNABLE TO CONTROVERT THE FINDINGS GIVEN BY THE CIT(A) THEREFORE WE FIN D NO INFIRMITY IN THE ORDER OF THE CIT(A). ACCORDINGLY THE SAME IS UPHE LD AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. 12. GROUND OF APPEAL NO.2 BY THE REVENUE READS AS U NDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE ON ACCOUNT OF WRITE OFF OF BAD DEBTS WHICH ARE DUE FROM M& P SUBHASH PROJECT IN WHICH COMPANY ITSELF IS O NE OF THE PARTNERS WHICH IS RECEIVING BENEFITS IN FUTURE FROM MKVDC LTD . 12.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE HAD CLAIMED RS.4 28 77 778/- BEING WRITE OFF OF DEBT RELATING T O M/S. M&P + S AS BAD DEBT. ON BEING QUESTIONED BY THE AO IT WAS EXPLAI NED BY THE ASSESSEE THAT M&P + SUBHASH WAS A PARTNERSHIP FIRM HAVING TWO PAR TNERS VIZ. M/S MATHER & PLATT PVT. LTD. (MPPL) AND M/S. SUBHASH PR OJECT PVT. LTD. A CONTRACT FOR CONSTRUCTION OF CERTAIN PUMPING / IRRI GATION PROJECT WAS AWARDED BY MAHARASHTRA KRISHNA VALLEY DEV. CORPN. ( MKVDC) TO THE FIRM AND THE FIRM HAD PLACED BACK TO BACK ORDERS FO R SUPPLY OF MATERIAL AND ERECTION ETC. ON THE RESPECTIVE PARTNERS. IN TERMS OF THE CONTRACT THE 22 ASSESSEE COMPANY HAD SUPPLIED VARIOUS MATERIALS TO THE FIRM WHICH IN TURN HAD SUPPLIED IT TO MKVDC. IT WAS SUBMITTED THAT BOT H THE ASSESSEE AS WELL AS THE FIRM HAD SHOWN THE RELEVANT SUPPLIES AS THEI R INCOME IN EARLIER PREVIOUS YEARS. FURTHER THE ASSESSEE'S RECOVERY WA S ENTIRELY DEPENDENT UPON THE FIRM RECEIVING PAYMENTS FROM MKVDC. HOWEVE R ON ACCOUNT OF WORSENING FINANCIAL POSITION OF MKVDC THE ASSESSEE COMPANY COULD NOT GET ITS DUES AND DID NOT HAVE ANY CHOICE BUT TO WRI TE OFF THE BACK TO BACK DEBTS DUE FROM THE FIRM. IT WAS SUBMITTED BY THE AS SESSEE THAT SINCE THE DEBTS WERE ACTUALLY WRITTEN OFF IN THE BOOKS AND HA D BEEN CONSIDERED AS INCOME IN EARLIER YEARS THE CONDITIONS OF SEC. 36( 1)(VII) R.W.S. 36(2) WERE FULLY COMPLIED WITH AND THEREFORE THE DEDUCTION WA S FULLY ALLOWABLE IN VIEW OF THE DECISION OF SPECIAL BENCH IN CASE OF OM AN INTERNATIONAL BANK'S REPORTED IN 100 ITD 285 (MUM SB). 12.2 HOWEVER THE AO WAS NOT SATISFIED WITH THE EXP LANATION GIVEN BY THE ASSESSEE. HE NOTED FROM THE RECORDS OF M/S M&P + SUBHASH THAT M/S M&P + S WAS FOLLOWING PROJECT COMPLETION METHOD OF ACCOUNTING AND IT WAS CLAIMED IN THE RETURNS THAT SINCE THE PROJEC T WAS STILL GOING ON CONSIDERING THE SYSTEM OF ACCOUNTING FOLLOWED NO I NCOME HAD ARISEN FOR TAXATION PURPOSES. HE FURTHER OBSERVED THAT IN RESP ECT OF THE WRITE OFF OF THE AMOUNT OF RS.4 28 77 778/- MADE BY THE ASSESSEE M/S. M&P + S HAD NOT GIVEN ANY EFFECT IN ITS BOOKS OF ACCOUNT. ACC ORDING TO HIM THIS WAS NOT APPROPRIATE IN VIEW OF THE FACT THAT M/S. M&P + S WAS RELATED CONCERN OF THE ASSESSEE AND THEREFORE IF A PARTICULAR TREA TMENT WAS GIVEN BY THE ASSESSEE IN ITS ACCOUNTS FOR A TRANSACTION RELATED TO M/S. M&P+S A CORRESPONDING EFFECT SHOULD ALSO HAVE BEEN GIVEN IN ACCOUNTS OF M/S. 23 M&P+S. THE ASSESSING OFFICER ALSO MADE ENQUIRY WITH M/S. MKVDC AND FOUND THAT CONTRARY TO THE CLAIM OF THE ASSESSE E THAT MKVDC WAS UNABLE TO CLEAR THE OUTSTANDING DUES OF M/S. M&P+S IN FACT THERE WERE NO RA BILLS OF M&P+S WHICH WERE PENDING WITH MKVDC. IN VIEW OF THE ABOVE THE ASSESSING OFFICER DISALLOWED ASSESSEE'S CLAIM OF DEDUCTION OF RS.4 28 77 778/- AS BAD DEBTS WRITTEN OFF. 12.3 BEFORE THE CIT(A) THE ASSESSEE MADE ELABORATE SUBMISSIONS. IT WAS SUBMITED THAT M & P + SUBHASH IS A PARTNERSHIP FIRM HAVING TWO PARTNERS VIZ. M/S.MATHER & PLATT PUMPS LTD. AND M/S . SUBHASH PROJECTS & MARKETING LTD. THIS FIRM IS A JOINT VENTURE BETWEEN THE TWO PARTNERS FLOATED IN ORDER TO CARRY OUT CONSTRUCTION OF CERTA IN PUMPING/IRRIGATION PROJECT FOR MAHARASHTRA KRISHNA VALLEY DEVELOPMENT CORPORATION LTD. (MKVDC). MKVDC HAS AWARDED THE CONTRACT TO THE JV FIRM AND THE JV FIRM IN TURN HAS PLACED BACK-TO-BACK ORDERS FOR SUP PLY OF MATERIALS AND ERECTION ETC. ON THE RESPECTIVE PARTNERS ONE OF WH ICH IS THE PRESENT ASSESSEE. THERE IS HARDLY ANY PROFIT MARGIN FOR THE FIRM IN THE SAID CONTRACT AND THE FIRM ACTS ONLY AS AN INTERMEDIARY. THE JV H AD TO BE FORMED ON THE INSISTENCE OF MKVDC. 12.4 IN TERMS OF THE CONTRACT THE ASSESSEE HAS S UPPLIED VARIOUS MATERIALS TO THE JV FIRM WHICH IN TURN HAS SUPPLIE D IT TO MKVDC. THE ASSESSEE HAS SHOWN THE RELEVANT SUPPLIES MADE TO TH E FIRM AS ITS INCOME IN EARLIER PREVIOUS YEARS. ONCE THE PAYMENT IS RELEAS ED BY MFVDC TO THE FIRM THE FIRM IN TURN RELEASES PAYMENT TO THE ASSE SSEE. THE JV FIRM DOES NOT HAVE ANY OTHER SOURCE OF INCOME AS IT WAS SPEC IFICALLY FORMED TO CARRY 24 OUT THE MKVDC WORK. THE ASSESSEES RECOVERY IS THU S ENTIRELY DEPENDENT UPON THE FIRM RECEIVING PAYMENTS FROM MKVDC. 12.5 IT WAS SUBMITTED THAT THE ASSESSEE HAS COMPLIE D WITH THE CONDITIONS OF SECTION 36(1)(VII) R.W.S. 36(2). RELYING ON VAR IOUS DECISIONS INCLUDING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CA SE OF STAR CHEMICALS IT WAS SUBMITTED THAT THE CLAIM MADE BY THE ASSESSE E HAS TO BE ALLOWED AS A DEDUCTION. 12.6 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSE E THE LD.CIT(A) DELETED AN AMOUNT OF RS.4 28 77 778/- BEING BAD DEB T CLAIMED BY THE ASSESSEE BY HOLDING AS UNDER : 11.4. AFTER CAREFUL CONSIDERATION I AM INCLINED TO ACCEPT THE CONTENTION OF THE APPELLANT. THE PROVISIONS O F SECTION 36(1)(VII) UNAMBIGUOUSLY MANDATE THAT THE AMOUNT OF ANY BAD DEB T OR PART THEREOF WHICH IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THE PREVIOUS YEAR IS ALLOWABLE AS DEDUCTION IF SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE A SSESSEE OF THE PREVIOUS YEAR OR OF AN EARLIER PREVIOUS YEAR. IN THE PRESENT CASE THERE IS NO ADVERSE FINDING BY THE ASSESSING OFFICER AGAINST THE CLAIM OF TH E ASSESSEE THAT THE AMOUNT WRITTEN OFF IN THE BOOKS HAS BEEN CONSIDERED A S INCOME IN EARLIER YEARS. THEREFORE THE CONDITION ENVISAGED AS PER SECTI ON 36(2) IS SATISFIED AND THEREFORE THE CLAIM OF DEDUCTION U/S 36(1)(VII) BECOMES ALLOWABLE AS THE AMOUNT HAS BEEN WRITTEN OFF AS IRRECOVERABLE IN T HE BOOKS OF THIS YEAR. THE OBSERVATION OF THE ASSESSING OFFICER THAT ASSESSEE'S CLA IM FOR DEDUCTION IN RESPECT OF WRITE OFF OF THE BAD DEBTS IS NOT ALLOW ABLE BECAUSE THE DEBTS HAVE NOT ACTUALLY BECOME BAD IN THIS YEAR LOSES SIGNIFI CANCE IN VIEW OF CBDT CIRCULAR NO. 551 DATED 23.1.1990 WHICH READS AS FOLLO WS: 'THE OLD PROVISIONS OF CLAUSE (VII) OF SUB-SECTION (1) R EAD WITH SUB- SECTION (2) OF SECTION LAID DOWN CONDITIONS NECESSARY FO R ALLOWABILITY OF BAD DEBTS. IT WAS PROVIDED THAT THE DEBT MUST BE EST ABLISHED TO HAVE BECOME BAD IN THE PREVIOUS YEAR. THIS LED TO ENO RMOUS LITIGATION ON THE QUESTION OF ALLOWABILITY OF BAD DE BTS IN A PARTICULAR YEAR BECAUSE THE BAD DEBTS WAS NOT NECESSARILY ALLOWE D BY THE ASSESSING OFFICER IN THE YEAR IN WHICH THE SAME HAD BEEN WRITTEN OFF ON THE GROUND THAT THE DEBT WAS NOT ESTABLISHED TO HAV E BECOME BAD IN THAT YEAR. IN ORDER TO ELIMINATE THE DISPUTES IN THE MATTE R OF DETERMINING THE YEAR IN WHICH A BAD DEBT CAN BE ALLOWED AND ALS O TO RATIONALIZE THE PROVISIONS THE AMENDING ACT 1987 HAS AMENDED CLAU SE (VII) OF SUB- SECTION (1) AND CLAUSE (I) OF SUB-SECTION (2) OF THE SE CTION 36 TO PROVIDE THAT THE CLAIM FOR BAD DEBT WILL BE ALLOWED IN THE YEAR IN WHICH SUCH A BAD DEBT HAS BEEN WRITTEN OFF AS IRRECOVERAB LE IN THE ACCOUNTS OF THE ASSESSEE. 25 CLAUSES (III) AND (IV) OF SUB-SECTION (2) OF THE SECTION 36 PROVIDED FOR ALLOWING DEDUCTION FOR A BAD DEBT IN AN EARLIER OR LATER PREVIOUS YEAR IF THE INCOME TAX OFFICER WAS SATISFIED THAT THE DEBT DID NOT BECOME BAD IN THE YEAR IN WHICH IT WAS WRITTEN OFF BY THE A SSESSEE. THESE CLAUSES HAVE BECOME REDUNDANT AS THE BAD DEBTS ARE NOW BEING STRAIGHTAWAY ALLOWED IN THE YEAR OF WRITE OFF. THE A MENDING ACT 1987 HAS THEREFORE AMENDED THESE CLAUSES TO WITHDRAW THEM AFTER THE A. Y. 1988-89. ' 11.5. IN VIEW OF THE AFORESAID I HOLD THAT THE APPE LLANT'S CLAIM OF DEDUCTION OF THE AMOUNT OF RS.4 28 77 778/- IN RESPEC T OF BAD DEBTS WRITTEN OFF IS ALLOWABLE U/S 36(1)(VII) OF THE I.T. A CT. ACCORDINGLY THE DISALLOWANCE OF RS.4 28 77 778/- IS DIRECTED TO BE DEL ETED. 12.7 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE RE VENUE IS IN APPEAL BEFORE US. 12.8 THE LD. DEPARTMENTAL REPRESENTATIVE HEAVILY RE LIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE ON THE OT HER HAND WHILE SUPPORTING THE ORDER OF THE CIT(A) HEAVILY RELIED O N THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TRF LTD. REPOR TED IN 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE B Y BOTH THE SIDES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E DECISIONS CITED BEFORE US. THE FINDING GIVEN BY LD.CIT(A) THAT THE AMOUNT WRITTEN OFF IN THE BOOKS HAS BEEN CONSIDERED AS INCOME IN THE EARLIER YEARS COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE . THE HONBLE SUPREME COURT IN THE CASE OF TRF LTD. (SUPRA) HAS H ELD THAT AFTER 01-04- 1989 THE ASSESSEE HAS TO ONLY ESTABLISH THAT DEBT W AS WRITTEN OFF AND IT IS NOT NECESSARY TO ESTABLISH THAT THE DEBT INFACT HAS BEC OME IRRECOVERABLE. SINCE THE ASSESSEE IN THE INSTANT CASE HAS FULFILLED THE CONDITIONS LAID DOWN IN SECTION 36(1)(VII) READ WITH SECTION 36(2) THEREFO RE IN VIEW OF DECISION OF HONBLE SUPREME COURT CITED (SUPRA) AND CONSIDERING THE SUBMISSIONS 26 MADE BEFORE CIT(A) WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE WE FIND NO INFIRMITY IN THE ORDER OF LD.CIT(A) DELETIN G THE ADDITION ON ACCOUNT OF WRITE OFF OF BAD DEBT. THE SAME IS ACCORDINGLY UPHELD. THIS GROUND BY THE REVENUE IS ACCORDINGLY DISMISSED. 14. GROUND OF APPEAL NO.3 BY THE REVENUE READS AS U NDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S.40(A)(I) OF THE ACT ON ACCOUNT OF PAYMENT MADE TO A NON-RESIDENT WITHOUT DEDUCTING TAX AT SOUR CE AND ALSO WITHOUT ASCERTAINING THE NON-RESIDENTS BUSINESS CONNECTIONS IN INDIA. 14.1 FACTS OF THE CASE IN BRIEF ARE THAT DURING T HE RELEVANT YEAR THE ASSESSEE HAS CLAIMED AN EXPENDITURE OF RS.1 69 32 0 93/- ON ACCOUNT OF SERVICE CHARGES PAID TO ONE MR. KHEDDAR AL SAADI B AGHDAD IRAQ FOR COORDINATION WITH IRAQI GOVERNMENT FOR TECHNICAL AN D COMMERCIAL INSPECTION ETC. THE ASSESSING OFFICER FOUND THAT TH E ASSESSEE HAS NOT DEDUCTED ANY TDS ON THIS AMOUNT OF EXPENDITURE CRED ITED IN THE BOOKS OF ACCOUNT. ON BEING QUESTIONED BY THE ASSESSING OFFIC ER AS TO WHY THE AFORESAID AMOUNT BE NOT DISALLOWED AS PER PROVISION S OF SEC. 40(A)(I) OF THE IT. ACT IT WAS SUBMITTED BY THE ASSESSEE THAT NO TD S WAS REQUIRED TO BE DEDUCTED ON THIS AMOUNT AS THE SAID EXPENDITURE WAS NOT CHARGEABLE TO TAX IN INDIA THE INCOME BEING ACCRUED NOT IN INDIA. 14.2 THE ASSESSING OFFICER DID NOT ACCEPT THE CONTE NTION OF THE ASSESSEE. HE WAS OF THE VIEW THAT IN TERMS OF PROVI SIONS OF SECTION 195(2) OF THE IT. ACT THE DECISION WHETHER TDS IS TO BE M ADE OR NOT HAS TO BE TAKEN BY THE ASSESSING OFFICER AFTER RECEIVING AN A PPLICATION FROM THE PERSON MAKING THE PAYMENT TO THE NON-RESIDENT. SINC E IN THE INSTANT CASE WITHOUT MAKING AN APPLICATION TO THE ASSESSING OFFI CER AND PROCURING THE 27 REQUISITE CERTIFICATE FOR NIL DEDUCTION THE ASSESS EE PRESUMED THAT NO TDS WAS TO BE MADE THE ASSESSING OFFICER HELD THAT THE EXPENDITURE OF RS.1 69 32 093/- ON ACCOUNT OF SERVICE CHARGES PAID TO MR. KHEDDAR AL SAADI CANNOT BE ALLOWED AS DEDUCTION DURING THE REL EVANT YEAR AS PER PROVISIONS OF SECTION 40(A)(I). ACCORDINGLY HE DI SALLOWED THE AMOUNT OF RS.1 69 32 093/-. 14.3 IN APPEAL THE LD.CIT(A) ALLOWED THE CLAIM OF T HE ASSESSEE BY HOLDING AS UNDER : 5.4 AFTER CAREFUL CONSIDERATION I FIND IT DIFFICU LT TO APPRECIATE THE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE MAINLY BY INTERPRETING SECTION 195(2) TO MEAN THAT THE ASSESSEE ON ITS OWN CANNOT DECIDE AS TO WHETHER ON THE SAID PAYMENT THE TDS IS RE QUIRED TO BE MADE OR NOT. SECTION 195(2) COMES INTO PLAY WHERE THE PAYMEN T MADE TO A NON- RESIDENT IS ONLY PARTLY AND NOT AS A WHOLE CHARGEABLE UNDER THE ACT IN THE CASE OF THE RECIPIENT. IN MY OPINION THE PROVISIONS O F SECTION 195(2) SHALL NOT BE ATTRACTED IN A CASE WHERE THE PAYMENT MADE TO A NON-RESIDENT IS NOT AT ALL CHARGEABLE UNDER I.T ACT 1961 IN THE HANDS OF THE PAYEE. IN THE CASE UNDER CONSIDERATION BEFORE INVOKING THE PROVISIONS OF SECTION 40(A)(IA) THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT AT LEAST PART OF THE PAYMENT MADE TO THE IRAQI COMMISSION AGENT WAS CHARGEABLE TO TAX UNDER THE PROVISIONS OF I.T ACT 19 61 SO AS TO ATTRACT THE PROVISIONS OF SECTION 195(2). ON THE CONTRARY CONSIDER ING THE FACT THAT THE PAYMENT OF RS.1 69 32 093/- HAS BEEN MADE BY THE APPE LLANT COMPANY TO MR. KHEDDAR AL SAADI (NON-RESIDENT) FOR SERVICES PROVI DED OUTSIDE INDIA THE AMOUNT WAS NOT CHARGEABLE TO TAX IN THE HANDS OF MR. KHEDDAR AL SAADI UNDER THE PROVISIONS OF IT. ACT 1961. AS SUCH THERE WAS NO QUESTION OF DEDUCTING TAX BEFORE MAKING THE PAYMENT. SINCE TAX IS NOT DEDUCTIBLE ON THE AMOUNT PAID THE PROVISIONS OF SECTION 40(A)(IA) COULD NOT BE INVOKED. I THEREFORE HOLD THAT ON THE FACTS OF THE CASE THE A SSESSING OFFICER IS NOT JUSTIFIED IN DISALLOWING THE AMOUNT OF RS.1 69 32 093/ - U/S. 40(A)(IA) OF THE IT. ACT. THE DISALLOWANCE IS DELETED. 14.4 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE REVENU E IS IN APPEAL BEFORE US 15 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE AO AND CIT(A). WE HA VE ALSO CONSIDERED THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIN D THE ASSESSEE HAD ENTERED INTO A CONTRACT FOR SUPPLY OF 100 PUMPS TO MINISTRY OF INTERIOR 28 GENERAL CORPORATION FOR WATER AND SEWAGE. THE ASSE SSEE COMPANY APPOINTED M/S. KHEDDAR AL SAADI AS A LIASONING AGEN CY FOR COORDINATION WITH IRAQI DEPARTMENT FOR COMMERCIAL INSPECTION AN D OTHER ACTIVITIES. THERE WAS NO OBLIGATION ON THE PART OF THE ASSESSEE FOR ERECTION BUT IT WAS ONLY A CONTRACT MERELY FOR SUPPLY. FOR DOING THE L IASONING WORK M/S. KHEDDAR AL SAADI WAS PAID EURO 3 LAKHS. THE LD. CO UNSEL ARGUED THAT THE CBDT IN ITS CIRCULAR NO.23 DATED 23-07-1969 HAS CLA RIFIED THAT IF THE EXPORT COMMISSION AGENT RENDERS SERVICES OUTSIDE IN DIA THE COMMISSION IS NOT TAXABLE IN INDIA AND HENCE THERE WAS NO REQUIRE MENT FOR DEDUCTING THE TDS. HE FURTHER ARGUES THAT THE SAID CIRCULAR WAS WITHDRAWN BY CIRCULAR NO.07/2009 DATED 22-10-2009 BUT THE WITHDRAWAL OF T HE CIRCULAR WILL BE PROSPECTIVE AS HELD IN THE CASE OF DY.CIT VS. SANJI V GUPTA REPORTED IN 135 TTJ (LUCKNOW) 641. 15.1 PER CONTRA THE LD. DR RELIED ON THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF TRANSMISSION CORPORATION OF A. P. LTD. VS. CIT REPORTED IN 239 ITR 587. THE AO HAS ALSO PLACED HI S HEAVY RELIANCE ON THE ABOVE DECISION. IN THE CASE OF TRANSMISSION CORPO RATION OF A.P. LTD. (SUPRA) THE ANDHRA PRADESH STATE ELECTRICITY BOARD HAS MADE CERTAIN PAYMENTS TO NON-RESIDENTS AGAINST THE PURCHASE OF M ACHINERY AND EQUIPMENTS AND ALSO AGAINST THE WORK EXECUTED BY TH E NON-RESIDENTS IN INDIA FOR ERECTING AND COMMISSIONING THE MACHINERY AND EQUIPMENTS. IN THE SAID CASE AFTER CONSIDERING THE NATURE OF THE SERVICES RENDERED BY THE NON-RESIDENT THE HONBLE SUPREME COURT HELD THAT TH E PURPOSE OF SUB- SECTION (1) OF SECTION 195 IS TO SEE THAT THE SUM W HICH IS CHARGEABLE U/S.4 OF THE ACT FOR LEVY AND COLLECTION OF INCOME TAX THE PAYER SHOULD DEDUCT INCOME TAX THEREON AT THE RATES IN FORCE IF THE A MOUNT IS TO BE PAID TO A NON 29 RESIDENT. IN THE SAID CASE THERE WAS A COMPOSITE PAYMENT AND PART OF WHICH WAS TAXABLE AND PART OF WHICH WAS NOT TAXABLE. CON SIDERING THE NATURE OF THE TRANSACTION BETWEEN THE APSEB & NON-RESIDENTS C OMPANY THE APEX COURT HELD THAT THE ASSESSEE WHO MADE THE PAYMENTS TO THE 3 NON-RESIDENTS WAS UNDER OBLIGATION TO DEDUCT TAX AT SOURCE U/S.19 5 OF THE ACT IN RESPECT OF THE SUMS PAID TO THEM UNDER THE CONTRACT ENTERED IN TO AND THE OBLIGATION OF THE RESIDENT IS TO DEDUCT TAX U/S.195 IS LIMITED ON LY TO APPROPRIATE PORTION OF THE INCOME CHARGEABLE UNDER THE ACT. 15.2 IN THE PRESENT CASE IN OUR OPINION NO INCOME IS TAXABLE AT ALL IN THE HANDS OF M/S. KHEDDAR AL SAADI IN INDIA. MOREOVER M/S. KHEDDAR AL SAADI WAS ONLY A LIASONING AGENT TO FACILITATE CLEA RANCE OF ALL DOCUMENTS FOR EARLY RELEASE OF PAYMENTS AND TO MAKE EFFORTS FOR G ETTING THE PAYMENT AT THE EARLIEST FROM THE IRAQI GOVERNMENT AND PAYMENT WAS MERELY A COMMISSION FOR RENDERING THE ABOVE SERVICES WHICH WERE OUTSIDE INDIA. THE AMOUNT PAID TO M/S. KHEDDAR AL SAADI IS NOT COVERED U/S.9( 1) (V) (VI) OR (VII) I.E. ROYALTY OR FOR TECHNICAL SERVICES. THERE IS NO TRE ATY BETWEEN INDIA AND IRAQ U/S.90 OF THE INCOME TAX ACT AND HENCE WE HAVE TO E XAMINE THE TAXABILITY OF THE PAYMENT MADE TO M/S. KHEDDAR AL SAADI UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT. NOWHERE IT IS THE CASE OF THE AO THAT M/S. KHEDDAR AL SAADI IS A RESIDENT OF INDIA OR OTHERWIS E ALSO THE SERVICES ARE RENDERED IN INDIA. SO FAR AS AMENDMENT TO EXPLANAT ION BELOW SECTION 9 BY THE FINANCE ACT 2010 IS CONCERNED THE SAID EXPLANA TION IS APPLICABLE IN RESPECT OF INCOME COVERED UNDER CLAUSE (V) (VI) OR (VII) OF SECTION 9(1) OF THE I.T. ACT. AS WE HAVE HELD THAT THE PAYMENT MAD E TO M/S. KHEDDAR AL SAADI IS NOT COVERED UNDER CLAUSE (V) (VI) OR (VII ) OF SECTION 9(1) THE 30 AMENDED EXPLANATION WILL HAVE NO BEARING ON THE TAX ABILITY OR NON- TAXABILITY OF THE INCOME IN RESPECT OF THE SAID NON -RESIDENT LIASONING AGENT. 15.6 WE FIND THAT IN THE CIRCULAR NO.786 DATED 07-0 2-2000 THE CBDT HAD CLARIFIED AS UNDER : THAT THE DEDUCTION OF TAX AT SOURCE UNDER SECTION 1 95 WOULD ARISE IF THE PAYMENT OF COMMISSION TO THE NON-RESIDENT AGENT IS CHAR GEABLE TO TAX IN INDIA. IN THIS REGARD ATTENTION TO CBDT CIRCULAR N O.23 DATED 23-07-1969 IS DRAWN WHERE THE TAXABILITY OF FOREIGN AGENTS OF IN DIAN EXPORTERS WAS CONSIDERED ALONGWITH CERTAIN OTHER SPECIFIC SITUATIONS. IT HAD BEEN CLARIFIED THEN THAT WHERE THE NON-RESIDENT AGENT OPERATES OUTSID E THE COUNTRY NO PART OF HIS INCOME ARISES IN INDIA. FURTHER SINCE T HE PAYMENT IS USUALLY REMITTED DIRECTLY ABROAD IT CANNOT BE HELD TO HAVE BEEN RECEIVED BY OR ON BEHALF OF THE AGENT IN INDIA. SUCH PAYMENTS ARE THE REFORE HELD TO BE NOT TAXABLE IN INDIA. THE RELEVANT SECTIONS NAMELY SECT ION 5(2) AND SECTION 9 OF THE INCOME-TAX ACT 1961 NOT HAVING UNDERGONE ANY C HANGE IN THIS REGARD THE CLARIFICATION IN CIRCULAR NO.23 SHALL PREVAILS. NO TAX IS THEREFORE DEDUCTIBLE UNDER SECTION 195 AND CONSEQUENTLY THE E XPENDITURE ON EXPORT COMMISSION AND OTHER RELATED CHARGES PAYABLE TO A NON- RESIDENT FOR SERVICES RENDERED OUTSIDE INDIA BECOME S ALLOWABLE EXPENDITURE. ON BEING APPRISED OF THIS POSITION THE COMPTROLLER AND AUDITOR GENERAL HAVE AGREED TO DROP THE OBJECTION R EFERRED TO ABOVE. 15.7 THE SAID CIRCULAR HAS BEEN WITHDRAWN SUBSEQUEN TLY BY THE CBDT VIDE CIRCULAR NO.07/2009 DATED 22-10-2009 BUT IT WI LL NOT HAVE RETROSPECTIVE EFFECT AS HELD IN THE CASE OF SANJIV GUPTA (SUPRA). WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) ON THIS ISSUE. WE ACCORDINGLY CONFIRM THE SAME AND GROUND NO.3 TAKEN BY THE REVENUE IS DISMISSED. ITA NO.302/PN/2010 (BY REVENUE) (A.Y. 2006-07) : 16. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD.CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE O F RS.1 38 64 000/- MADE U/S.40(A)(I) OF THE INCOME TAX ACT ON ACCOUNT O F PAYMENT MADE TO A NON-RESIDENT WITHOUT DEDUCTING TAX AT SOURCE AND ALSO WITHOUT ASCERTAINING THE NON-RESIDENTS BUSINESS CONNECTIONS IN INDIA? 31 16.1 AFTER HEARING BOTH THE SIDES WE FIND ABOVE GR OUND IS IDENTICAL TO GROUND OF APPEAL NO.3 IN ITA NO.368/PN/2009. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVE NUE HAS BEEN DISMISSED. FOLLOWING THE SAME RATIO THIS GROUND B Y THE REVENUE IS DISMISSED. ITA NO.1000/PN/2012 (BY ASSESSEE) (A.Y. 2006-07) : 17. THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER : THE LD.CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDIN G DISALLOWANCE OF WRITE-OFF OF OBSOLETE AND SLOW-MOVING INVENTORY OF RS. 13 79 920/- AS PER THE CONSISTENT PRACTICE FOLLOWED BY THE COMPANY. THE COMPANY CARRIED OUT A DETAILED ANALYSIS OF ALL SLOW-MOVING AND OBSOLETE INV ENTORY AND WRITES DOWN THEIR VALUE IN THE BOOKS IN ORDER TO PRESENT A TRUE AND FAIR VIEW OF ITS STATE OF AFFAIRS. THE PARTS WHICH HAVE NOT MOVED FOR MORE THAN ONE YEAR AND LESS THAN TWO YEARS ARE WRITTEN DOWN BY 50% AND T HOSE WHICH HAVE NOT MOVED FOR MORE THAN TWO YEARS ARE WRITTEN DOWN FULLY . 17.1 AFTER HEARING BOTH THE SIDES WE FIND ABOVE GR OUND IS IDENTICAL TO GROUND OF APPEAL NO.1 IN ITA NO.351/PN/2009. WE HA VE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN RESTORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION WITH CERTAIN DIREC TIONS. FOLLOWING THE SAME RATIO THIS GROUND BY THE ASSESSEE IS ALSO REST ORED TO THE FILE OF THE AO FOR FRESH ADJUDICATION IN THE LIGHT OF THE DIRECTIO NS GIVEN THEREIN. 18. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IN ITA NO.351/PN/2009 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 368/PN/2009 AND ITA NO.302/PN/2010 ARE DISMISSED AND ITA NO.1000/PN/201 2 BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 28-10-2013. SD/- SD/- (R.S. PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED : 28 TH OCTOBER 2013 SATISH 32 COPY OF THE ORDER IS FORWARDED TO : 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-III &V PUNE 4. THE CIT-III & V PUNE 5. D.R. B BENCH PUNE 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE