ACIT, New Delhi v. Sh. Ravinder Singhal, New Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE AND SHRI K.D. RANJAN SHRI GEORGE MATHAN I.T.A. NO.2775/DEL./2009 (ASSESSMENT YEAR: 2006-07) ACIT CIRCLE 8(1) VS. SH. RAVINDER SINGHAL NEW DELHI. Y-9 GREEN PARK NEW DELHI. (PAN/GIR NO.AAQPS7920R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI O.P. SAPRA ADV. REVENUE BY : SMT. SUNITA SINGH SR.DR ORDER PER K.D. RANJAN AM : THIS APPEAL BY THE REVENUE FOR AY 2006-07 ARISES O UT OF ORDER OF CIT(A)-XI NEW DELHI. THE MAIN GROUND OF APPEAL RAISED READ AS UNDER: LD.CIT(A) ERRED IN LAW ON FACTS AND IN THE CIRCUM STANCES OF THE CASE BY ALLOWING TRADING LOSS OF RS.14 26 600/-. 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO ALLO WING THE TRADING LOSS OF RS.14 26 600/- ON ACCOUNT OF DEMURRAGE CHARGES. TH E FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE MADE PURCHASES ONLY FROM ONE PART Y M/S RICHA KNITS LTD. THE AO NOTED THAT THE ASSESSEE HAD CLAIMED TRADING LOSS OF RS.14 26 600/-. ON A QUERY RAISED BY THE ASSESSING OFFICER IT WAS EXPLAINED THAT IMPORT ED GOODS WERE SEIZED BY PORT TRUST COCHIN DUE TO SOME CUSTOMS DUTY DISPUTE. THE ASSES SEE SETTLED THE DISPUTE UNDER KAR VIVAD SAMADHAN SCHEME (KVSS). HOWEVER WHEN ASSESS EE APPROACHED THE PORT TRUST IT WAS FOUND THAT GOODS WERE AUCTIONED BY PORT TRUS T TO RECOVER THEIR DEMURRAGE CHARGES. IT WAS ALSO EXPLAINED BY THE ASSESSEE THAT THE GOOD S IMPORTED IN 1994 AND THE DISPUTE WAS SETTLED IN 1999. THE ASSESSEE CONTINUED TO MAKE EF FORTS TO GET ITS GOODS FORM PORT TRUST UP TO 2005. SINCE THE GOODS WERE AUCTIONED THE AM OUNT OF RS.14 26 600/- WAS DEBITED TO P&L A/C WHICH WAS REJECTED BY THE AO. 3. ON APPEAL THE CIT(A) DELETED THE ADDITION BY OB SERVING AS UNDER: ITA NO.2775/DEL./2009 (A.Y. : 2006-07) 2 2.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE ON BEHALF OF THE APPELLANT. I HAVE SEEN THE DOCUMENTS FILED BY THE A PPELLANT BEFORE THE A.O. WHICH ARE IN RELATION TO PAYMENT OF CUSTOM DUTY UNDER KVS S FOR FULL AND FINAL SETTLEMENT OF CUSTOMS DUES AGAINST IMPORTED GOODS. IT IS OBVIOUS THAT THE PERSON WILL APPROACH THE PORT AUTHORITIES ONLY AFTER THE C USTOM CLEARANCE IS TAKEN. HOWEVER AFTER SETTLING THE MATER WITH CUSTOMS WHE N THE APPELLANT APPROACHED COCHIN PORT TRUST HE WAS TOLD THAT THE DEMURRAGE CH ARGES FOR THE INTERVENING PERIOD OF 6 TO 7 YEARS WERE TO BE PAID FIRST. NO WR ITTEN DEMAND NOTE REGARDING DEMURRAGE CHARGES IS ISSUED BY PORT TRUST. THE ACTU AL DUES ARE TOLD (CALCULATED ON PER DAY BASIS) ON THE DAY WHEN A PERSON IS READY TO PAY THEM. ACCORDING TO CLEARING AGENT OF THE APPELLANT SUCH CHARGES IN 199 9 WOULD BE ABOUT RS.22 LACS. THE GOODS WERE IMPORTED IN 93-94 AND AFTER LAPSE OF 7 YEARS THE QUALITY WOULD HAVE SUBSTANTIALLY DAMAGED AS THEY WERE LYING UNAT TENDED IN THE GODOWN OF PORT TRUST. HENCE THERE WAS HARDLY ANY REAL VALUE OF TH E GOODS EVEN IF THEY WERE RELEASED. THEREFORE TO PAY DEMURRAGE CHARGES MUCH H IGHER THAN THE PRESENT VALUE OF GOODS WAS LIKE SPENDING GOODS MONEY AFTER BAD. THE APPELLANT THEREFORE MOVED APPLICATION BEFORE COCHIN PORT TRUST WITH A R EQUEST TO WAIVE THE DEMURRAGE CHARGES IN THE PECULIAR FACTS AND CIRCUMS TANCES. COPY OF SUCH CORRESPONDENCE WITH COCHIN PORT TRUST FOR FIVE YEAR S WAS PLACED BEFORE THE A.O. AS ALSO ON APPEAL. HOWEVER THE REQUEST WAS NOT ENT ERTAINED AND FINALLY APPELLANT WAS INFORMED IN APRIL 05 BY HIS CLEARING AGENT THAT THE PORT AUTHORITIES HAVE AUCTIONED THE GOODS IN ORDER TO RECOVER PART OF DUE S BY WAY OF DEMURRAGE CHARGES. IN THESE CIRCUMSTANCES THERE IS NO DOUBT THAT THE L OSS WAS ACTUALLY INCURRED BY THE APPELLANT. IT WAS ALSO NOT IN DOUBT THAT THE LOSS W AS INCURRED IN THE COURSE OF BUSINESS CONDUCTED WITH NORMAL PRUDENCE. THE A.O.S CONTENTIONS THAT NOBODY WILL MAKE PAYMENT WITHOUT VERIFICATION (THAT GOODS WILL BE DELIVERED OR NOT) IS QUITE UNFOUNDED. THE PORT AUTHORITIES WOULD NOT ENT ERTAIN ANY REQUEST WITHOUT CLEARANCE FROM THE CUSTOMS. MOREOVER SINCE GOODS WE RE DETAINED DUE TO CUSTOMS PROBLEM THERE MAY BE AN IMPRESSION THAT NOTHING WA S DUE TO PORT TRUST SINCE DELAY WAS NOT CAUSED BY THE APPELLANT. ACCORDINGLY IN MY OPINION THE DECISION OF THE APPELLANT CANNOT BE SAID TO BE UNPRUDENT. WITHO UT PREJUDICE TO THAT EVEN IF LOSS IS INCURRED DUE TO UNWISE OR INCORRECT DECISION OF THE APPELLANT THERE WAS NO DISPUTE THAT THE LOSS WAS INCURRED BY THE APPELLANT VERY MUCH IN THE COURSE OF BUSINESS. THEREFORE DISALLOWANCE OF THE SAME BY TH E A.O. WAS WITHOUT ANY BASIS AND NOT JUSTIFIED. HENCE DISALLOWANCE OF RS.14 28 0 00 IS DELETED. 3. BEFORE US LD.SR.DR SUPPORTED THE ORDER OF THE AO. ON THE OTHER HAND LD.AR OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THOUGH T HE MATERIAL AVAILABLE ON RECORD. IT IS A FACT THAT ASSESSEE HAD SUFFERED A LOSS OF R S.14 26 600/- ON ACCOUNT OF SALE OF GOODS ITA NO.2775/DEL./2009 (A.Y. : 2006-07) 3 AT A LOWER FIGURE. THE YEAR IN WHICH LOSS HAS OCCU RRED IS NOT IN DISPUTE. THE CIT(A) IN HIS ORDER HAS MADE OUT A CASE AS HE HAD HELD THAT L OSS HAS OCCURRED TO THE ASSESSEE ON ACCOUNT OF DEMURRAGE CHARGES FOR THE PERIOD OF 6-7 YEARS. THE LOSS WAS COMMUNICATED TO THE ASSESSEE BY HIS AGENT. THEREFORE IN VIEW OF F INDING RECORDED BY THE CIT(A) IN ABOVE PARAGRAPH WE DO NOT FIND ANY REASON TO HOLD OTHERW ISE. THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD TO CLAIM THAT LOSS IS NOT AL LOWABLE AS DEDUCTION. SINCE THE LOSS ON ACCOUNT OF DEMURRAGE CHARGES AND SALE OF GOODS WAS SUFFERED BY THE ASSESSEE AND THE ASSESSEE CAME INTO KNOWLEDGE OF SUCH LOSS IN APRIL 2005 THE AMOUNT IS ALLOWABLE AS DEDUCTION IN AY 2006-07. ACCORDINGLY WE DO NOT FI ND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT(A) DELETING THE ADDITION. 5. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 6. ORDER PRONOUNCED IN OPEN COURT AFTER CONCLUSION OF THE HEARING ON 18.01.2010. SD/- SD/- (GEORGE MATHAN) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED JAN. 18 2010. SKB COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT ITA NO.2775/DEL./2009 (A.Y. : 2006-07) 4