M/s. Urja Products Pvt. Ltd.,, Ahmedabad v. The Dy.CIT., Circle-8,, Ahmedabad

ITA 3578/AHD/2007 | 2004-2005
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 357820514 RSA 2007
Assessee PAN AAACU3413E
Bench Ahmedabad
Appeal Number ITA 3578/AHD/2007
Duration Of Justice 3 year(s) 4 month(s) 7 day(s)
Appellant M/s. Urja Products Pvt. Ltd.,, Ahmedabad
Respondent The Dy.CIT., Circle-8,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 07-01-2011
Date Of Final Hearing 29-12-2010
Next Hearing Date 29-12-2010
Assessment Year 2004-2005
Appeal Filed On 30-08-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 29/12/2010 DRAFTED ON: 2 9/12/2010 1. ITA NO.3578/AHD/2007 - A.Y. 2004-05 2. ITA NO.784/AHD/2010 A.Y. 2004-05 URJA PRODUCTS PVT.LTD. 423-425 GIDC OPP.TELEPHONE EXCHANGE ODHAV AHMEDBAD VS. THE DCIT CIRCLE-8 AHMEDABAD PAN/GIR NO. : AAACU 3413 E ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : MS. URVASHI SHODHAN A.R. RESPONDENT BY: SHRI S.S. SHUKLA D.R. O R D E R PER SHRI MUKUL KR. SHRAWAT JUDICIAL MEMBER : FOR ASSESSMENT YEAR 2004-05 THESE APPEALS ARE F ILED BY THE ASSESSEE ARISING FROM THE SEPARATE ORDERS OF CIT(A) -XIV AHMEDABAD DATED 25/05/2007 (ITA NO.3578/AHD/2007) AND DATED 2 8/01/2010 (ITA NO.784/AHD/2010). FOR THE SAKE OF CONVENIENCE TH ESE TWO APPEALS ARE CONSOLIDATED AND HEREBY DECIDED BY THIS COMMON ORDE R. (A). ITA NO.3578/AHD/2007 2. GROUND NO.1 READS AS UNDER: I. (A) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF TECHNOLOGY LICENCE FEES PAID BY THE APPELLANT OF ` 3 56 453/- HOLDING IT AS CAPITAL EXPENDITURE. ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDI NG ASSESSMENT ORDER PASSED U/S. 143(3) OF THE I.T. ACT 1961 DATED 30 /11/2006 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF PTF E CLOTH HIGH SILICA CLOTH & FIBER GLASS/COTTON/POLYESTER CLOTH. IT WAS NOTICED BY THE ASSESSING OFFICER THAT UNDER THE HEAD TECHNOLOGY LICENCE FEES A SUM OF 3 56 453/- WAS CLAIMED AS AN EXPENDITURE. IT WA S FOUND THAT THE AMOUNT WAS PAID TO A FOREIGN PARTY NAMELY M/S.SENI OR OPERATIONS. IN SUPPORT OF THE CLAIM COPIES OF THE AGREEMENTS BETW EEN THE ASSESSEE AND THE SAID FOREIGN CONCERN WERE FURNISHED. THERE WE RE TWO TYPES OF AGREEMENT; ONE WAS IN RESPECT OF PAYMENT FOR SERVIC ES AND THE OTHER WAS IN RESPECT OF THE TECHNICAL FEES. ON PERUSAL OF TH E TERMS OF THE AGREEMENT IT WAS NOTICED THAT THE TECHNOLOGY FEES WAS TO BE PAID IN INSTALLMENTS AND FOR THE YEAR UNDER CONSIDERATION FIRST 1/3 RD INSTALLMENT WAS OF U.S. $ 6600 WAS STATED TO HAVE BEEN PAID. ASSESSEE HAS ALSO FU RNISHED THE DETAILS ABOUT THE NATURE OF AGREEMENT AND RELEVANT PARAGRAP H IS REPRODUCED BELOW:- 4.1. IN REGARD TO YOUR REQUIREMENT STATED UNDER PA RA-4 OF YOUR LETTER FOR WHICH WE HAVE TO SUBMIT THAT THE SAID 1/ 3 INSTALLMENT OF US $ 6 600 WAS REQUIRED TO BE PAID ON SIGNING THE ABOVE REFERRED TWO AGREEMENTS AND FILING WITH THE RESERVE BANK OF INDIA. BOTH THE AGREEMENTS WERE SIGNED AND EXECUTED ON 25 TH JUNE 2003 AND THEREAFTER THEY WERE FILED WITH RBI AND ACCORDINGLY THE FIRST INSTALLMENT AS STIPULATED AND AGREED UPON WAS DUE T O BE PAID WHICH WAS FULLY PAID. IT MAY FURTHER BE NOTED THA T ON THE BASIS OF SUCH TECHNICAL SUPPORT AGREEMENT EXECUTED BY US SO THAT WE COULD GET REGISTERED WITH GOVT. AND QUASI GOVT. ESTABLISH MENTS TO MEET WITH THE PRE-CONDITIONS LAID DOWN BY THOSE ESTABLIS HMENTS TO MEET ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 3 - WITH THE PRE-CONDITIONS LAID DOWN BY THOSE ESTABLIS HMENTS. AFTER OUR COMPANY GOT REGISTERED ENQUIRIES FLOATED BY TH OSE ESTABLISHMENTS WERE RESPONDED BY THE COMPANY AND LA TER ON THE COMPANY COULD GET ORDERS WHICH TOOK ITS OWN TIME IN EXECUTING DELIVERY OF FINAL PRODUCT IN THE FORM OF EXPANSION JOINTS. TO SUPPORT OUR SUBMISSION WE FURNISH HEREWITH A COPY OF ORDER RECEIVED FROM BHEL FOR WHICH VETTING WAS CARRIED OUT BY SENIOR OPERATIONS AND ACCORDINGLY THE SERVICES HAS STIPULATED IN TH E AGREEMENT WERE PERFORMED BY SENIOR OPERATIONS INC. USA 2.1. HOWEVER THE ASSESSING OFFICER WAS NOT CONVINC ED AND IN HIS OPINION THE LUMP-SUM PAYMENT WAS A CAPITAL EXPENDITURE IN NATURE. IN HIS OPINION THE ASSESSEE HAS NOT FURNISHED ANY EVI DENCE TO SHOW THAT WHAT TECHNICAL KNOW-HOW WAS SUPPLIED BY THE ASSESSE E. A.O.S ONE MORE ALLEGATION WAS THAT THE DESCRIPTION OF THE PRODUCT AS STATED IN THE AGREEMENT HAD NOT TALLIED WITH THE PRODUCT MENTIONE D IN THE INVOICES. FROM THE SIDE OF THE ASSESSEE AN ARGUMENT WAS THAT A TDS WAS DEDUCTED ON THE SAID PAYMENT THEREFORE THE PAYMENT WAS REV ENUE IN NATURE HOWEVER IT WAS COMMENTED THAT MERE FACTUM OF DEDUC TION OF TAX DO NOT TURN THE NATURE OF PAYMENT INTO REVENUE PAYMENT IF IT IS CAPITAL IN NATURE. FINALLY THE ASSESSING OFFICER HAS DISALLOWED THE C LAIM OF PAYMENT OF RS.3 56 453/-. THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 3. BEFORE LEARNED CIT(APPEALS) AGAIN THE FACTS WERE REITERATED HOWEVER HE WAS NOT CONVINCED AND UPHELD THE DISALL OWANCE OF PAYMENT VIDE FOLLOWING PARAGRAPH:- ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 4 - 2.3. I HAVE CONSIDERED THE FACTS OF THE CASE AND T HE SUBMISSIONS AS ADVANCED BY THE APPELLANT. I AM NOT INCLINED T O AGREE WITH THE VIEWS OF THE APPELLANT. THE CASE LAWS RELIED UPON BY THE APPELLANT ARE ON DIFFERENT FACTS. IN THE CASE OF IAEC (PUMP S) LTD. SUPRA THE ASSESSEE WAS GRANTED LICENCE TO USE ITS PATENTS AND DESIGNS EXCLUSIVELY IN INDIA. IN THE CASE OF SAYAJI INDUST RIES SUPRA THE PAYMENT WAS MADE FOR USING THE KNOW HOW FOR THE PUR POSE OF ITS RUNNING BUSINESS FOR A LIMITED PERIOD. IN THE CASE OF GOODYEAR INDIA LTD. THE PAYMENT WAS MADE UNDER A TECHNICAL AGREEMENT FOR THE USE OF TECHNICAL KNOWHOW FOR A LIMITED PERIOD F OR MANUFACTURING AN IMPROVED KIND OF TYRES WITHOUT AN Y TRANSFER OF OWNERSHIP OF TECHNICAL DATA PLANS DESIGNS ETC. I N THE CASE OF ASSTT.CIT VS. AMTREX APPLIANCES LTD. (2005) 94 TTJ 396 THE PAYMENT WAS MADE FOR USING TECHNICAL KNOWHOW FOR IM PROVISATION OF PRODUCT. HERE IN THE APPELLANTS CASE THE FAC TS ARE ENTIRELY DIFFERENT. THE APPELLANT WAS TO PAY LUMPSUM FEES O F $ 20 000 TO M/S.SENIOR OPERATIONS IN THREE EQUAL INSTALMENTS IN THE FOLLOWING MANNER:- I) FIRST ONE THIRD INSTALMENT TO BE PAID ON FILING THI S AGREEMENT WITH THE RESERVE BANK OF INDIA; II) SECOND ONE-THIRD TO BE PAID ON DELIVERY TO URJA OF THE MANUFACTURING TECHNOLOGY: AND III) FINAL ONE-THIRD INSTALMENT TO BE PAID WITHIN 6 MONT HS OF COMMENCEMENT OF COMMERCIAL PRODUCTION OF THE PRODUC TS USING THE MANUFACTURING TECHNOLOGY PROVIDED BY SENI OR OPERATIONS TO URJA OR FOUR YEARS AFTER THE DATE OF FILING THIS AGREEMENT WITH THE RESERVE BANK OF INDIA WHICHEVER IS EARLIER. IN ADDITION TO THE LUMP SUM FEE URJA SHALL PAY SEN IOR OPERATIONS A ROYALTY EQUAL TO 5 PERCENT (%) OF THE NET SELLING PRICE FOR THE PRODUCTS IN RESPECT OF SALES IN THE TERRITORY. IN APPELLANTS CASE THE FACT IS THAT THE APPELLANT HAS PAID ONLY 1/3 RD INSTALMENT AND OTHER INSTALMENTS WERE NOT PAID DUR ING THE YEAR THAT MEANS THERE WAS NO DELIVERY MADE TO URJA AND COMMERCIAL PRODUCTION HAS NOT COMMENCED BY USING TH E NEW ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 5 - MANUFACTURING TECHNOLOGY BEING PROVIDED BY SENIOR O PERATIONS. THE APPELLANT WAS TO DEVELOP A NEW PRODUCT WHICH IS NOT PRODUCED DURING THIS YEAR. HENCE THE AMOUNT PAID DURING TH E YEAR AS FIRST 1/3 RD INSTALMENT IS MERELY AN ADVANCE AMOUNT FOR THE NEW TECHNOLOGY TO BE OBTAINED TO COMMENCE PRODUCTION OF NEW PRODUCT. THEREFORE IN MY OPINION THE ACTION OF A O IN DISALLOWING THE PAYMENT MADE IN THIS RESPECT WAS QU ITE JUSTIFIED AND THIS GROUND IS HEREBY REJECTED. BEING AGGRIEVED NOW THE ASSESSEE IS FURTHER IN AP PEAL BEFORE US. 4. FROM THE SIDE OF THE APPELLANT MS. URVASHI SHOD HAN LEARNED AUTHORISED REPRESENTATIVE AND FROM THE SIDE OF THE REVENUE MR. S.S.SHUKLA LEARNED DEPARTMENTAL REPRESENTATIVE APP EARED. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE RECORDS AVAILA BLE BEFORE US. 4.1. IN THE COMPILATION AN AGREEMENT STATED TO BE TECHNOLOGY LICENCE AGREEMENT DATED 25 TH DAY OF JUNE-2003 IS PLACED ON RECORD WHICH WAS EXECUTED BETWEEN M/S.SENIOR OPERATIONS INC. TEXAS USA AND THE ASSESSEE URJA PRODUCTS PVT.LTD. AHMEDABAD. THE PRODUCT WAS LOW PRESSURE DUCTING METAL RECTANGULAR AND NON -METALLIC EXPANSION JOINTS. IN CONSIDERATION OF THE LICENCE GRANTED BY M/S.SENIOR OPERATIONS USA TO ASSESSEE THERE WAS A CLAUSE FO R LUMPSUM PAYMENT OF US $ 20 000. THE PAYMENT WAS TO BE MADE IN THREE EQUAL INSTAL LMENTS. IN ADDITION TO THE ABOVE LUMPSUM PAYMENT THE ASSES SEE WAS ALSO REQUIRED TO PAY ROYALTY EQUAL TO 5% OF THE NET SELLING PRICE OF THE SAID PRODUCT. THERE WAS A CLAUSE OF CONFIDENTIALITY THAT THE ASSESSEE SHALL KEEP THE KNOWLEDGE CONFIDENTIALLY AND TO BE TREATED AS PROPRIETARY OF ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 6 - M/S. SENIOR OPERATIONS. FURTHER IN ONE OF THE CLA USES IT HAS ALSO BEEN MENTIONED THAT M/S. SENIOR OPERATIONS USA SHOULD RETAIN INTELLECTUAL PROPERTY RIGHTS. OUR ATTENTION HAS ALSO BEEN DRAWN ON THE INVOICES ISSUED IN RESPECT OF THE SAID PRODUCT. THIS LICENCE WAS SAID TO BE FOR A PERIOD OF 10 YEARS . THE LEARNED AUTHORISED REPRESENTATIVE HAS ALSO DEMONSTRATED THAT THE PRODUCT IN QUESTION WAS ALREADY MANUFACTURED BY THE ASSESSEE IN THE PAST AND IN SUPPORT SHE HAS BROUGHT TO OUR NOTICE CERTAIN OLD INVOICES. THROUGH ALL T HESE DOCUMENTS AND EVIDENCES IT WAS DEMONSTRATED THAT THE PRODUCT WHI CH WAS UNDER THE SAID AGREEMENT WAS EARLIER MANUFACTURED BY THE ASSESSEE. THE TECHNOLOGY WHICH WAS RECEIVED BY THE ASSESSEE WAS ONLY TO AUGMENT THE PROCESS . IT HAS BEEN VEHEMENTLY ARGUED THAT NO NEW PRODUCT WAS PRODUCED AFTER ATTAINING THE SAID TECHNOLOGY. FURTHER IT WAS AL SO DISTINGUISHED THAT THE LUMP-SUM CONSIDERATION WAS PAID AS A TECHNOLOGY FE ES WHICH IS IN THE NATURE OF LICENSE-FEES ONLY AND IT WAS NOT AT ALL FOR ACQUIRING ANY TECHNICAL KNOW-HOW. IT WAS CLARIFIED THAT SINCE N O TECHNICAL KNOW-HOW WAS ACQUIRED THEREFORE THE LUMP-SUM PAYMENT WAS N OT TOWARDS ACQUISITION OF ANY CAPITAL ASSET. FURTHER IT HAS ALSO BEEN POINTED OUT THAT THE ASSESSEE HAS TREATED THE PAYMENT AS REVENUE IN NATURE AND THEREFORE DEDUCTED THE TAX AT SOURCE U/S.195 OF THE I.T.ACT. IN THE LIGHT OF THE ABOVE FACTS WE HAVE EXAMINED A DECISION OF HON'BLE DELHI HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. J.K. SYNTEHTICS LTD. REPORTED AT [2009 ]176 TAXMAN 355 (DELHI) WHEREIN IT WAS HELD THAT SINCE UNDER THE AGREEMENT THE ASSESSEE HAD OBTAINED A TECHNICAL ASS ISTANCE AND ACQUIRED SOME TECHNICAL INFORMATION WHICH WAS A KNOW-HOW REL ATED TO PROCESS OF MANUFACTURE THEN IT WAS NOT A TRANSFER OF THE OWNE RSHIP OF THE KNOW-HOW ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 7 - AND TO BE TREATED AS A REVENUE EXPENDITURE. THE HO N'BLE COURT HAS CONCLUDED MERE ACQUISITION OF KNOW-HOW DURING THE Y EAR UNDER CONSIDERATION BEING IN RESPECT OF A BUSINESS ALREAD Y IN EXISTENCE THEN SUCH AN EXPENDITURE IS REQUIRED TO BE TREATED AS AN EXPENDITURE ON REVENUE ACCOUNT. THERE IS ONE MORE DECISION AS C ITED BEFORE US OF HON'BLE HIGH COURT OF MADHYA PRADESH (INDORE BENCH) IN THE CASE OF CIT VS. EICHER MOTORS LTD. REPORTED AT [2007] 163 TAXMAN 55 6 (M.P.) WHEREIN AS PER THE AGREEMENT THE TECHNICAL KNOW- HOW WAS PROCURED FOR ASSISTANCE OF MANUFACTURING OF COMMERC IAL VEHICLES AND IN LIEU THERE WAS A CLAUSE FOR PERIODIC PAYMENT OF ROY ALTY. THE ASSESSEE HAS CLAIMED THE ROYALTY PAYMENT AS REVENUE EXPENDITURE. THE HON'BLE COURT HAS HELD THAT THE ROYALTY PAYMENT WAS WITH REGARD T O AN OUTLAY FOR EARNING PROFIT IN NORMAL COURSE OF BUSINESS RATHER THAN AN EXPENDITURE WITH THE OBJECT OF ACQUIRING AN ADVANTAGE OF ENDURI NG NATURE FOR BENEFIT OF TRADE THEREFORE ALLOWABLE AS REVENUE EXPENDITU RE. AN ANOTHER DECISION OF HON'BLE BOMBAY HIGH COURT PRONOUNCED IN THE CASE OF CIT VS. ESSEL PROPACK LTD. REPORTED AT [2010] 191 TAXMAN 2 44 (BOM. ) HAS BEEN CITED WHEREIN THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH A FOREIGN COMPANY UNDER WHICH ASSESSEE WAS GRANTED A NON-EXCLUSIVE LICENCE FOR A PERIOD OF FIVE YEARS RESTRICTED TO A TERRITORY. UNDER THE AGREEMENT SOLE PROPRIETARY RIGHTS IN THE SAID PATE NT WERE VESTED WITH THE LICENSOR AND NOT WITH THE ASSESSEE. THE ASSESSEE W AS TO PAY A ROYALTY AT CERTAIN PERCENTAGE. THE ASSESSEE WAS ALSO REQUIRE D TO PAY IN ADDITION TO THE ROYALTY A LUMPSUM AMOUNT OVER A PERIOD OF FIVE YEARS. ON THOSE FACTS THE HON'BLE COURT HAS HELD THAT THE SAID TEC HNICAL KNOW-HOW FEES WAS ALLOWABLE AS A REVENUE EXPENDITURE. FEW MORE D ECISIONS HAVE ALSO ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 8 - BEEN CITED BEFORE US BUT IN OUR CONSIDERED OPINION THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IS VERY CLOSE TO THE FACT S OF THE PRESENT APPEAL THEREFORE IN THE LIGHT OF THE FOREGOING DI SCUSSION AND CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS ON APPRECIATION OF THE EVIDENCES PLACED ON RECORD WE ARE OF THE CONSCIENTIOUS VIEW THAT THE IMPUGNED PAYMENT IS ALL OWABLE AS A REVENUE EXPENDITURE. WITH THE RESULT THIS GROUND IS HEREB Y ALLOWED. 5. GROUND NO.2 READS AS UNDER: (B) THE LEARNED CIT(A) HAS FURTHER ERRED IN CONFIR MING DISALLOWANCE OF BAD DEBT WRITTEN OFF OF RS.9 60 314 /- IN RESPECT OF THE DEBT DUE TO M/S.TIRUPATI ENTERPRISES. 5.1. THE ASSESSEE HAS WRITTEN OFF A BAD DEBT OF RS. 9 60 314/- RELATED TO M/S.TIRUPATI ENTERPRISES. THE ASSESSEE HAS SOLD TH E GOODS AND THE PAYMENTS CLAIMED TO BE IN DISPUTE WAS WRITTEN OFF A S BAD DEBT. THE ASSESSEE HAS CLARIFIED THAT A NOTICE WAS ISSUED FOR NON-PAYMENT BUT IN THE ABSENCE OF ANY EXPENSES THE AMOUNT WAS WRITTEN OFF IN THE BOOKS OF ACCOUNT. HOWEVER THE ASSESSING OFFICER WAS OF TH E VIEW THAT SINCE THE PART OF THE PAYMENTS HAVE BEEN RECEIVED BY THE ASSE SSEE THEREFORE REST OF THE PAYMENT WAS NOT A BAD DEBT HENCE WRONGL Y WRITTEN OFF IN THE BOOKS OF ACCOUNT. WHEN THE MATTER HAD GONE IN APPE AL THE LEARNED CIT(APPEALS) HAS CONFIRMED THE ACTION OF THE ASSESS ING OFFICER FOLLOWING THE DECISION OF HON'BLE GUJARAT HIGH COU RT IN THE CASE OF DHALL ENTERPRISES & ENGINEERS PVT. LTD. VS. CIT REP ORTED AS (2007)295 ITR 481(GUJ.) :: (2007)207 CTR 729 (GUJ.). NOW BEF ORE US A LATEST ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 9 - DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F TRF LTD. VS. CIT REPORTED AS [2010]323 ITR 397 (SC) WHEREIN IT WAS HELD AS UNDER:- THIS POSITION IN LAW IS WELL-SETTLED. AFTER APRI L 1 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DE BT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. HOW EVER IN THE PRESENT CASE THE ASSESSING OFFICER HAS NOT EXAMINE D WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. WHEN A BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEB ITED AND THE CUSTOMERS ACCOUNT IS CREDITED THUS CLOSING THE A CCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STATED ABOVE THE ASSESSI NG OFFICER HAS NOT EXAMINED WHETHER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BEEN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE T HE MATTER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSI DERATION OF THE ABOVEMENTIONED ASPECT ONLY AND THAT TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 6. ON THE OTHER HAND FROM THE SIDE OF THE REVENUE MR.S.S. SHUKLA LEARNED DEPARTMENTAL REPRESENTATIVE APPEARED AND PL ACED RELIANCE ON INDUSTRIAL CABLES (I) LTD. VS. ACIT REPORTED AT [20 05]97 ITD 267 (CHANDIGARH) FOR THE PROPOSITION THAT ONCE THE ASSE SSEE HAD NOT STOPPED THE BUSINESS WITH THE SAID DEBTOR AGENCY AND THERE WAS A REASONABLE EXPECTATION OF RECOVERY THEN MERE WRITING OFF OF DEBT WAS NOT SUFFICIENT. ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 10 - HOWEVER THE FACTS OF THE PRESENT APPEAL DO NOT MAT CH WITH THIS CITED DECISION PRIMARILY BECAUSE IN THE PRESENT APPEAL TH E ASSESSEE HAD CLAIMED TO HAVE STOPPED THE BUSINESS ACTIVITY AND THERE WAS NO LIKELIHOOD OR REASONABLE EXPECTATION OF RECOVERY OF UNREALIZED AM OUNT. BECAUSE OF THESE REASONS THE ASSESSEE HAD DECIDED TO WRITE -O FF THE AMOUNT AS A BAD DEBT. THUS THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE WARRANTS TO FOLLOW THE DECISION OF HON'BLE SUPREME COURT AS CIT ED (SUPRA). WITH THE RESULT THIS GROUND IS HEREBY ALLOWED. 7. IN THE RESULT APPEAL OF THE ASSESSEE I.E. ITA NO.3578/AHD/2007 IS ALLOWED. B. ITA NO.784/AHD/2010 FOR ASSESSMENT YEAR 2004-05 8. IN THIS APPEAL THE ASSESSEE HAS RAISED THE GROU ND AGAINST THE CONFIRMATION OF LEVY OF PENALTY US/.271(1) OF RS.4 72 390/-. 8.1. THE FACTS IN BRIEF AS EMERGED FROM THE PENALT Y ORDER PASSED U/S.271(1)(C) OF THE I.T.ACT DATED 27/03/2009 AND THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T.ACT D ATED 30/11/2006 WERE THAT THE PENALTY WAS LEVIED IN RESPECT OF DISALLOWA NCE OF TECHNOLOGY LICECE FEES OF RS.3 56 453/- AND ANOTHER DISALLOWA NCE OF BAD DEBT WRITTEN OFF OF RS.9 60 314/-. SINCE THE FIRST APP ELLATE AUTHORITY HAS CONFIRMED THE ADDITION THEREFORE CONSEQUENT THERE UPON THE ASSESSING OFFICER HAS IMPOSED A MINIMUM PENALTY OF RS.4 72 3 90/-. ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 11 - 9. HEARD BOTH THE SIDES. RECORDS OF THE CASE PERUS ED. AS IS EVIDENT FROM THE ABOVE DISCUSSION WHILE DECIDING THE APPEA L IN RESPECT OF THE IMPUGNED QUANTUM ADDITIONS WE HAVE QUASHED BOTH TH E ADDITIONS. ONCE THE IMPUGNED ADDITIONS WHICH WERE THE BASIS OF THE LEVY OF THE CONCEALMENT PENALTY HAVE BEEN QUASHED BY US AS PER THE ABOVE ORDER THEREFORE THE CONCEALMENT PENALTY DO NOT SURVIVE A NY MORE. WITH THE RESULT WE HEREBY DIRECT TO DROP THE PENALTY. RESU LTANTLY APPEAL IS ALLOWED. 10. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE AR E ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 7/ 1 /2011. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL KR. SH RAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBE R AHMEDABAD; DATED 7 / 01 /2011 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE DEPARTMENT. 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV AHMEDABAD 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD ITA NO.3578/AHD /2007 & ITA NO.784/AHD/2010 M/S.URJA PRODUCTS PVT.LTD. VS. THE DCIT ASST.YEAR -2004-05 - 12 - 1. DATE OF DICTATION.. 29/12/2010 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 29/12/2010 OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S7.1.11 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 7.1.11 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER