Lypho-Med Remedies Pvt.Ltd.,, Ahmedabad v. The Dy.CIT.,Circle-4,, Ahmedabad

ITA 1394/AHD/2009 | 2005-2006
Pronouncement Date: 31-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 139420514 RSA 2009
Assessee PAN AAACL4919N
Bench Ahmedabad
Appeal Number ITA 1394/AHD/2009
Duration Of Justice 1 year(s) 8 month(s) 30 day(s)
Appellant Lypho-Med Remedies Pvt.Ltd.,, Ahmedabad
Respondent The Dy.CIT.,Circle-4,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 01-07-2009
Date Of Final Hearing 27-01-2011
Next Hearing Date 27-01-2011
Assessment Year 2005-2006
Appeal Filed On 01-05-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI G.D. AGRAWAL V.P.(AZ) & HON'BLE SHRI T.K. SHARMA J.M. ) I.T.A. NO. 1394/AHD./2009 ASSESSMENT YEAR : 2005-2006 LYPHO-MED REMEDIES PVT. LTD. -VS.- DEPUTY COMMISSIONER OF INCOME TAX AHMEDABAD (PAN : AAACL 4919 N) CIRCLE-4 AHMED ABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI BANDISH SOPARKAR A.R. RESPONDENT BY : SHRI K. MADHUSUDAN SR. D.R. O R D E R PER SHRI T.K. SHARMA JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE O RDER DATED 26.02.2009 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VIII AHMEDABA D FOR THE ASSESSMENT YEAR 2005-06. 2. GROUND NO. 1 OF THIS APPEAL IS THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN UPHOLDING THE DISALLOWANCE OF RS.3 67 381/ - CLAIMED AS BAD DEBTS THOUGH THE SAME HAVE BEEN ESTABLISHED TO HAVE BECOME BAD DEBTS AND WRITT EN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ALTERNATIVELY AN AMOUNT OF RS.8 299/- CO ULD HAVE BEEN ALLOWED AS KASAR INSTEAD OF BAD DEBTS AS THE SAID AMOUNTS REPRESENT SHORT PAYMENTS AND RS.16 395/- COULD HAVE BEEN ALLOWED AS BUSINESS LOSS AS THE SAID SMALL AMOUNTS COULD NOT B E RECOVERED LOOKING TO COMMERCIAL EXPEDIENCY AND BALANCE RS.3 42 687/- AS BAD DEBTS. 3. AT THE TIME OF HEARING BEFORE US ON BEHALF OF A SSESSEE SHRI BANDISH SOPARKAR LD. COUNSEL APPEARED AND CONTENDED THAT THE ENTIRE AMOUNT OF RS .3 67 381/- CLAIMED AS BAD DEBTS WAS NOT RECOVERABLE THEREFORE THE ASSESSEE ACTUALLY HAD W RITTEN OFF THE SAID AMOUNT IN THE BOOKS OF ACCOUNTS. HE SUBMITTED THAT THE ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SELLING OF PHARMACEUTICALS FORMULATIONS. IT SOL D GOODS TO SEVERAL PARTIES DURING EARLIER PREVIOUS YEARS AND OFFERED THE SALES INCOME TO TAX IN THE RESPECTIVE PREVIOUS YEARS. SEVEN PARTIES HAVE NOT PAID THEIR DUES RANGING FROM RS.325/- TO R S.2 85 000/- AGGREGATING TO RS.3 67 381/-. THE ASSESSEE-COMPANY HAS TAKEN NECESSARY STEPS TO R ECOVER THE SAID DEBTS BUT COULD NOT RECOVER 2 ITA NO. 1394-AHD-2009 THE SAME THEREFORE THE ASSESSEE HAS WRITTEN OFF T HE SAID DEBTS AS BAD DEBTS IN ITS BOOKS OF ACCOUNTS OF THE PREVIOUS YEAR RELEVANT TO THE ASSES SMENT YEAR UNDER APPEAL. IT WAS FURTHER SUBMITTED THAT IN THE IMPUGNED ORDER THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) MERELY CONFIRMED THE DISALLOWANCE FOLLOWING THE JUD GMENT OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF T.R.F. LIMITED VS.- COMMISSIONER OF IN COME TAX REPORTED IN [2010] 323 ITR 397 (SC) WHEREIN IT IS HELD THAT IT IS NOT NECESSARY T O ESTABLISH THAT DEBT IN FACT HAS BECOME IRRECOVERABLE. THE LD. COUNSEL ACCORDINGLY SUBMITTE D THAT THE AMOUNT OF RS.8 299/- IS ALLOWABLE AS CASAR RS.16 395/- AS BUSINESS LOSS AND REMAININ G AMOUNT PERTAINING TO M/S. AMBICA AGENCY AS BAD DEBTS AS PER THE JUDGMENT OF THE HON'BLE SUP REME COURT IN THE CASE OF T.R.F. LIMITED (SUPRA). 4. ON THE OTHER HAND SHRI K. MADHUSUDAN LD. SR. D .R. APPEARING ON BEHALF OF THE REVENUE ARGUED AT LENGTH AND SUBMITTED THAT IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR THE ASSESSEE HAS RECEIVED PAYMENT THROUGH CHEQUE WHICH WAS DISHONORED THEREFORE IT CANNOT BE SAID THAT THE AMOUNT DUE FROM M/S. AMBICA AGENCY AM OUNTING TO RS.2 85 000/- HAS BECOME BAD IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEA R UNDER APPEAL. HE FURTHER SUBMITTED THAT ONLY BAD DEBTS CAN BE WRITTEN OFF AND NOT ALL DEBTS. 5. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AS WELL AS THE JUDGMENT OF HON'BLE SUPREME CO URT IN THE CASE OF T.R.F. LIMITED VS.- COMMISSIONER OF INCOME TAX REPORTED IN [2010] 323 I TR 397 (SC). THE HON'BLE SUPREME COURT IN THIS JUDGMENT HAS HELD THAT AFTER THE AMENDMENT OF SECTION 36(1)(VII) OF THE IN COME TAX ACT 1961 WITH EFFECT FROM APRIL 1 1989 IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE: IT IS ENOUGH IF THE BAD DEBT IS WRIT TEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. ADMITTEDLY THE ASSESSEE HAS WRITTEN OFF THE ENTIRE AMOUNT AS BAD DEBTS IN THE BOOKS OF ACCOUNTS. IN THESE CIRCUMSTANCES THE JUDGMENT OF T HE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LIMITED (SUPRA) IS SQUARELY APPLICABLE TO TH E FACTS OF THE ASSESSEES CASE. WE ACCORDINGLY DELETE THE DISALLOWANCE OF RS.3 69 381/- WHICH IS CLAIMED BY THE ASSESSEE AS BAD DEBTS. RESULTANTLY GROUND NO. 1 IS ALLOWED. 6. GROUND NO. 2 OF THIS APPEAL IS AS UNDER :- THE LD. CIT(A.) HAS ERRED IN UPHOLDING PARTIALLY T HE RESTRICTION OF DEDUCTION U/S. 80IB(3) TO THE EXTENT OF RS.16 223/- THOUGH THE APPELLANT HAS EARNED SERVICE CHARGES INCOME OF RS.4 4 500/- DURING THE 3 ITA NO. 1394-AHD-2009 PROCESS OF RENDERING JOB WORK SERVICES TO THE CUSTO MERS AND INTEREST OF RS.9 566/- ON DELAYED PAYMENT BY THE CUSTOMERS OF T HE APPELLANT HAVING GOT DIRECT NEXUS WITH THE ACTIVITIES OF THE ELIGIBLE INDUSTRIAL UNDERTAKING. 7. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER TOOK THE VIEW THAT THE ASSESSEE-COMPANY IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IB(3) IN RESPECT OF SERVICE CHARGES AMOUNTING TO RS.44 500/- AND INTEREST INCOME OF RS.9 566/- WITH REGARD TO SERVICE CHARGES HE POINTED OUT THAT THE ASSESSEE-COMPANY IS MAINTAINING MANUFACTURING RECORD OF VARIOUS CLIENTS IN RESPECT OF THEIR JOB WORK CARRIED OUT. THE PURPOSE OF DOING JOB WORK IS TO KEEP TRACK ON THE GOODS RECEIV ED ON JOB WORK ISSUE BILLS ETC. THE LD. D.R. DISPUTED THE SAME ON THE GROUND THAT THE ASSESSEE I S MAINTAINING EXTRA RECORDS OF SUCH MANUFACTURER WHICH IS A STATUTORY REQUIREMENT AND THIS INCOME IS NOT DERIVED FROM INDUSTRIAL UNDERTAKING. WITH REGARD TO INTEREST ON DELAYED PA YMENT AMOUNTING TO RS.9 566/- BOTH SIDES CONCEDED THAT AS PER THE JUDGMENT OF THE HON'BLE GU JARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. VS.- DCIT REPORTED IN 283 ITR PAG E 402 (GUJ.) THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 80IB(3). 8. AFTER HEARING BOTH THE SIDES WE HAVE CAREFULLY GONE THROUGH THE REASONING GIVEN BY THE ASSESSING OFFICER AND LEARNED COMMISSIONER OF INCOM E TAX (APPEALS). THE INTEREST ON DELAYED PAYMENT IS INCOME DERIVED FROM MANUFACTURING AS HEL D BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NIRMA INDUSTRIES LTD. (SUPRA). WE ACCORDING LY DIRECT THE ASSESSING OFFICER TO ALLOW DEDUCTION UNDER SECTION 80IB(3) ON INTEREST INCOME OF RS.9 566/- WHICH WAS RECEIVED ON DELAYED PAYMENT. WITH REGARD TO SERVICE CHARGES WE ARE CONVINCED T HAT THESE WERE RECEIVED FOR MAINTAINING EXCISE RECORDS OF ITS CUSTOMERS WHICH IS A STATUTORY REQUIREMENT OF THE MANUFACTURER. THE JOB WORK CHARGES RECEIVED FOR MAI NTENANCE OF EXCISE RECORDS IN OUR OPINION IS NOT INCOME DERIVED FROM INDUSTRIAL UNDERTAKING. THE REFORE THE ASSESSEE IS ENTITLED TO CLAIM OF BENEFIT UNDER SECTION 80IB(3) OF THE INCOME TAX ACT 1961 IN RESPECT OF SERVICE CHARGES. RESULTANTLY THE VIEW TAKEN BY BOTH THE AUTHORITIES BELOW IN THIS REGARD IS THEREFORE UPHELD. 4 ITA NO. 1394-AHD-2009 9. THE LAST GROUND OF APPEAL IS AGAINST UPHOLDING T HE DISALLOWANCE OF RS.8 320/- OUT OF SALES PROMOTION EXPENSES UNDER SECTION 40A(3). THE LD. CO UNSEL OF THE ASSESSEE SUBMITTED THAT THIS PAYMENT WAS MADE TO AGENT THEREFORE THE SAME IS C OVERED BY RULE 6DD(K) OF THE INCOME TAX RULES 1962. 10. ON THE OTHER HAND THE LD. D.R. POINTED OUT THA T THE ASSESSEE PURCHASED UMBRELLA FOR RS.41 600/- AND THE PAYMENT AS MADE IN CASH. PRIMA FACIE IT APPEARS THAT NO AGENT IS INVOLVED THEREFORE THE DISALLOWANCE OF RS.8 320/- WAS RIGHT LY MADE BY THE ASSESSING OFFICER BY INVOKING THE PROVISIONS CONTAINED IN SECTION 40A(3) OF THE I NCOME TAX ACT. 11. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AU THORITIES BELOW. IT IS PERTINENT TO NOTE THAT NO DOCUMENTARY EVIDENCE IS FURNISHED BY THE ASSESSE E EITHER BEFORE US OR BEFORE THE AUTHORITIES BELOW TO PROVE THAT THE AMOUNT IN QUESTION IS PAID TO THE AGENT. WE THEREFORE DECLINE TO INTERFERE. RESULTANTLY THIS GROUND OF APPEAL IS RE JECTED. 12. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON 31.01.20 11 SD/- SD/- (G.D. AGRAWAL) (T.K. SHARMA ) VICE-PRESIDENT (AZ) JUDICIAL MEMBER DATED : 31/ 01 / 2011 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT. 3) CIT(A.) CONCERNED (4) CIT CONCERNED (5) D.R. ITAT AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGI STRAR ITAT AHMEDABAD LAHA/SR.P.S.