The DCIT, Circle-1(2),, Baroda v. Koshambh Multitred Pvt.Ltd.,, Baroda

ITA 1453/AHD/2010 | 2007-2008
Pronouncement Date: 13-08-2010 | Result: Dismissed

Appeal Details

RSA Number 145320514 RSA 2010
Assessee PAN AAACK7744A
Bench Ahmedabad
Appeal Number ITA 1453/AHD/2010
Duration Of Justice 3 month(s) 8 day(s)
Appellant The DCIT, Circle-1(2),, Baroda
Respondent Koshambh Multitred Pvt.Ltd.,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 13-08-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 13-08-2010
Assessment Year 2007-2008
Appeal Filed On 05-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD AHMEDABAD AHMEDABAD AHMEDABAD BENCH BENCH BENCH BENCH D DD D BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI N.S N.S N.S N.S. SAINI . SAINI . SAINI . SAINI ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING: 3-8-1020 DRAFTED ON: 3-8-2010 ITA NO. 1453 /AHD/ 2010 ASSESSMENT YEAR :2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX CIR.1(2) KAYAKER HAVEN RACE COURSE CIRCLE BARODA. VS. M/S. KOSHAMBH MULTITRED PRIVATE LTD. 507 CITY PLAZA DANDIA BAZAR BARODA. PAN/GIR NO. : AAACK 7744A (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SUDHANS HU S. JHA D.R. RESPONDENT BY: SHRI M.G. PATEL WITH SMT.ARTI N. SHAH. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I BARODA DATED 21-1-2010. 2. THE SOLE GROUND OF APPEAL OF THE REVENUE IS THAT :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN DELETING THE ADDITION OF `.24 56 683/- MADE ON ACCO UNT OF DISALLOWANCE OF CLAIM OF BAD DEBTS WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE HAD NOT TAKEN INTO CONSIDERA TION THE AMOUNT OF ADVANCE IN COMPUTING THE INCOME IN ANY OF THE ASSESSMENT YEARS AS REQUIRED UNDER THE PROVISIONS O F SECTION 36(1)(VII) OF THE ACT. THE ASSESSEE HAS ALSO FAILED TO DISCHARGE THEIR ONUS TO PROVE THE DEBTS AS REALLY B AD WITH SUPPORTING DOCUMENTARY EVIDENCE FOR THE EVIDENCE MA DE BY THEM FOR THE RECOVERY OF THE AMOUNT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER MADE THE DISALLOWANCE OF `.24 56 683/- CLAI MED AS BAD DEBT - 2 - BY THE ASSESSEE FOLLOWING THE DECISION OF THE HON'B LE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT. LTD. VS. CIT 207 CTR 729. 4. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX (APPEALS) THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE IDENTICAL ISSUE WAS CONSIDERED B Y LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN ASSESSEES CASE FOR ASSESSMENT YEAR 2006-07 AND THE ISSUE WAS DECIDED I N FAVOUR OF THE ASSESSEE. IT WAS URGED THAT THE DECISION OF THE EARLIER YEAR MAY BE FOLLOWED SINCE THE FACTS REMAIN THE SAME. 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVE D AS UNDER :- I HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE AND THE F ACTS OF THE CASE. I FIND THAT INDEED THIS ISSUE WAS CONSID ERED IN AN APPEAL NO. CAB-I/56/09-10 VIDE ORDER DATED 28-5-200 9 AND IT WAS HELD THAT IN VIEW OF SUPREME COURTS JUDGMENT I N RAJENDRA Y. SHAH AND THE DECISION OF THE SPECIAL BE NCH IN OMAN INTERNATIONAL BANK IT WAS NOT NECESSARY FOR T HE ASSESSEE TO DEMONSTRATIVELY PROVE THAT THE DEBT HAD BECOME BAD DURING THE YEAR. IT WAS SUFFICIENT THAT THE ASS ESSEE HAD WRITTEN OFF ITS DEBTS IN ITS BOOKS DURING THE YEAR CONSIDERING THE SAME TO BE IRRECOVERABLE. 6. IN THE INSTANT CASE HOWEVER THE FACTS ARE DIFF ERENT. THE ASSESSEE HAD MADE ADVANCES TO VARIOUS PERSONS FOR J OB WORK AND SUPPLY OF MATERIAL. IT IS NOT A CASE WHERE THE ASSE SSEE HAD WRITTEN OFF THE UNRECOVERED SALES BALANCES. THE AMOUNTS WRI TTEN OFF REPRESENT EXPENSES INCURRED IN LIEU OF WHICH THE JO B WORK ETC. COULD NOT BE COMPLETED. DETAILS IN THIS REGARD ARE AS UNDER:- SR. NO. NAME OF THE PARTY AMOUNT (`) REMARKS. 1. ADHU NIK POLYBAGS PVT. LTD. 6 20 517 THE AMOUNT WAS OUTSTANDING SINCE 2000-01 BY WAY OF ADVANCE FOR JOB WORK - 3 - OF PLASTIC CARRY BAGS. THE ASSESSEE COULD RECOVER ONLY `.1 50 000/- THROUGH THE COURT AFTER INSTITUTING SUIT FOR RECOVERY. THE BALANCE AMOUNT (`.6 20 517/- WAS THEREFORE WRITTEN OFF. 2. SANDEEP ENTERPRISES. 10 32 563 OUTSTANDING SINCE 1999-00 BY WAY OF ADVANCER FOR JOB WORK OF PLASTIC CARRY BAGS. NO RECOVERY COULD BE MADE DESPITE ALL EFFORTS OVER LAST 7 YEARS. 3. ERODE RANA TEXTILE PROCESSOR PRIVATE LTD. 4 10 031 ADVANCE PAYMENT WAS MADE TO THE PARTY IN FINANCIAL YEAR 2002-03 FOR JOB WORK CHARGES ON GREY FABRIC. THE PARTY DID NOT COMPLETE THE JOB WORK NOR RETURNED THE MONEY DESPITE ALL EFFORTS. 4. BHARAT METAL BOX CO.LTD. 2 63 017 ADVANCES WERE MADE IN 2001-02 AND 2002- 03 FOR SUPPLY OF TIN BOXES. HOWEVER PARTY DID NOT REFUND THE ADVANCES DESPITE ALL EFFORTS. 5. VARIOUS PARTIES. 1 30 554 SUNDRY BALANCES (ADVANCES) MADE FOR SUPPLY OF RAW MATERIAL WERE WRITTEN OFF. THIS AMOUNT REPRESENTS SMALL ADVANCES MADE TO A NUMBER OF PARTIES FOR SUPPLY OF RAW MATERIAL. THE SAME WAS OUTSTANDING FOR MORE THAN 5 YEARS HENCE WRITTEN OFF. FROM THE ABOVE DETAILS IT IS SEEN THAT THE AMOUNTS IN QUESTION ARE DIFFERENT IN NATURE FROM BAD DEBTS IN THE SENSE THA T THEY WERE NOT AMOUNTS RECEIVABLE AGAINST SALES BUT RATHER ADVANC ES MADE BY - 4 - THE ASSESSEE HIMSELF TOWARDS PURCHASES OF GOODS AND SERVICES. HENCE THE ASSESSING OFFICERS OBSERVATION THAT THE WRITE OFF WAS NOT ALLOWABLE ON THE GROUND THAT THE AMOUNTS WERE N OT OFFERED FOR TAXATION IN THE EARLIER YEARS WOULD NOT BE GERMANE TO THE ISSUE. BEING ADVANCES AGAINST PURCHASES OF GOODS AND SERVI CES THE TRANSACTIONS WERE IN THE NATURE OF EXPENDITURE AND NOT INCOME OF THE ASSESSEE. THE IRRECOVERABLE AMOUNTS WOULD THERE FORE BE ALLOWABLE AS BUSINESS LOSS IN THE HANDS OF THE APPE LLANT. IN MIND HUF LTD. VS. JCIT 286 ITR (AT) 88 THE ITAT DELHI BENCH HAS HELD THAT ADVANCES GIVEN DURING THE COURSE OF BUSINESS F OR SUPPLY FOR RAW MATERIAL AND WRITTEN OFF BEING IRRECOVERABLE WOULD BE ALLOWABLE AS A TRADING LOSS UNDER SECTION 37 OF TH E ACT. IN THE INSTANT CASE THE FACTS ARE SIMILAR. THERE ALSO THE ADVANCES WERE MADE FOR SUPPLY OF MATERIAL BUT THE GOODS WERE NOT SUPPLIED NOR WERE THE ADVANCE RETURNED DESPITE EFFORTS MADE FOR RECOVERY. ACCORDINGLY FOLLOWING THE ABOVE MENTIONED DECISION THE DISALLOWANCE OF `. 24 56 683/- IS DIRECTED TO BE D ELETED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADIN G OF PLASTIC CARRY BAGS PRINTED FABRICS ETC. DURING THE COURSE OF ITS BUSINESS IT MADE ADVANCE TO SEVERAL PARTIES FOR JOB WORK AND SU PPLY OF RAW MATERIALS. DURING THE YEAR UNDER CONSIDERATION IT HAS WRITTEN OFF `.24 56 683/- OUT OF SUCH ADVANCES RELATING TO FIVE PARTIES AS DETAILED ABOVE IN THIS ORDER AS IRRECOVERABLE AND C LAIMED DEDUCTION FOR THE SAME. THE LEARNED ASSESSING OFFICER DISALLO WED THE CLAIM FOR DEDUCTION BY OBSERVING THAT THE AMOUNT HAS NOT BECOME BAD DURING THE YEAR UNDER CONSIDERATION AND IN SUPPORT OF ITS ACTION PLACED RELIANCE ON THE DECISION OF THE HON'BLE GUJA RAT HIGH COURT IN THE CASE OF DHAL ENTERPRISES AND ENGINEERS PVT. LTD . VS. C.I.T. 207 CTR 729. 8. ON APPEAL LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) DELETED THE DISALLOWANCE BY OBSERVING THAT THE ADVA NCE GIVEN - 5 - DURING THE COURSE OF THE BUSINESS WHEN BECOMES IRRE COVERABLE IS DEDUCTIBLE AS BUSINESS LOSS. THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) DERIVED SUPPORT FROM THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF MIND HUF LTD. VS. JC IT 286 ITR (AT) 88 (DEL). 9. BEFORE US THE LEARNED DEPARTMENTAL REPRESENTATIV E RELIED UPON THE ORDER OF THE LEARNED ASSESSING OFFICER. 10. ON THE OTHER HAND THE LEARNED AUTHORISED REPRES ENTATIVE OF THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS) AND ALSO SUBMITTED THAT DECISI ON OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FINDS SUPPORT FROM THE RECENT DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. VS. C.I.T. (2010) 323 ITR 397 (SC). 11. WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSE SSEE CLAIMED DEDUCTION IN RESPECT OF ADVANCES WHICH WERE MADE DU RING THE COURSE OF THE ORDINARY BUSINESS OF THE ASSESSEE FOR THE PURPOSE OF JOB WORK AND SUPPLY OF RAW MATERIAL. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS WRITTEN OFF THE AMOUNT IN QUESTION AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNTS. FULL DETAI LS OF THE PARTIES RELATING TO WHICH DEDUCTION WAS CLAIMED WAS FURNISH ED BEFORE THE LOWER AUTHORITIES. WE FIND THAT THE LEARNED ASSESS ING OFFICER COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE A SSESSEE HAS RECEIVED ANY BENEFIT IN RESPECT OF ADVANCES IN QUES TION TILL THE DATE OF ASSESSMENT OR THE ASSESSEE HAS NOT WRITTEN OFF T HE AMOUNT AS IRRECOVERABLE IN ITS BOOKS OF ACCOUNTS. IN THE C ASE OF DHALL ENTERPRISES AND ENGINEERS PVT. LTD. (SUPRA) THE H ON'BLE GUJARAT HIGH COURT HELD THAT THE ASSESSEE HAS TO PROVE THAT THE DEBT IN QUESTION HAS BECOME BAD SO AS TO ALLOW DEDUCTION UN DER SECTION 36(1)(VII) OF THE ACT. ON THE OTHER HAND THE HON' BLE SUPREME COURT IN THE CASE OF T.R.F. LTD. (SUPRA) HAS HELD T HAT FOR CLAIMING DEDUCTION UNDER SECTION 36(1) (VII) AFTER 1-4-1989 ONLY WRITES OFF OF - 6 - DEBT AS IRRECOVERABLE IS SUFFICIENT TO ALLOW DEDUCT ION AS BAD DEBT TO THE ASSESSEE. 12. HOWEVER IN OUR CONSIDERED OPINION IN THE INSTA NT CASE THE AMOUNT IN QUESTION IS NOT A DEBT WITHIN THE MEANING OF SECTION 36(1)(VII) BUT THE SAME IS ORDINARY BUSINESS ADVANC E WHICH IF BECOMES BAD THEN SUCH LOSS TO THE ASSESSEE IS ALLOW ABLE UNDER SECTION 28 OF THE ACT ITSELF. OUR ABOVE VIEW FIND S SUPPORT FROM THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F BADRIDAS DAGA VS. CIT (1958) 34 ITR 10 (SC) AND CIT VS. MYSO RE SUGAR COMPANY LTD. (1962) 46 ITR 649 (SC). FURTHER THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SARANGPUR COTTON MANUFACT URING CO. LTD. VS. C.I.T. (1983) 143 ITR 166 (SC) HAS HELD THAT W HEN A BUSINESSMAN WRITES OFF AN AMOUNT IT IS PRIMA FACIE EVIDENCE THAT THE AMOUNT IS IRRECOVERABLE. THEREAFTER THE ONUS W ILL BE ON THE DEPARTMENT TO REBUT THE PRIMA FACIE INFERENCE BY CI TING CIRCUMSTANCES OR LEADING EVIDENCES TO REBUT THE STA ND OF THE ASSESSEE TO PROVE THAT THE DEBT WAS IN FACT NOT BAD . IN THE IN INSTANT CASE WE FIND THAT NO SUCH MATERIAL WAS BROU GHT ON RECORD BY THE REVENUE. IN THE CIRCUMSTANCES WE DO NOT FI ND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LEARNED C OMMISSIONER OF INCOME TAX (APPEALS). IT IS CONFIRMED. THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 13. IN THE RESULT THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 13 TH AUGUST 2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTA NT MEMBER AHMEDABAD: ON THIS 13 TH DAY OF AUGUST 2010 PATKI - 7 - COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 10-8-2010 -------------- ----- 2. DRAFT PLACED BEFORE AUTHORITY 10-8-2010 ----- -------------- 3. DRAFT PROPOSED & PLACED 11-8-2010 ------------ ------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 11-8-2010 ------------------- JM 5. APPROVED DRAFT COMES TO P.S 13-8-2010 ------------------- 6. KEPT FOR PRONOUNCEMENT ON 13-8-2010 -------------------- 7. FILE SENT TO THE BENCH CLERK 13-8-2010 -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------