ACIT 2(3), MUMBAI v. TUSHACO PUMPS P.LTD, MUMBAI

ITA 1994/MUM/2010 | 2006-2007
Pronouncement Date: 09-12-2011 | Result: Dismissed

Appeal Details

RSA Number 199419914 RSA 2010
Assessee PAN AABCT7703K
Bench Mumbai
Appeal Number ITA 1994/MUM/2010
Duration Of Justice 1 year(s) 8 month(s) 28 day(s)
Appellant ACIT 2(3), MUMBAI
Respondent TUSHACO PUMPS P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-12-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 09-12-2011
Date Of Final Hearing 29-11-2011
Next Hearing Date 29-11-2011
Assessment Year 2006-2007
Appeal Filed On 11-03-2010
Judgment Text
1 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D BEFORE SHRI R.K. PANDA A.M. AND SHRI VIJAY PAL RAO J.M. ITA NO. 1994/MUM/2010 ASSESSMENT YEAR 2006-07 DCIT 2(3) R. NO. 555 AAYAKAR BHAWAN MUMBAI 20. VS. M/S TUSHACO PUMPS PVT. LTD. 601 6 TH FLOOR RAHEJA PLAZA LBS MARG GHATKOPAR (W) MUMBAI 400 086. PAN AABCT7703K APPELLANT RESPONDENT APPELLANT BY SHRI C.G.K. NAIR RESPONDENT BY SHRI N.M. PORWAL DATE OF HEARING 29.11.2011 DATE OF PRONOUNCEMENT 09.12.2011 ORDER PER R.K. PANDA A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER DT. 01.12.2009 OF THE CIT(A)- 6 MUMBAI RELATING TO A.Y. 2006-07. 2. GROUNDS OF APPEAL NO. 1 & 4 ARE BEING GENERAL IN NATURE ARE DISMISSED. 3. GROUND NO. 2 BY THE REVENUE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT AN AMOUNT OF RS. 19 7 6 000/- IS DEDUCTIBLE AS BAD DEBTS IGNORING THE FACT THAT THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS OF SECTION 36(I)(VII) R.W. S. 36(2) THEREOF. 2 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. 3.1. FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTED THAT THE ASSESSEE HAD DE BITED AN AMOUNT OF RS. 19 76 000/- TOWARDS BAD AND DOUBTFUL DEBTS. THE A. O. ASKED THE ASSESSEE TO JUSTIFY AS TO WHY THE SAME SHOULD NOT BE DISALLOWED . THE A.O. MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE VIDE ITS SUB MISSION DTD. 29 TH AUGUST 2008 SUBMITTED THAT THE SAME HAS NOT BEEN CONSIDERE D AS INCOME IN ANY OF THE ASSESSMENT YEAR. NO BILL-WISE/ACCOUNT-WISE JUSTIFI CATION WAS FURNISHED SO AS TO PROVE ITS CLAIM BY THE ASSESSEE. THEREFORE THE A.O. DISALLOWED AN AMOUNT OF RS. 19 76 000/- AND ADDED TO THE TOTAL INCOME OF TH E ASSESSEE. 3.2 BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT EXP ENSES SUCH AS COURIER EXPENSES ETC. INCURRED ON BEHALF OF THE CLIENT WAS DEBITED TO THE CUSTOMERS ACCOUNT ALONG WITH EQUIPMENTS ETC. SUPPLIED TO THE CUSTOMER. IN THE CASE OF FEW CLIENTS THE ASSESSEE WAS NOT ABLE TO RECOVER T HE AMOUNT OF COURIER CHARGES DEBITED TO THE CUSTOMERS ACCOUNT WHEREAS THE INVOI CES RAISED FOR THE EQUIPMENTS HAD ALREADY BEEN RECEIVED. AFTER CONSIDE RABLE FOLLOW UP BY THE SALESMAN IT WAS DECIDED BY THE ASSESSEE TO WRITER OFF THESE AMOUNTS. FURTHER DUE TO DELAY IN EXECUTION OF ORDERS RECEIVED FROM T HE CUSTOMERS SUCH CUSTOMERS DEDUCTED SOME NOMINAL AMOUNT TOWARDS LATE DELIVERY CHARGES. AFTER RECEIVING INFORMATION FROM THE MARKETING DEPARTMENT THAT THESE AMOUNTS WERE NOT RECOVERABLE THE ASSESSEE DECIDED TO WRITE IT O FF IN THE BOOKS OF ACCOUNT AS DELAY IN EXECUTION OF ORDERS WAS ATTRIBUTABLE TO TH E ASSESSEE. IT WAS SUBMITTED THAT THE TURNOVER FOR THE YEAR UNDER CONSIDERATION WAS APPROX. RS. 24.32 CRORES AND THE PERCENTAGE OF BAD DEBTS COMES 0.8% O F THE TOTAL TURNOVER. AS AGAINST 170 NO. OF CASES FOR BAD DEBT WRITTEN OFF B Y THE ASSESSEE 124 CASES FELL UNDER THE HEAD LATE DELIVERY. IT WAS FURTHER SUBMI TTED THAT THE A.O. WITHOUT APPLYING HIS MINDS TO THE SUBMISSIONS MADE ON 29 TH AUGUST 2008 FILED BEFORE HIM CAME TO THE CONCLUSION THAT BAD DEBTS ARE NOT CONSIDERED AS INCOME IN ANY ASSESSMENT YEAR. 3 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. 3.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. ON ACCOUNT OF BAD DEB TS BY HOLDING AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE ISSUE AND THE S UBMISSIONS MADE BY THE AR AND FIND MERIT IN THEM. A PERUSAL OF THE COP Y OF LETTER FILED BY THE APPELLANT BEFORE THE AO CLEARLY DOES NOT MAKE A NY MENTION REGARDING THE BAD DEBTS NOT HAVING BEEN CONSIDERED AS INCOME IN ANY OF THE ASSESSMENT YEARS. BESIDES THE ENCLOSURE WI TH THE SAID LETTER GIVES COMPLETE DETAILS OF THE BILL WISE DEBTS WRITT EN OFF GIVING THE REASONS ON ACCOUNT OF WHICH THE PAYMENT HAD BEEN WI THHELD BY THE DEBTORS. LOOKING AT ALL THE FACTS AND CIRCUMSTANCE S OF THE CASE THE WRITE OFF BAD DEBTS BY THE APPELLANT IS HELD ALLOWA BLE AS A DEDUCTION AND THIS GROUND OF APPEAL IS ALLOWED. 4. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE VARIOUS DETAILS FI LED BY THE ASSESSEE IN THE PAPER BOOK PLACED AT PAGE 39 TO 43 WE FIND THE DET AILS OF BAD DEBTS CONTAIN THE NAMES OF BHARAT HEAVY ELECTRICALS LTD. BHARAT PETR OLEUM CORPORATION LTD. BHARAT HEAVY PLATE & VESSELS LTD. CENTRAL RAILWAY HINDUSTAN COAL LTD. HINDUSTAN PETROLEUM CORPORATION LTD. AND INDIAN OI L CORPORATION LTD. ETC. WHICH ARE GOVERNMENT ORGANISATIONS. THEREFORE WITH OUT CONSIDERING THE AMOUNTS RECEIVABLE FROM GOVERNMENT ORGANIZATIONS T HE LD. CIT(A) DELETED THE CLAIM OF BAD DEBTS MADE BY THE ASSESSEE. FURTHER THE CERTIFICATE PRODUCED BEFORE THE LD. CIT(A) OBTAINED FROM THE CHARTERED A CCOUNTANT SHOWS THAT THE BAD DEBT WRITTEN OFF HAVE BEEN TAKEN AS SALES IN TH E YEAR 2000-01 2001-02 2002-03 2003-04 2004-05 AND 2005-06. A PERUSAL O F THE DETAILS PLACED AT PAPER BOOK PAGE 39 TO 43 SHOWS THAT THE INVOICES RE LATE TO THE FINANCIAL YEAR 2002-03 2003-04 2004-05 2005-06 CORRESPONDING TO A.Y. 2003-04 2004-05 2005-06. IT HAS NOT BEEN CONCLUSIVELY PROVED THAT SUCH AMOUNT HAS BEEN CONSIDERED AS INCOME EITHER IN THE CURRENT YEAR OR IN THE PRECEDING ASSESSMENT YEAR. UNDER THESE CIRCUMSTANCES WE DEEM IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF THE A.O. WITH A DIRECTION TO GIVE ON E MORE OPPORTUNITY TO THE 4 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. ASSESSEE TO SUBSTANTIATE THE FULFILLMENT OF THE CON DITIONS MENTIONED IN SECTION 36(I)(VII) R.W.S. 36(2). THE A.O. WHILE DECIDING T HE ISSUE SHALL KEEP IN MIND THE ALLOWABILITY OF THE BAD DEBT IN CASE OF AMOUNT RECE IVABLE FROM GOVERNMENT ORGANIZATIONS. THE A.O. SHALL DECIDE THE ISSUE AFR ESH AND IN ACCORDANCE WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. GROUND NO. 2 BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 5. GROUND NO. 3 BY THE REVENUE READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT AN AMOUNT OF RS.11 51 624/- REPRESENTING BANK CHARGES INCURRED IN RELATION TO C APITAL WORK IN PROGRESS WAS ADMISSIBLE AS REVENUE EXPENDITURE. 