Gujarat Insecticides Limited,, Ankleshwar v. The Addl.CIT.,Bharuch Range,, Bharuch

ITA 2234/AHD/2014 | 2007-2008
Pronouncement Date: 22-03-2021 | Result: Dismissed

Appeal Details

RSA Number 223425614 RSA 2014
Assessee PAN AAACG8436D
Bench Surat
Appeal Number ITA 2234/AHD/2014
Duration Of Justice 6 year(s) 7 month(s) 16 day(s)
Appellant Gujarat Insecticides Limited,, Ankleshwar
Respondent The Addl.CIT.,Bharuch Range,, Bharuch
Appeal Type Income Tax Appeal
Pronouncement Date 22-03-2021
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 22-03-2021
Date Of Final Hearing 19-07-2017
Next Hearing Date 19-07-2017
First Hearing Date 19-07-2017
Assessment Year 2007-2008
Appeal Filed On 05-08-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH SURAT BEFORE SHRI PAWAN SINGH JUDICIAL MEMBER AND DR. ARJUN LAL SAINI ACCOUNTANT MEMBER ITA NO. 2234/AHD/2014 (ASSESSMENT YEAR: 2007-08) ( VIRTUAL COURT HEARING) GUJARAT INSECTICIDES LTD PLOT NO. 805/806 GIDC INDUSTRIAL ESTATE ANKLESHWAR-393002 (GUJARAT). PAN : AAACG 8436 D VS ADDITIONAL COMMISSIONER OF INCOME TAX BHARUCH RANGE BHARUCH. APPELLANT RESPONDENT APPELLANT BY SHRI SANJAY R SHAH CA RESPONDENT BY SHRI O. P. VAISHNAV CIT-DR DATE OF HEARING 18/02/2021 DATE OF PRONOUNCEMENT 22/03/2021 ORDER UNDER SECTION 254(1) OF INCOME-TAX ACT PER PAWAN SINGH JUDICIAL MEMBER 1. THIS APPEAL BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER (APPEALS) -II BARODA DATED 4 APRIL 2014 FOR ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: (I) THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW AND FACTS OF THE CASE BY HOLDING THAT ASSESSING OFFICER HAS RIGHTLY NOT ALLOW DEDUCTION OF 1 73 51 790/-CLAIMED BY THE APPELLANT IN RESPECT OF NOTIONAL INTEREST TAXED AS INCOME IN EARLIER YEAR WHICH WAS NOT REALIZED BY THE APPELLANT . 2. BRIEF FACTS OF THE CASE AS GATHERED FROM THE ORDER OF LOWER AUTHORITIES ARE THAT THE ASSESSEE IS A CORPORATE ENTITY ENGAGED IN THE BUSINESS OF MANUFACTURING OF INSECTICIDES PESTICIDES AND ITS ITA NO. 2234/AHD/2014 GUJARAT INSECTICIDES LIMITED 2 FORMULATION AND INTERMEDIATES FILED ITS RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR DECLARING TOTAL LOSS OF 6.72 CRORE UNDER THE NORMAL PROVISIONS OF INCOME TAX ACT AND BOOK PROFIT UNDER SECTION 115 JB AT NIL. THE CASE WAS SELECTED FOR A SCRUTINY. DURING THE ASSESSMENT THE ASSESSEE FILED REVISED RETURN OF INCOME AND CLAIMED BAD DEBTS /BUSINESS LOSS OF 1.73 CRORE ON ACCOUNT OF THE FACT THAT OVER A PERIOD OF LAST SEVERAL YEARS THE SAID AMOUNT WAS ADDED AS ITS INCOME ON THE GROUND THAT NOTIONAL INTEREST ACCRUED IN FAVOUR OF ASSESSEE ON ACCOUNT OF INTERCORPORATE DEPOSITS WITH NIPPON INVESTMENTS PRIVATE LIMITED. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE NEVER CHARGED INTEREST ON INTERCORPORATE DEPOSIT WITH NIPPON INVESTMENT PRIVATE LIMITED THE ASSESSING OFFICER CALCULATED AND ADDED NOTIONAL INTEREST. ON SUCH ADDITIONS THE ASSESSEE FILED APPEAL BEFORE COMMISSIONER (APPEALS) WHEREIN THE ADDITIONS WERE AFFIRMED. ON FURTHER APPEAL BEFORE TRIBUNAL THE ADDITIONS WERE UPHELD IN ALL EARLIER YEARS. ON FURTHER VERIFICATION THE ASSESSING OFFICER NOTED THAT ASSESSEE MADE INTERCORPORATE DEPOSIT OF 95 LAKHS TO NIPPON INVESTMENT PRIVATE LIMITED OUT OF WHICH 80 LAKHS WERE RECEIVED IN FINANCIAL YEAR 2005-06 AND REMAINING 15 LAKHS WERE RECEIVED IN THE CURRENT FINANCIAL YEAR THAT IS 2006-07. THE CLAIM MADE BY ASSESSEE IN REVISED RETURN OF INCOME WAS NOT ACCEPTED BY ASSESSING OFFICER BY TAKING VIEW THAT THE ASSESSEE NEVER CHARGED ANY INTEREST FROM NIPPON INVESTMENT PRIVATE LIMITED AND ARE NOW THE CLAIM OF DEDUCTION OF NOTIONAL INTEREST OF 1.73 CRORE CANNOT BE ALLOWED. 3. ON APPEAL BEFORE COMMISSIONER (APPEALS) THE ACTION OF ASSESSING OFFICER WAS UPHELD. WHILE AFFIRMING THE ORDER OF ASSESSING OFFICER THE LEARNED COMMISSIONER (APPEALS) HELD THAT AUTHORISED ITA NO. 2234/AHD/2014 GUJARAT INSECTICIDES LIMITED 3 REPRESENTATIVE OF ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE OF NOTIONAL INTEREST IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF JURISDICTIONAL TRIBUNAL DATED 27 TH MARCH 2012 COPY OF WHICH WAS PLACED ON RECORD. THE LEARNED COMMISSIONER (APPEALS) ALSO EXTRACTED THE RELEVANT PARAGRAPH OF ORDER OF TRIBUNAL IN PARA 3 OF IMPUGNED ORDER. FURTHER AGGRIEVED THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THIS TRIBUNAL. 4. WE HAVE HEARD THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE (AR) OF ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE (DR) FOR REVENUE AND PERUSED THE ORDERS OF LOWER AUTHORITIES CAREFULLY. THE LEARNED AR OF THE ASSESSEE SUBMITS THAT ASSESSEE MADE INTERCORPORATE DEPOSIT WITH NIPPON INVESTMENT PRIVATE LIMITED. THE ASSESSING OFFICER MADE THE ADDITION OF NOTIONAL INTEREST INCOME IN SIX ASSESSMENTS FROM 2000-01 TO 2005- 06 BY TAKING VIEW THAT IN TWO ASSESSMENT YEARS IN 1998-99 AND 1999-2000 THE ASSESSEE HAD ACCOUNTED FOR THE ACCRUED INTEREST. THE ASSESSEE FURNISHED THE DETAIL OF SUCH ADDITIONS WHICH ARE REFERRED BY ASSESSING OFFICER IN PARA 5 OF THE ASSESSMENT ORDER. DURING THE RELEVANT PERIOD UNDER CONSIDERATION THE ASSESSEE RECEIVED BACK THE INTERCORPORATE DEPOSITS; HOWEVER THEY DID NOT PAY ANY INTEREST TO THE ASSESSEE OUT OF THE ABOVE NOTIONAL INTEREST. THE ASSESSEE CLAIMED THIS AMOUNT OF INTEREST AS DEDUCTIBLE AMOUNT EITHER AS A BAD DEBTS OR BUSINESS LOSS UNDER SECTION 36(1)(VII) AND/OR SECTION 28 BY FILING REVISED RETURN. THE ASSESSING OFFICER REJECTED THE CLAIM OF ASSESSEE ON THE GROUND THAT PRINCIPAL AMOUNT IS RECOVERED. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THAT AMOUNT OF 1.73 CRORE HAS ALREADY BEEN TAXED BY THE DEPARTMENT IN EARLIER YEARS ON THE GROUND THAT IT IS ACCRUED INTEREST ON ITA NO. 2234/AHD/2014 GUJARAT INSECTICIDES LIMITED 4 INTERCORPORATE DEPOSIT. DURING THIS YEAR UNDER CONSIDERATION THE ASSESSEE HAS BEEN ABLE TO RECOVER ONLY PRINCIPAL AMOUNT AND NO AMOUNT IS RECEIVED TOWARDS SUCH ACCRUED INTEREST THUS THE ASSESSEE HAD PUT ITS CLAIM FOR DEDUCTION OF AMOUNT AS BUSINESS LOSS. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THAT THE LAST SIX ASSESSMENT YEARS THE INTEREST AMOUNT IS TAXED AS A BUSINESS INCOME THUS ACCEPTED POSITION IS THAT ADVANCE IS BEING GIVEN IN ORDINARY COURSE OF BUSINESS OF LENDING MONEY THEREFORE THE ASSESSEE IS ENTITLED FOR SUCH DEDUCTION. 5. IN ALTERNATIVE SUBMISSION THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT IF THE CLAIM IS NOT CONSIDERED AS BAD DEBTS THE SAME HAVING BEEN ASSESSED AT THE BUSINESS INCOME IN THE PAST IS ALSO CONSIDERED TO BE ALLOWABLE AS A BUSINESS LOSS UNDER SECTION 28 AS THE SAME HAS BECOME IRRECOVERABLE AND UNREALIZED DURING THE YEAR UNDER CONSIDERATION ONLY PRINCIPAL AMOUNT COULD BE RECOVERED. IN SUPPORT OF HIS SUBMISSION THE LEARNED AR OF THE ASSESSEE RELIED UPON THE FOLLOWING DECISIONS: DEONITI PRASAD SINGH VERSUS CIT -15 ITR 165 (PATNA) CT NARAIYAN CHETTIAR VERSUS CIT -60 ITR 690(MADRAS) DINESH MILLS LTD VERSUS CIT (122 TAXMAN 384 (GUJARAT) SHIV NARAYAN KARMENDRA NARAYAN CS VERSUS CIT 277 ITR 27(ALLAHABAD). 6. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF LOWER AUTHORITIES. THE LEARNED AR FURTHER SUBMITS THAT THE ASSESSEE HAS NOT SHOWN AND INCOME FROM THE INTERCORPORATE DEPOSIT. THE ASSESSEE HAS NOT FULFILLED THE CONDITION PRESCRIBED UNDER SECTION 36 (2) FOR CLAIMING BAD DEBTS. THE BUSINESS OF ASSESSEE IS NOT OF MONEY LENDING THEREFORE THE ASSESSEE CANNOT CLAIM THAT THE ASSESSEE MADE INTERCORPORATE DEPOSIT IN THE COURSE OF HIS BUSINESS. DURING THE EARLIER YEARS THE ASSESSEE NEVER ITA NO. 2234/AHD/2014 GUJARAT INSECTICIDES LIMITED 5 CLAIMED AS A BUSINESS LOSS ON ACCOUNT OF NON-RECEIPT OF INTEREST ON SUCH INTERCORPORATE DEPOSIT THEREFORE THE ASSESSEE IS ALSO NOT ENTITLED FOR BUSINESS LOSS AS CLAIMED. THE LEARNED DR FOR THE REVENUE FURTHER SUBMITS THAT BEFORE THE FIRST APPELLATE STAGE THE ASSESSEE ITSELF ADMITTED THAT ISSUE IS COVERED BY THE DECISION OF TRIBUNAL IN EARLIER YEARS AGAINST THE ASSESSEE. THE LEARNED DR PRAYED FOR DISMISSAL OF THE APPEAL. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES CAREFULLY. THE ASSESSING OFFICER REJECTED THE REVISED CLAIM OF BAD DEBTS OF BAD DEBTS /BUSINESS LOSS OF 1.73 CRORE BY TAKING VIEW THAT THE ASSESSEE NEVER CHARGED ANY INTEREST FROM NIPPON INVESTMENT PRIVATE LIMITED AND ARE NOW THE CLAIM OF DEDUCTION OF NOTIONAL INTEREST OF 1.73 CRORE CANNOT BE ALLOWED. THE LEARNED COMMISSIONER (APPEALS) UPHELD THE ACTION OF THE ASSESSING OFFICER ON THE GROUND THAT THE AUTHORIZED REPRESENTATIVE OF ASSESSEE FAIRLY CONCEDED THAT THIS ISSUE OF NOTIONAL INTEREST IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUNAL. WE HAVE NOTED THAT FOR CLAIMING THE SAID AMOUNT THE ASSESSEE HAS NOT FULFILLED THE CONDITION PRESCRIBED UNDER SECTION 36 (2) FOR CLAIMING BAD DEBTS MEANING THEREBY THE ASSESSEE HAS NOT OFFERED THE SAID NOTIONAL INCOME AS ITS INCOME IN EARLIER YEARS. HENCE THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION OF BAD DEBTS. SIMILARLY IT WAS NEVER THE CLAIM OF THE ASSESSEE THAT THE INTERCORPORATE DEPOSIT WAS GIVEN FOR BUSINESS PURPOSE. EVEN OTHERWISE THE ASSESSEE IS NOT IN MONEY LENDING THEREFORE THE ASSESSEE CANNOT CLAIM THAT THE ASSESSEE MADE INTERCORPORATE DEPOSIT IN THE COURSE OF HIS BUSINESS. DURING THE EARLIER YEARS THE ASSESSEE NEVER CLAIMED AS A BUSINESS LOSS ON ITA NO. 2234/AHD/2014 GUJARAT INSECTICIDES LIMITED 6 ACCOUNT OF NON-RECEIPT OF INTEREST ON SUCH INTERCORPORATE DEPOSIT THEREFORE THE ASSESSEE IS ALSO NOT ENTITLED FOR BUSINESS LOSS AS WELL. 8. THE CASE LAWS RELIED BY LEARNED AR FOR THE ASSESSEE IS NOT HELPFUL TO HIM AS THE FACTS IN ALL CASES ARE AT VARIANCE. IN DEONITI PRASAD SINGH VS CIT(SUPRA) AS WELL AS IN C T CHETTIAR VS CIT (SUPRA) THE ASSESSEE WAS IN THE BUSINESS OF MONEY LENDING BUSINESS. IN DINESH MILLS LTD VS CIT (SUPRA) THE ASSESSEE DISCOVERED LOSS ON ACCOUNT OF MISAPPROPRIATION BY IT EMPLOYEE WHICH WAS TREATED AS INCIDENTAL TO THE BUSINESS. SIMILARLY IN CASE OF SHIV NARAYAAN KARMENDRA NARAYAN VS CIT (SUPRA) THE CLAIM WAS BASED ON ACCOUNT OF EMBEZZLEMENT WAS MADE BY ITS EMPLOYEE. THEREFORE NONE OF THE CASE LAW IS APPLICABLE ON THE FACTS OF THE PRESENT CASE. 9. HENCE THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSED. 10. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 22 MARCH 2021 BY PLACING ORDER ON NOTICE BOARD AS PER RULE 34(5) OF INCOME TAX (APPELLATE TRIBUNAL) RULES 1963. SD/- SD/- (DR.ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER) JUDICIAL MEMBER ) SURAT DATED : 22 ND MARCH 2021 COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A) ITAT (DR)/GUARD FILE OF ITAT . BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR SURAT