AARTI CORPORATE SERVICES LTD, MUMBAI v. ITO 10(3)(1), MUMBAI

ITA 336/MUM/2010 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 33619914 RSA 2010
Assessee PAN AAACA3485G
Bench Mumbai
Appeal Number ITA 336/MUM/2010
Duration Of Justice 1 year(s) 6 month(s) 15 day(s)
Appellant AARTI CORPORATE SERVICES LTD, MUMBAI
Respondent ITO 10(3)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-07-2011
Assessment Year 2005-2006
Appeal Filed On 13-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND R.K.PANDA(A.M ) ITA NO.336/MUM/2010 (ASSESSMENT YEAR: 2005-06) AARTI CORPORATE SERVICES LIMITED 2 ND FLOOR UDYOG KSHETRA MULUND GOREGAON LINK ROAD OFF L.B.S.ROAD MULUND (WEST) MUMBAI-400080 PAN: AAACA3485G INCOME TAX OFFICER 10(3)(1) MUMBAI. APPELLANT V/S RESPONDENT DATE OF HEARING : 28.7.2011 DATE OF PRONOUNCEMENT : 28.7.2011 APPELLANT BY : SHRI DEEPE SH T CHHEDA RESPONDENT BY : SHRI P.K.B.M ENON O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 18.11.2009 PASSED BY THE LE ARNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SERVICES IN THE FIELD OF FINANCE INCLUDING SERVICE IN THE FIELD OF MERCHA NT BANKING CUSTODIAL AND TRUSTEESHIP ACTIVITIES ETC. IT FILED RETURN DECLARING NET LOSS AT RS.13 25 310/-. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ITA NO.336/MUM/2010 (ASSESSMENT YEAR: 2005-06) 2 ASSESSEE HAS CLAIMED BAD DEBTS AMOUNTING TO RS.30 18 056/-. ON BEING ASKED THE ASSESSEE SUBMITT ED ITS NOTE JUSTIFYING ITS CLAIM OF BAD DEBTS. THE AO NOT ED THAT THE ASSESSEE HAS NOT MADE SINCERE EFFORTS TO RECOVER TH E ABOVE AMOUNT. THE AO ALSO NOTED THAT FINANCIAL POSITION OF THE DEBTOR PARTIES ARE NOT REFLECTED IN THE REASONS PRO VIDED BY THE ASSESSEE SO THAT IT COULD BE CONCLUDED THAT WRI TE OFF THE DEBTS WAS JUSTIFIABLE. THE AO ALSO REFERRED TO SECT ION 36(1) (VII) R.W.S.36(2) OF THE INCOME TAX ACT 1961(IN SH ORT THE ACT) AND STATED THAT IT IS OBLIGATORY ON THE PART OF THE ASSESSEE TO PROVE THAT THE DEBT WRITTEN OFF BY HIM IS INDEED A BAD DEBTS FOR THE PURPOSES OF ALLOWANCE UNDER SEC TION 36(1)(VII). THE AO AFTER RELYING ON THE SEVERAL D ECISIONS DISALLOWED THE CLAIM OF BAD DEBTS OF RS.30 18 056/ -AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME O F RS.16 92 750/- VIDE ORDER DATED 12.12.2007 PASSED UNDER SECTION 143(3) OF THE ACT. ON APPEAL IT WAS SUBM ITTED BY THE ASSESSEE THAT THE AMOUNT OF RS.30 18 056/- ADV ANCED TO MINDHOLA RASAYAN A PARTNERSHIP FIRM WAS OUTSTANDI NG FOR MORE THAN 7 YEARS AND SAME HAS BEEN WRITTEN OFF DUR ING HE YEAR BY DEBITING THE P AND L ACCOUNT AND CREDITIN G THE LOAN ACCOUNT. THE ASSESSEE ALSO RELIED ON THE SEVERAL D ECISIONS. IT WAS ALSO STATED THAT FOR THE PURPOSE OF CLAIM OF BAD DEBT THE ONLY REQUIREMENT IS THAT THE DEBT SHOULD BE WRI TTEN OFF IN ITA NO.336/MUM/2010 (ASSESSMENT YEAR: 2005-06) 3 BOOKS OF THE ASSESSEE AND THERE IS NO BURDEN ON THE ASSESSEE TO PROVE THAT THE DEBT IS BAD AND IT IS LE FT ON COMMERCIAL WISDOM OF THE ASSESSEE TO TREAT THE DEBT AS BAD. THE ASSESSEE ALSO STATED THAT THEY MADE PERSONAL FO LLOW UP TELEPHONIC CONVERSATIONS AND MEETINGS AS WELL REMIN DERS FOR RECOVERY OF DEBTS WHICH CANNOT BE DOCUMENTED FOR WHICH THE ASSESSEE WAITED FOR 7 YEARS BEFORE WITTING OFF THE SAID DEBT. IN VIEW OF THESE SUBMISSIONS THE ASSESSEE P RAYED THAT DISALLOWANCES OF BAD DEBTS MAY BE ALLOWED. HOW EVER THE LEARNED COMMISSIONER OF INCOME TAX (A) KEEPING IN VIEW THE RATIO OF THE DECISION OF THE HONBLE JURISDICTI ONAL HIGH COURT IN DIT(INTERNATIONAL TAXATION) V/S OMAN INTE RNATIONAL BANK SAOG 313 ITR 128 (BOM) OBSERVED THAT TO WRIT E OFF A PARTICULAR DEBTS AS BAD DEBTS HAS TO BE BASED ON SO ME MATERIAL WHICH HAS BEEN ALLOWED TO BE LOOKED INTO BY THE AO. SINCE THE APPELLANT HAS FAILED TO FURNISH ANY SUCH MATERIAL OR EVIDENCE TO EXPLAIN THAT THE EVENTS ARE EXISTED AS NARRATED IN THE DECISION OF THE HONBLE GUJARAT HI GH COURT IN THE CASE OF CIT V/S AHMEDABAD ELECTRICITY CO.LTD ( 262 ITR 97). FOLLOWING THE SAME HE HELD THAT THE AO WAS JUSTIFIED IN DISALLOWING THE CLAIM OF THE APPELLANT WHICH HE SUSTAINED. 3. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) THE ASSESSEE IS IN APPEAL ITA NO.336/MUM/2010 (ASSESSMENT YEAR: 2005-06) 4 BEFORE US CHALLENGING THE SUSTENANCE OF DISALLOWAN CE OF BAD DEBTS OF RS.30 18 056/- 4. AT THE TIME OF HEARING THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT NOW THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF TRF LTD. V/S CIT (201 0) 323 ITR 397(SC) THEREFORE FOLLOWING THE SAME THE CLAI M OF BAD DEBT BE ALLOWED TO THE ASSESSEE. 5. ON THE OTHER HAND THE LEARNED D.R. SUPPORTS THE ORDER OF THE AO AND THE LEARNED COMMISSIONER OF INCOME TA X (A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT UNDER THE PROVISIONS OF SECTION 36(1 )(VII) OF THE ACT AS AMENDED W.E.F. 1.4.1989 THE ASSESSEE IS NOT REQUIRED TO ESTABLISH THAT THE CONCERNED DEBTS HAS ACTUALLY BECOME BAD IN THE RELEVANT YEAR FOR THE PURPOSE OF CLAIMIN G DEDUCTION AND THE ONLY REQUIREMENT FOR CLAIMING THE DEDUCTION IS THAT THE ASSESSEE HAS TO WRITE OFF THE RELEVANT DEBTS IN ITS BOOKS OF ACCOUNT TREATING THE SAME AS BAD. IN THE PRESEN T CASE THERE IS NO DISPUTE THAT THE ASSESSEE HAS WRITTEN O FF THE RELEVANT BAD DEBTS OF RS. 30 18 056/- BY DEBITING THE P&L ACCOUNT AND REDUCING EQUIVALENT AMOUNT FROM THE TOT AL DEBTS THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE ITA NO.336/MUM/2010 (ASSESSMENT YEAR: 2005-06) 5 SUPREME COURT IN THE CASE OF TRF LTD. VS. CIT [2010 ] 323 ITR 397(SC) WHEREIN IT HAS BEEN HELD THAT AFTER TH E AMENDMENT OF SECTION 36(1)(VII)OF THE INCOME-TAX AC T 1961 WITH EFFECT FROM APRIL 1 1989 IN ORDER TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS IT IS NOT NECESSARY FOR T HE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRR ECOVERABLE : IT IS ENOUGH IF THE BAD DEBTS IS WRITTEN OFF AS IRR ECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE WE HOLD THAT THE ASS ESSEE IS ENTITLED TO DEDUCTION OF BAD DEBTS OF RS.30 18 056/ - AND ACCORDINGLY THE DISALLOWANCE OF BAD DEBTS OF RS.30 18 056/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFORE ALLOW ED. 7. IN THE RESULT THE ASSESSEES APPEAL STANDS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.7.2011. SD SD ( R.K.PANDA) (D.K.AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED 28 TH JULY 2011 SRL: ITA NO.336/MUM/2010 (ASSESSMENT YEAR: 2005-06) 6 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILE. TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI