M/s. Kinarivala R.J.K. Industries, Ahmedabad v. The dY.CIT.,Circle-10,, Ahmedabad

ITA 2569/AHD/2009 | 2006-2007
Pronouncement Date: 08-01-2010 | Result: Allowed

Appeal Details

RSA Number 256920514 RSA 2009
Bench Ahmedabad
Appeal Number ITA 2569/AHD/2009
Duration Of Justice 3 month(s) 28 day(s)
Appellant M/s. Kinarivala R.J.K. Industries, Ahmedabad
Respondent The dY.CIT.,Circle-10,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 08-01-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted C
Tribunal Order Date 08-01-2010
Date Of Final Hearing 31-12-2009
Next Hearing Date 31-12-2009
Assessment Year 2006-2007
Appeal Filed On 10-09-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'C' (BEFORE S/SHRI T K SHARMA AND D C AGRAWAL) ITA NO.2569/AHD/2009 (ASSESSMENT YEAR:- 2006-07) M/S KINARIWALA RJK INDUSTRIES KINARIVALA HOUSE OPP. K P BOARDING GULBAI TEKRA ELLISBRIDGE AHMEDABAD V/S THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-10 AHMEDABAD [APPELLANT] [RESPONDENT] APPELLANT BY :- SHRI S N SOPARKAR RESPONDENT BY:- SHRI VINOD TANWANI DR O R D E R PER D C AGRAWAL (ACCOUNTANT MEMBER): THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME-TAX (APPEALS) WHEREIN THE ONLY ISSUE RAISED IS THAT THE AUTHORITIES BELOW HAVE NOT ALLOWED THE CLAIM OF LOS S OF RS.4 79 258/- BEING THE AMOUNT WRITTEN OFF BY THE ASSESSEE IN THE BOOKS OF ACCOUNT. 2 THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS D OING BUSINESS OF MANUFACTURING OF TEXTILE MACHINERY AND ITS SPARE PARTS. IN ADDITION TO THIS THE ASSESSEE HAS DECLARED CAPI TAL GAINS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICE D THAT THE ASSESSEE HAS WRITTEN OFF A SUM OF RS.4 79 258/- BEI NG THE SUM RECEIVABLE FROM M/S KINARIWALA SPINNERS LTD. A REL ATED CONCERN OF THE ASSESSEE. IT WAS EXPLAINED TO THE AO THAT THE A BOVE AMOUNT INCLUDED SALE PROCEEDS OF GOODS AND LEASE RENT. THE SAID CONCERN HAD BECOME SICK IT HAS STOPPED ITS ACTIVITIES SINC E APRIL 2005 AND M/S KALUPUR COMMERCIAL BANK LTD. HAS TAKEN POSSESSI ON OF THE UNIT AND THEREAFTER THE BANK HAS DISPOSED OF THE MANUFAC TURING UNIT OF 2 M/S KINARIWALA SPINNERS LTD. THE AO DID NOT ALLOW THE CLAIM OF BAD DEBT ON THE GROUND THAT THE DEBT IS NOT INCIDENTAL TO THE BUSINESS. IT IS NOT REVENUE IN NATURE AND IT HAS NOT BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. HE NOTICED TH AT THE ABOVE AMOUNT REPRESENTED THE AMOUNT RECOVERABLE ON ACCOUN T OF UTILIZATION OF TRANSPORT FACILITIES BY THE SAID PARTY FOR ITS O WN BUSINESS AND NOT FOR ASSESSEES BUSINESS. SINCE THE ASSESSEE IS ENGA GED IN THE MANUFACTURING ACTIVITY AND NOT IN THE BUSINESS OF T RANSPORTATION THEREFORE IT CANNOT BE SAID THAT IT WAS TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE. HE ACCORDINGL Y DISALLOWED THE CLAIM OF BAD DEBT OF RS.4 79 258/-. 3 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OBSERVED THAT M/S KINARIWALA SPINNERS LTD. IS A SIS TER CONCERN OF THE ASSESSEE. DEBT COULD NOT BE SAID AS BAD BECAUSE THE ASSESSEE COULD HAVE TAKEN ACTION AGAINST THE DIRECTOR OF THE COMPANY FOR RECOVERY AS IT WAS ONLY A FAMILY ARRANGEMENT AND TH EREFORE THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISED AND ENGINEERS P. LTD. V CIT (2007) 295 ITR 481 (GUJ ) WOULD BE APPLICABLE. HE ACCORDINGLY CONFIRMED THE ORDER OF T HE AO. 4 BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMI TTED THAT THE ASSESSEE HAS BEEN SHOWING LEASE RENTAL INC OME FROM RUNNING OF SUCH BUSS ON HIRE AS BUSINESS INCOME. IT WAS GIVEN ON HIRE TO SISTER CONCERN OUT OF COMMERCIAL EXPEDIENCY AND FOR THE PURPOSE OF BUSINESS ONLY. IN ANY CASE THE LOSS SHO ULD BE ALLOWED AS A BUSINESS LOSS U/S 28. FURTHER ONCE THE ASSETS OF M/S KINARIWALA SPINNERS LTD. HAVE BEEN SOLD OFF BY THE BANK IT HA S BECOME BAD AND THEREFORE NOT RECOVERABLE AND THEREFORE HAS BEEN ALLOWABLE AFTER BEING WRITTEN OFF AS PER SECTION 36(1)(VII). THE LEARNED DR ON THE OTHER HAND SUPPORTED THE ORDER OF THE AUTHORIT IES BELOW. 3 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE ARE OF THE CONSIDERED VI EW THAT THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. THE REASONS ARE THAT THE RENTAL INCOME RECEIVABLE FROM THE SISTER CONCERN HAS BEEN CREDITED IN THE BOOKS OF ASSESSEE AND HAVE BEEN OFFERED FOR TAXATIO N. SECONDLY THE AMOUNT RECOVERABLE HAS BECOME BAD ON ACCOUNT OF DIS POSAL OF THE ASSETS OF M/S KINARIWALA SPINNERS LTD. BY THE BANK AGAINST RECOVERY OF THEIR DUES. THIRDLY THE ASSESSEE HAS ACTUALLY W RITTEN OFF THE AMOUNT IN THE BOOKS. THEREFORE THE CLAIM IS ALLOWA BLE U/S 36(1)(VII) READ WITH SECTION 36(2) AND ALSO IN ACCORDANCE WITH THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF DHALL ENTERPRISED AND ENGINEERS P. LTD. V CIT (2007) 295 ITR 481 (GUJ). 6 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 08-01-2 010 SD/- SD/- (T K SHARMA) JUDICIAL MEMBER (D C AGRAWAL) ACCOUNTANT MEMBER DATE : 08-01-2010 COPY OF THE ORDER FORWARDED TO : 1. M/S KINARIWALA RJK INDUSTRIES KINARIVALA HOUSE OPP. K P BOARDING GULBAI TEKRA ELLISBRIDGE AHMEDABAD 2. THE DCIT CIRCLE-10 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-XVI AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DE PUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABA