ADDL CIT RG 7(3), MUMBAI v. YAHOO WEB SERVICES P. LTD, MUMBAI

ITA 2042/MUM/2010 | 2005-2006
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 204219914 RSA 2010
Bench Mumbai
Appeal Number ITA 2042/MUM/2010
Duration Of Justice 10 month(s) 17 day(s)
Appellant ADDL CIT RG 7(3), MUMBAI
Respondent YAHOO WEB SERVICES P. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 28-01-2011
Date Of Final Hearing 06-01-2011
Next Hearing Date 06-01-2011
Assessment Year 2005-2006
Appeal Filed On 12-03-2010
Judgment Text
I.T.A NO.2042/ MUM/2010 YAHOO WEB SERVICES P. LTD 1 IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH MUMBAI. [ CORAM: PRAMOD KUMAR AM AND V. DURGA RAO JM ] I.T.A NO.2042/ MUM/2010 ASSESSMENT YEAR: 2005-06 ADDL. CIT RANGE 7(3) .. APPELLANT 6 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI. VS YAHOO WEB SERVICES P. LTD. . RESPONDEN T 801 NICHOLAS PIRAMAL TOWER PENINSULA PARK GANPATRAO KADAM MARG LOWER PAREL MUMBAI-13. PA NO.AAACY 1252 B APPEARANCES: PAVAN VED FOR THE APPELLANT R. MURLIDHAR FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. THIS APPEAL FILED BY THE ASSESSING OFFICER IS DIRECT ED AGAINST CIT(A)S ORDER DATED 20 TH NOVEMBER 2009 IN THE MATTER OF ASSESSMENT UNDER SECT ION 143(3) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 2005-06. 2. GRIEVANCES RAISED BY THE ASSESSING OFFICER ARE AS FOLLO WS: 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE THE CIT (A) WAS JUSTIFIED IN ALLOWING THE DISALLOWANCE OF TDS RECEIVABLE OF ` .8 48 592 WRITTEN OFF AND MADE BY THE AO AS BAD DEBT S U/S.36(1)(VII) ONLY BECAUSE THE ASSESSEE WROTE THEM OFF IN ITS BOOKS OF A CCOUNT WHEN SUCH A DEBT DID NOT ARISE DURING THE NORMAL COURSE OF BUSINESS ? 2. WHETHER ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE THE CIT (A) WAS JUSTIFIED IN TREATING THE TDS RECEIVABLES WRITTE N OFF AT PART WITH I.T.A NO.2042/ MUM/2010 YAHOO WEB SERVICES P. LTD 2 BAD DEBTS WRITTEN OFF WHEN SUCH AN AMOUNT STOOD IN THE BOOKS BECAUSE OF NO PROPER CLAIM MADE BY THE ASSESSEE TO RETRIEVE IT BY FILING PROPER RETURNS AND DID NOT ARISE IN THE NORMAL COURSE OF BUSI NESS.? 3. AS THE ABOVE GRIEVANCES ARE INTERCONNECTED WE WIL L TAKE THEM UP TOGETHER. 4. BRIEFLY STATED THE MATERIAL FACTS OF THE CASE AR E LIKE THIS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT TH E ASSESSEE HAS CLAIMED DEDUCTION OF ` .11 15 137 IN RESPECT OF BAD DEBTS WRITTEN. ON AN AN ALYSIS OF THE NATURE OF AMOUNTS INCLUDED IN THE DEDUCTION THE ASSESSING OFFI CER NOTED THAT WHILE ` .2 66 545 PERTAINS TO CLIENTS WHO ARE NOT SATISFIED WIT H THE SERVICES ` .8 48 592 REPRESENT TDS RECEIVABLE WHICH WERE WRITTEN OFF. W HEN THE ASSESSEE WAS REQUIRED TO SHOW CAUSE AS TO WHY TDS WRITE OFF AMOUNTING TO ` .8 48 592 NOT BE DISALLOWED IT WAS SUBMITTED THAT IN THESE CASES THE ASSESSEE WAS EITHER NOT PROVIDED WITH TDS CERTIFICATE AT ALL OR THE RELEVANT CERTIFICATES WERE PROVIDED AFTER THE ASSESSMENTS HAD BECOME TIME BARRED. IT WAS ALSO SUBMITTED THAT SINCE UN-CLAIMABLE TDS REPRESENTS DUES RECOVERABLE FROM TAX DEDUCTOR/CUSTOMER THE ASSESSEE COMPANY HAD WRITTEN OFF THE SAME AS BAD DEBTS. WITHOUT PREJUDICE TO THIS LINE OF ARRANGEMENT IT WAS ALSO SUBMITTED THAT IN ANY EVENT INABILITY OF CLAIM CRED IT FOR TAX DEDUCTIONS AT SOURCE WAS A LOSS INCIDENTAL TO BUSINESS AND IT SHOULD BE ALLOWED DEDUCTION AS BUSINESS LOSS. RELIANCE WAS PLACED ON HONBLE PUNJAB & HARYANA HIGH COURTS JUDGEMENT IN THE CASE OF CIT VS SHREYANS INDUSTRIES 303 ITR 393. NONE OF T HESE ARGUMENTS HOWEVER IMPRESSED THE ASSESSING OFFICER. HE WAS OF THE VIEW THAT SINCE TDS AMOUNT DOES NOT REPRESENT A DEBT IN THE FIRST PLACE IT CANNOT AT ALL BE CONSIDERED FOR DEDUCTION AS BAD DEBT U/S.36(1)(VII). HE ALSO RELIED UPON HONBLE SUP REME COURTS JUDGEMENT IN THE CASE OF NATIONAL ALUNIMUM CO. LTD V. CIT (79 ITR 51 4) IN SUPPORT OF THE PROPOSITION THAT TAX DEDUCTIBLE AT SOURCE CANNOT BE CONSIDERED AS A BAD DEBT. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION AMOUNTING TO ` . 8 48 592 ON ACCOUNT OF TDS WRITTEN OFF. AGGRIEV ED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). RELYING UPON HONBLE PU NJAB & HARYANA HIGH COURTS JUDGEMENT IN THE CASE OF SHREYANS INDUSTRIES (SUPRA) C IT (A) ALLOWED THE DEDUCTION IN RESPECT OF WRITING OFF UNCLAIMED TAX DEDUCTIONS AT SOURCE. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL ON RECORD AND I.T.A NO.2042/ MUM/2010 YAHOO WEB SERVICES P. LTD 3 DULY CONSIDERED FACTUAL MATRIX OF THE CASE AS ALSO THE APPLICABLE LEGAL POSITION. 6. WE FIND THAT IN NATIONAL ALUMINUM CO. LTDS CASE (SUPRA) HONBLE SUPREME COURT WAS IN-SEISIN OF A SITUATION IN WHICH ASSESSEE HAD CLAIMED DEDUCTION IN RESPECT OF DEMAND UNDER SECTION 201 R.W.S. 195 THAT THE ASSESSEE HAD TO PAY BECAUSE IT FAILED TO DISCHARGE THE TAX DEDUCTION OBLIGATIONS IMP OSED ON THE ASSESSEE. THEIR LORDSHIPS WERE OF THE CONSIDERED VIEW THAT THE PAYMEN T MADE BY THE ASSESSEE ON ACCOUNT OF HIS NOT DISCHARGING THE TAX DEDUCTION OBL IGATIONS AND THEREFORE THE SAME COULD NOT BE ALLOWED AS DEDUCTION ON BUSINESS INCOM E. AS AGAINST THE POSITION THAT HONBLE SUPREME COURT WERE DEALING WITH WE AR E RIGHT NOW DEALING WITH A SITUATION IN WHICH NEITHER THE ASSESSEE GOT THE MONEY L AWFULLY DUE TO HIM AS IT WAS SAID TO HAVE BEEN RETAINED AS TAX DEDUCTION AT SOURCE NOR DID THE ASSESSEE GET ANY TAX CREDIT IN COMPUTATION OF ITS TAX LIABILITY. TH E AMOUNTS REPRESENTED BY SUCH TAX DEDUCTIONS WHICH WERE UNAVAILABLE FOR TAX CREDITS C LEARLY REPRESENTED LOSS INCURRED BY THE ASSESSEE IN THE COURSE OF BONAFIDE BUSINESS ACTIVITI ES. ON THESE FACTS AS HELD BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE O F SHREYANS INDUSTRIES (SUPRA) THERE IS NO INFIRMITY IN ASSESSEE BEING ALLOWED DEDUCT ION IN RESPECT OF THE LOSS SO INCURRED TO THE ASSESSEE. WE APPROVE THE CONCLUSIONS ARR IVED AT BY THE CIT (A) AND DECLINE TO INTERFERE IN THE MATTER. 7. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 28 TH JANUARY 2011 SD/- (V. DURGA RAO ) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI DATED 28 TH JANUARY 2011 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS) -13MUMBAI 4. COMMISSIONER OF INCOME TAX 7 MUMBAI 5. DEPARTMENTAL REPRESENTATIVE BENCH G MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR ITAT MUMBAI I.T.A NO.2042/ MUM/2010 YAHOO WEB SERVICES P. LTD 4 I.T.A NO.2042/ MUM/2010 YAHOO WEB SERVICES P. LTD 5