5.1 FACTS OF THE CASE IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. NOTED THAT THE ASSESSEE HAS SHOWN CAPITAL WORK-IN- PROGRESS AMOUNTING TO RS. 64 29 000/-. IT HAD ALSO CLAIMED BANK CHARGES AMOUNTING TO RS. 12 10 000/- DURING THE YEAR. HE T HEREFORE ASKED THE ASSESSEE TO FURNISH THE DETAILS OF THE BANK CHARGES . THE ASSESSEE FILED DETAILS AND SANCTION LETTER OF AUTO LOAN FROM HDFC BANK LTD . ON WHICH IT HAD PAID INTEREST OF RS. 29 188/-. THEREFORE THE A.O. DOUBT ED THE BANK CHARGE EXPENSES OF RS. 12 10 000/-. ACCORDING TO HIM THERE WAS NO JUSTIFICATION AS TO WHY BANK CHARGES SHOULD NOT BE APPORTIONED TOWARDS THE WORK- IN-PROGRESS OR THAT SUCH EXPENSES BE HELD AS A CAPITAL EXPENDITURE. AFTER D EDUCTING THE INTEREST AMOUNT OF RS. 29 188/- THE A.O. DISALLOWED THE BANK CHARG ES AMOUNTING TO RS. 11 80 812/-. 5 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. 5.2 BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT TH E AMOUNT OF RS. 64 29 000/- REFLECTED IN THE BOOKS AS CAPITAL WORK- IN-PROGRESS UNDER THE HEAD FIXED ASSETS REPRESENTED ADVANCES MADE TO VARIOUS C IVIL CONTRACTORS TOWARDS RENOVATION OF OFFICE PREMISES. IT WAS STATED THAT THE CAPITAL WORK-IN-PROGRESS HAS NOTHING TO DO WITH THE BANK CHARGES. FURTHER N O LOAN HAS BEEN TAKEN BY THE ASSESSEE FOR ADVANCING VARIOUS AMOUNTS TO THE C IVIL CONTRACTORS TOWARDS RENOVATION OF THE OFFICE EXPENSES. THE ASSESSEE AL SO GAVE BREAK-UP OF THE BANK CHARGES WHICH ARE AS UNDER:- - DEMAND DRAFT MAKING CHARGES - BANK CHEQUE ISSUING CHARGES - OUTSTATION CHEQUE CHARGES - BANK GUARANTEE CHARGES - EXPORT-IMPORT DOCUMENTATION CHARGES - COMMISSION ON BILLS DISCOUNTING CHEQUES DISCOU NTING ETC. - COMMISSION FOR GIVING BANK GUARANTEE - CHEQUE BOOK ISSUE CHARGES - COMMISSION ON ISSUE OF LETTER OF CREDIT - VARIOUS CHARGES DEBITED BY THE BANK FOR FACILITA TING VARIOUS BANKING FACILITIES ETC. 5.3 BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND THE DETAILS FURNISHED BEFORE HIM THE LD. CIT(A) HELD THAT THE EXPENSES ARE REVENUE IN NATURE EXCEPT A SUM OF RS. 6378/- WHICH RELATES TO INTEREST ON LATE PAYMENT OF TDS. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) T HE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES PURSUED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON 6 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. BEHALF OF THE ASSESSEE. WE FIND THE A.O. CONFUSED H IMSELF AND DISALLOWED THE BANK CHARGES CONSIDERING THE SAME TO BE BANK INTERE ST. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK WE FIND THE BANK CHARGES OF RS. 11 80 812/- DISALLOWED BY THE A.O. CONSISTS OF DD CHARGES OUTSTATION CHECK CLEARING CHARGES BANK GUARANTEE CHARGES EXP ORT/IMPORT DOCUMENTATION CHARGES COMMISSION FOR GIVING BANK GUARANTEE COMM ISSION ON ISSUE OF LETTER OF CREDIT CHECK BOOK ISSUE CHARGES AND VARIOUS OTH ER CHARGES DEBITED BY THE BANK FOR FACILITATING VARIOUS BANKING FACILITIES ET C. THE DISALLOWABLE PORTION OF RS. 6378/- WHICH REPRESENTS INTEREST ON LATE PAYMEN T OF TDS HAS ALREADY BEEN DISALLOWED BY THE LD. CIT(A). UNDER THESE CIRCUMST ANCES WE AGREE WITH THE LD. CIT(A) THAT THE BANK CHARGES OF RS. 11 80 812/- (LE SS RS. 6378/-) ARE REVENUE IN NATURE AND HAS TO BE ALLOWED AS REVENUE EXPENDIT URE. WE THEREFORE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING T HE AMOUNT OF RS. 11 51 624/-. ACCORDINGLY THE SAME IS UPHELD. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 09.12.2011. SD/- SD/- (VIJAY PAL RAO) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED 09.12.2011. RK 7 ITA 1994/ M/2010 M/S TUSHACO PUMPS P. LTD. COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 6 MUMBAI 4. THE CIT 2 MUMBAI 5. THE DR BENCH D 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI