M/S. APTE AMALGAMATIONS LTD, MUMBAI v. THE DCIT CIR 10(2), MUMBAI

ITA 710/MUM/2008 | 2002-2003
Pronouncement Date: 09-03-2010 | Result: Partly Allowed

Appeal Details

RSA Number 71019914 RSA 2008
Assessee PAN AACCA3326L
Bench Mumbai
Appeal Number ITA 710/MUM/2008
Duration Of Justice 2 year(s) 1 month(s) 8 day(s)
Appellant M/S. APTE AMALGAMATIONS LTD, MUMBAI
Respondent THE DCIT CIR 10(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-03-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted H
Tribunal Order Date 09-03-2010
Date Of Final Hearing 04-03-2010
Next Hearing Date 04-03-2010
Assessment Year 2002-2003
Appeal Filed On 31-01-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI T.R. SOOD (AM) ITA NO.710/MUM/2008 ASSESSMENT YEAR : 2002-03 M/S. APTE AMALGAMATIONS LTD. 14A-THE CLUB NEAR MANGAL ANAND HOSPITAL SWASTIK PARK CHEMBUR MUMBAI-400 071. ..( APPELLANT ) P.A. NO. (AACCA 3326 L) VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 10(2) AAYAKAR BHAVAN MUMBAI-400 020. ..( RESPONDENT ) APPELLANT BY : SHRI SANJAY R. PARIKH RESPONDENT BY : SHRI S. K. PAHWA AND SHRI KESHAV SAXENA O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 25.10.2007 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2002-03. 2. IT IS OBSERVED THAT THE APPEAL FILED BY THE ASSESSEE IS LATE BY FIVE DAYS. THE ASSESSEE FILED AN AFFIDAVIT DATED 8.2.2008 OF SHRI VAMAN MADHAV APTE CHAIRMAN OF THE COMPANY INTERALIA STATING THAT DUE TO ITA NO.710/M/08 A.Y:02-03 2 BAD FINANCIAL POSITION AND CIRCUMSTANCES BEYOND THE CONTROL OF THE MANAGEMENT OF THE COMPANY THE DELAY IN FILING OF T HE APPEAL MAY BE CONDONED WHICH WAS NOT SERIOUSLY OBJECTED BY THE LD. DR. 3. THAT BEING SO AND IN THE ABSENCE OF ANY CONTRARY MAT ERIAL PLACED ON RECORD BY THE REVENUE WE ARE SATISFIED WITH THE REA SONS STATED BY THE ASSESSEE IN HIS AFFIDAVIT SUPRA AND ACCORDINGLY THE D ELAY IS CONDONED. 4. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING CHEMICALS AND TR ADING OF SCIENTIFIC INSTRUMENTS. THE RETURN WAS FILED DECLARING A LOSS OF RS.2 75 90 854/-. HOWEVER THE ASSESSMENT WAS COMPLETED ON A TOTAL LOSS OF RS.18 89 330/- INCLUDING THE DISALLOWANCE OF EXP ENDITURE ON VRS RS.19 18 441/- AND PROVISION FOR DOUBTFUL DEBTS RS. 40 37 161/- VIDE ORDER DATED 25.2.2005 PASSED U./S.143(3) OF THE I T ACT 1961(THE ACT). ON APPEAL THE LD. CIT(A) WHILE UPHOLDING THE ORDER OF THE AO ON THE DISALLOWANCE OF VRS EXPENDITURE OF RS.19 18 441/- AND PROVISION FOR DOUBTFUL DEBTS RS.40 37 161/- PARTLY ALLOWED TH E APPEAL. 5. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.710/M/08 A.Y:02-03 3 6. GROUND NO.1 IS AGAINST SUSTENANCE OF DISALLOWANCE OF V RS EXPENSES OF RS.19 18 441/-. 7. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT DURING T HE COURSE OF ASSESSMENT IT WAS INTERALIA OBSERVED BY THE AO THAT THE ASSESSEE COMPANY FLOATED A VRS SCHEME AND HAS INCURRED AN EXPENDI TURE OF RS.95 92 205/- OUT OF THIS AMOUNT 1/5 TH OF THE SAID AMOUNT I.E. RS.19 18 441/- HAS BEEN CHARGED TO THE P&L ACCOUNT AND T HE BALANCE AMOUNT OF RS.76 73 764/- HAS BEEN ADDED TO THE DEFERR ED REVENUE EXPENDITURE. THE AO WAS OF THE VIEW THAT THE AMOUNT OF EXPENDITURE HAD BEEN INCURRED SUBSEQUENTLY TO THE CLOSURE OF THE BUSI NESS AND HENCE VRS EXPENDITURE IS NOT WHOLLY AND EXCLUSIVELY IN CURRED FOR THE PURPOSE OF BUSINESS AND THEREFORE HE DISALLOWED RS.19 18 441/- AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) WHILE OBSERVING THAT DURING THE CURRENT YEAR THERE IS NO MA NUFACTURING ACTIVITY HENCE THE QUESTION OF ALLOWABILITY OF EXPEN SES RELATING TO THE MANUFACTURING BUSINESS DOES NOT ARISE CONFIRMED THE DISA LLOWANCE MADE BY THE AO. 8. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE AT THE OUTSET SUBMITS THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN ACIT V S. APTE AMALGAMATIONS LTD. IN ITA NO.3107/MUM/2005 FOR ASSESSMEN T YEAR ITA NO.710/M/08 A.Y:02-03 4 2001-02 DATED 18.1.2008 WHEREIN THE TRIBUNAL ON THE SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE HAS UPHELD THE ORDER OF THE LD. C IT(A) IN DELETING THE DISALLOWANCE MADE BY THE AO. HE ALSO PLACE D ON RECORD THE COPY OF THE SAID ORDER OF THE TRIBUNAL . 9. ON THE OTHER HAND THE LD. DR SUBMITS THAT SINCE DUR ING THE CURRENT YEAR THERE IS NO MANUFACTURING ACTIVITY CARRIED OUT BY THE ASSESSEE THEREFORE THE DECISION OF THE TRIBUNAL RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE IS DISTINGUISHABLE ON FACTS AND H ENCE THE ORDER PASSED BY THE LD. CIT(A) IN CONFIRMING THE DISALL OWANCE MADE BY THE AO BE UPHELD. 10. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIN D THAT IT HAS BEEN OBSERVED BY THE AO IN PARA-2 OF THE ASSESSMENT ORDE R THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING CHEMICALS AND TRADING OF SCIENTIFIC INSTRUMENTS. HOWEVER WHILE DISALLOWING THE CLAIM OF VRS EXPENDITURE OF RS.19 18 4 41/- THE AO OBSERVED THAT THE AMOUNT OF EXPENDITURE HAS BEEN INCUR RED SUBSEQUENT TO THE CLOSURE OF THE BUSINESS AND HENCE NOT AL LOWABLE. WE FURTHER FIND THAT THE LD. CIT(A) WHILE CONSIDERING TH E ASSESSES CLAIM OF DEPRECIATION IN PARA 2.3 OF HIS ORDER HAS OBSERVED THAT ....ON PERUSAL OF VARIOUS TABLES CONTAINED IN THI S ITEM IT IS QUITE CLEAR THAT BARRING 200 KGS OF SULPHAMETHOX AZOLE ITA NO.710/M/08 A.Y:02-03 5 MANUFACTURED DURING THE YEAR THERE IS NO OTHER MANUFACTURING SHOWN IN TABLE A. LIKEWISE IN TABLE- B (II) NO CONSUMPTION OF RAW MATERIAL HAS BEEN SHOWN . IN TABLE C(IV & V) RELATING TO DETAILS OF ACTUAL PROD UCTION OF VARIOUS GOODS NO FIGURE HAS BEEN REFLECTED. THE O NLY BUSINESS ACTIVITY DURING THIS YEAR RELATES TO TRADI NG OF GOODS. BASICALLY THE APPELLANT APPEARS TO HAVE SOL D SOME OF ITS RAW MATERIAL AND OTHER STOCKS. IN FACT IN S CHEDULE- 15 OF THE P&L ACCOUNT THE COST OF RAW MATERIAL CONS UMED IS SHOWN AS RS. NIL. HENCE IT IS QUITE CLEAR THAT DURING THE PREVIOUS YEAR 2001-02 THE APPELLANT HAD NOT UND ER TAKEN ANY MANUFACTURING ACTIVITIES. WHATEVER AMOUN T IS SHOWN BY WAY OF TURNOVER AND BUSINESS INCOME IS B Y WAY OF TRADING SERVICE CHARGES AND COMMISSION. IN THE CIRCUMSTANCES THE AO HAS RIGHTLY DISALLOWED DEPRECI ATION ON PLANT AND MACHINERY. HOWEVER AS PER THE DETAILS F ILED BY THE APPELLANT THE DEPRECIATION ON PLANT AND MAC HINERY IS ONLY TO THE EXTENT OF RS.38 35 765/-. THE BALAN CE DEPRECIATION DISALLOWED IS ON COMPUTER FURNITURE A ND MOTOR CARS. AS IT CAN NOT BE DENIED THAT THE ASSES SEE WAS HAVING SOME BUSINESS ACTIVITY DURING THE PREVIO US YEAR THE DEPRECIATION ON NON-MANUFACTURING ITEMS S HOULD BE ALLOWED. 11. WE FURTHER FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02 SUPRA WHILE CONSIDERING THE SIMI LAR DISALLOWANCE OF RS.19 18 441/- MADE BY THE AO ON THE G ROUND THAT THE IMPUGNED EXPENDITURE WAS INCURRED SUBSEQUENT TO THE CLOSU RE OF THE BUSINESS AND HENCE COULD NOT BE SAID TO HAVE BEEN INCURRE D WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS HAS HELD VIDE PARA- 6 OF ITS ORDER DATED 18.1.2008 AS UNDER : .....THERE IS NO DENIAL OF THE FACT THAT THE ASSES SEE HAS INCURRED THE IMPUGNED EXPENDITURE IN THE PREVIO US YEAR BY WAY OF PAYMENT OF THE IMPUGNED SUM TO THE EMPLOYEES AT THE TIME OF THEIR VOLUNTARY RETIREMENT IN ACCORDANCE WITH THE SCHEME OF VOLUNTARY RETIREMENT JOINTLY AGREED UPON BETWEEN THE ASSESSEE-COMPANY A ND THE UNION OF WORKMEN. CONDITIONS OF SECTION 35DDA(1 ) ARE FULFILLED IN THIS CASE. IN THIS VIEW OF THE MAT TER THE ITA NO.710/M/08 A.Y:02-03 6 ORDER PASSED BY THE CIT(A) IS CONFIRMED. GROUND N O.1 IS DISMISSED. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIBUN AL AND KEEPING IN VIEW THAT MERELY BECAUSE THE ASSESSEE HAS CLOSED HIS MANUFACTU RING ACTIVITIES DOES NOT MEAN THAT THE ASSESSEE HAS NOT CARRIED OUT ITS BUSINESS ACTIVITIES AS ALSO HELD BY THE LD. CIT(A) (SUPR A) WHICH HAS NOT BEEN CONTROVERTED BY THE REVENUE WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO THE DEDUCTION OF EXPENSES OF RS.19 1 8 441/- AND ACCORDINGLY THE LD. CIT(A) WAS NOT JUSTIFIED IN UP HOLDING THE DISALLOWANCE OF VRS EXPENDITURE OF RS.19 18 441/-. T HE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IN THI S REGARD IS DELETED. THE GROUND TAKEN BY THE ASSESSEE IS THEREFO RE ALLOWED. 12. GROUND NO.2 IS AGAINST THE SUSTENANCE OF DISALLOWANCE OF CLAIM OF BAD DEBTS OF RS.40 37 161/-. 13. THE BRIEF FACTS OF THE ABOVE ISSUE ARE THAT IT WAS I NTERALIA OBSERVED BY THE AO THAT THE ASSESSEE COMPANY HAS DEBITED P ROVISION FOR DOUBTFUL DEBTS AMOUNTING TO RS.40 37 161/- TO ITS P&L ACCOUNT. THE ASSESSEE WAS ASKED TO JUSTIFY THE CLAIM MADE. IN RESPONSE IT WAS STATED BY THE ASSESSEE VIDE LETTER DATED 22.11.2004 AS U NDER : THE ENTIRE AMOUNT CONSIST OF AMOUNT DUE FROM STANHOPE SETA-U.K. AMOUNTING TO RS.38 17 917/- ITA NO.710/M/08 A.Y:02-03 7 (RS.35 02 534/- + RS.3 15 383/-)THIS AMOUNT WAS DUE AS COMMISSION AND HAS BEEN OFFERED FOR TAX IN ALL THE RELEVNT PREVIOUS YEAR. WE CONFIRM THAT THE COMMISSION WAS BOOKED AS INCOME IN THE RELEVANT YEARS AND WAS OFFE RED FOR TAX BUT THE COMMISSION COULD NOT BEEN REALIZED DUE TO INCOMPLETE WORK/INCOMPLETE ERECTION IN CERTAIN CASE S AND THESE AMOUNTS HAVE BEEN WRITTEN OFF. THERE IS NO M ORE ON GOING BUSINESS WITH THE PARTY AND HENCE EVEN WIT H ANY AMOUNT OF WORK THE PARTY REFUSED TO PAY THE COMMIS SION AND HENCE THE AMOUNT HAS BEEN WRITTEN OFF AND CLAI MED AS EXPENDITURE. THE AO AFTER CONSIDERING ASSESSEES EXPLANATION OBSERVED TH AT THE CLAIM OF THE ASSESSEES COMPANY FOR DOUBTFUL DEBTS IS PROVI SIONAL IN NATURE AND HENCE A CONTINGENT LIABILITY AND CANNOT BE ALLOWED TO BE DEBITED TO THE P&L ACCOUNT SINCE CONTINGENT LIABILITIES D O NOT CONSTITUTE EXPENDITURE AND CANNOT BE THE SUBJECT MATTER OF DEDUCT ION EVEN UNDER THE MERCANTILE SYSTEM OF ACCOUNTING. THE AO AFTER RELY ING ON THE DECISIONS IN THE CASE OF SAJJAN MILL LTD. VS. CIT(1985) 156 ITR 585(SC) INDIAN MOLASSES CO. P. LTD. VS. CIT (1959) 37 ITR 66(SC) AND MAHADEO GANGAPRASAD VS. SECOND ITO (1966) 61 ITR 3 84 (BOM.) DISALLOWED THE ASSESSEES CLAIM FOR PROVISION FOR DOUBTFUL DEBTS OF RS.40 37 161/- AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD. CIT(A) OBSERVED THAT FROM THE RELEVANT ENTRI ES RECORDED IN THE BALANCE SHEET IT IS QUITE CLEAR THAT THE DEBT ENTRY IN THE P&L ACCOUNT IS THAT OF A PROVISION. IF THE AMOUNT HAD BEEN WRITTE N OFF IT WOULD NOT HAVE APPEARED IN THE BALANCE SHEET AS A LIABILITY. SE C. 36 (2) OF THE IT ACT REQUIRES THAT THE AMOUNT SHOULD BE WRITTEN OFF IN THE HANDS OF THE ITA NO.710/M/08 A.Y:02-03 8 DEBTORS. MOREOVER AS ADMITTED BY THE APPELLANT THIS B USINESS ACTIVITY IS CLOSED IN THE YEAR 2000 AND ACCORDINGLY HELD THAT IN ANY CASE THE SAME CANNOT BE ALLOWED AS A BUSINESS EXPENDITURE. 14. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFORE AO A ND LD. CIT(A) FURTHER SUBMITS THAT THE PROVISION FOR DOUBTF UL DEBTS IS A NATURE OF BAD DEBT ALLOWABLE U/S.36(1)(VII)OF THE ACT AND I N SUPPORT REFERENCE WAS ALSO MADE TO THE BALANCE SHEET P&L ACCOUNT SCHEDULE NO.8 APPEARING AT PAGE 1 2 3 AND 19 OF THE SECOND PAPER B OOK OF THE ASSESSEE TO SHOW THAT THE AMOUNT OF PROVISION OF DOUBTFUL DEBTS HAS BEEN REDUCED FROM THE AMOUNT OUTSTANDING AGAINST THE SUNDRY DEBTORS. THE RELIANCE WAS ALSO PLACED ON THE DECISION OF THE TRIBUNAL IN A.C. NIELSEN RESEARCH SERVICES (P) LTD. VS. ADDL. CIT (2008) 24 SOT 495(MUM.) WHEREIN THE TRIBUNAL ON THE SIMILAR FA CTS AND CIRCUMSTANCES HAS ALLOWED THE CLAIM OF BAD DEBTS. HE THERE FORE SUBMITS THAT THE DISALLOWANCE MADE BY AO AND SUSTAINED B Y THE LD. CIT(A) BE DELETED. 15. ON THE OTHER HAND THE LD. DR SUPPORTS THE ORDER OF THE AO AND THE LD. CIT(A). ITA NO.710/M/08 A.Y:02-03 9 16. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THE FACTS ARE NOT IN DISPUTE INASMUCH AS THE ASSESSEE HAS CLAIMED PROVISION F OR DOUBTFUL DEBTS OF RS.40 37 161/- DEBITED TO ITS P&L ACCOUNT AS B AD DEBTS. THE CLAIM OF THE ASSESSEE IS THAT SINCE THE ASSESSEE HAS REDUCED CORRESPONDING AMOUNT FROM THE SUNDRY DEBTORS APPEARING IN SCHEDULE NO.8 TO THE BALANCE SHEET FOR THE YEAR ENDED 31.3.200 2 THE ASSESSEE HAS COMPLIED WITH THE RELEVANT PROVISION OF THE ACT AND HENCE KEEPING IN VIEW THE DECISION OF THE TRIBUNAL IN A.C. NIELSEN RESEARCH SERVICES (P) LTD. (SUPRA) THE ASSESSEE IS ENTITLED TO DEDUCTION U /S.36(1)(VII) OF THE ACT. PER CONTRA THE CLAIM OF THE REVENUE IS THAT SIN CE IT IS MERELY A PROVISION FOR DOUBTFUL DEBTS WHICH IS IN THE NATURE OF CONTINGENT LIABILITIES HENCE THE SAME IS NOT ALLOWABLE. 17. UNDER THE RELEVANT PROVISIONS OF SEC. 36(1)(VII) R EAD WITH ITS EXPLANATION (AFTER THE AMENDMENT W.E.F. APRIL 1 1 989) IT IS NOW A MANDATORY CONDITION THAT DEDUCTIONS CAN BE ALLOWED AS B AD DEBTS ONLY WHEN IT IS ACTUALLY WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS AND NOT ON THE BASIS OF A MERE PROVISION. 18. IN A.C. NIELSEN RESEARCH SERVICES (P) LTD.(SUPRA) T HE TRIBUNAL HAS GIVEN THE FACTUAL MATRIX OF THE CASE IN PARA 13 AND 14 AND HELD AS UNDER : ITA NO.710/M/08 A.Y:02-03 10 13. THE RELEVANT PRESENTATION OF THESE ENTRIES IN P&L ACCOUNT IS GIVEN IN SHCEDULE-O ATTACHED TO THE P&L ACCOUNT AND THE SAME IS REPRODUCED AS BELOW :- SCHEDULE-O : DIRECT EXPENSES PARTICULARS FOR THE YEAR ENDED MARCH 31 2003 FOR THE YEAR ENDED MARCH 31 2002 FIELD EXPENSES 6 073 321 6 353 412 HIRE CHARGES 2 414 097 3 606 528 DATA COLLECTION CHARGES 22 689 523 26 166 925 CONVEYANCE EXPENSES 3 780 070 3 729 334 PRINTING & STATIONERY EXPENSES 3 555 111 4 218 770 COMMUNICATION EXPENSES 4 668 233 7 616 835 PURCHASE OF PRODUCT 3 542 490 3 265 073 CONSULTANCY FEES 5 192 722 5 430 946 ENTERTAINMENT & BUSINESS PROMOTION EXPENSES 152 998 195 093 TRAVELLING 8 199 331 10 679 912 PROVISION FOR DOUBTFUL DEBTS 4 261 873 1 250 000 SUNDRY EXPENSES 2 254 738 1 807 695 BAD DEBTS WRITTEN OFF 1 411 120 14. THE RELEVANT PRESENTATION OF ABOVE ENTRIES IN T HE BALANCE SHEET IS REPRODUCED AS BELOW:- SCHEDULE H : SUNDRY DEBTORS (UNSECURED CONSIDERED GOOD) OUTSTANDING FOR A PERIOD EXCEEDING SIX MONTHS OTHERS 1 844 821 52 699 787 3 737 826 50 947 990 LESS : PROVISION FOR DOUBTFUL DEBTS 8 496 447 46 048 161 ========== 5 546 894 49 138 922 =========== FROM ABOVE FACTUAL POSITION OF THE FACTS IN THE PR ESENT CASE WE NOTICED THAT THE ASSESSEE HAS TWO TYPES OF ACCOUNTS ONE IS PROVI SION FOR DOUBTFUL DEBTS AND ANOTHER IS BAD DEBTS WRITTEN OFF. THE ASSESSEE HAS NOT CLAIMED BAD DEBTS FOR THE PROVISION ACCOUNT. THE ASSESSEES CLAIM IS ONLY IN RESPECT OF BAD DEBTS WRITTEN OFF ACCOUNT. THE PROVISION ACCOUNT I S COVERED BY EXPLANATION TO SECTION 36(1)(VII). THEREFORE THE ASSESSEE IS NOT ENTITLED FOR PROVISION ITA NO.710/M/08 A.Y:02-03 11 ACCOUNT AND SAME HAS NOT BEEN CLAIMED BY THE ASSESS EE AS BAD DEBTS UNDER SECTION 36(1) (VII). THE ASSESSEES CLAIM IS ONLY I N RESPECT OF BAD DEBTS WRITTEN OFF ACCOUNT. THE ASSESSEE HAS DEBITED THIS ACCOUNT IN P&L ACCOUNT AND HAS MADE CORRESPONDING ENTRIES IN BAD DEBTS WRI TTEN OFF ACCOUNT. WE FIND THAT THE EFFECTIVE CLAIM OF THE ASSESSEE FOR B AD DEBT IS RS.14 11 120/- WHICH IS IN ACCORDANCE WITH SECTION 36 (1)(VII). THE ASSESSE SATISFIED THE CONDITION OF THE PROVISION IN RESPECT OF WRITING O FF. IN THE LIGHT OF ABOVE DISCUSSION THE CLAIM OF THE ASSESSEE FOR BAD DEBTS U/S.36 (1)(VII) IS ALLOWED. FROM THE ABOVE IT IS CLEAR THAT IT WAS NOBODYS CASE THAT PROVISION FOR DOUBTFUL DEBTS OF RS.42 61 873/- AND RS.12 50 000/- FO R THE YEAR ENDED ON 31.3.2003 AND 31.3.2002 RESPECTIVELY IS ALLOW ABLE. THE CLAIM BEFORE THE TRIBUNAL WAS IN RESPECT OF BAD DEBTS WRITTEN OFF RS.14 11 120/- FOR THE YEAR ENDED 31.3.2003 AND THE SAME HAS BEEN ALLOWED BY THE TRIBUNAL (SUPRA). 19. IN THE CASE BEFORE US THE ASSESSEE HAS CLAIMED PROVISION FOR DOUBTFUL DEBTS RS.40 37 161/- WITHOUT GIVING ANY DETA ILS OF CORRESPONDING ENTRY IN THE RELEVANT PARTYS ACCOUNT OR I N THE SUNDRY DEBTORS ACCOUNT AND HENCE THE CLAIM MADE BY THE ASSESSEE I N VIEW OF THE SPECIFIC PROVISION COVERED BY EXPLANATION TO SECTION 3 6(1) (VII) IS NOT ALLOWABLE INASMUCH AS IN THE AFORESAID DECISION OF T HE TRIBUNAL RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE THE SAME CL AIM WAS NOT EVEN MADE BY THE ASSESSEE AS OBSERVED AND HELD BY THE TR IBUNAL THAT THE ASSESSEE IS NOT ENTITLED FOR PROVISION ACCOUNT AND SAME HAS NOT BEEN CLAIMED BY THE ASSESSEE AS BAD DEBTS UNDER SECTION ITA NO.710/M/08 A.Y:02-03 12 36(1) (VII). THUS IN OUR VIEW THE DECISION OF THE TR IBUNAL RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE SUPPORTS THE CASE OF TH E REVENUE. IN THIS VIEW OF THE MATTER AND KEEPING IN VIEW THAT SINCE THE ASSESSEE DID NOT WRITE-OFF THE DEBT IN QUESTION AS IRRECOVERABL E IN HIS ACCOUNTS FOR THE PREVIOUS YEAR HENCE ON THE PLAIN LANGUAGE O F THE SECTION 36(1)(VII) READ WITH ITS EXPLANATION OF THE ACT THE DEBT CANNOT BE ALLOWED AS A BAD DEBT. THIS VIEW ALSO FINDS SUPPORT F ROM THE DECISION OF HONBLE MADRAS HIGH COURT IN CIT VS. MICROMAX SYSTEMS P. LTD. (2005) 277 ITR 409(MAD.) WHEREIN IT HAS BEEN HE LD AT PLACITUM 30 APPEARING AT PAGE 416 OF THE ITR AS UNDER : IN THE PRESENT CASE IT CAN BE SEEN THAT THE ASSES SEE DID NOT WRITE OFF THE DEBT IN QUESTION AS IRRECOVERABLE IN HIS ACCOUNTS FOR THE PREVIOUS YEAR. HENCE ON THE PLAIN LANGUAGE OF SECTION 36(1)(VII) OF THE ACT THE DEBT CANNOT BE ALLOWED AS A BAD DEBT. IT MAY BE THAT THE ASSE SSEE COMMITTED AN INADVERTENT MISTAKE BUT WE CANNOT GO BY NOTIONS OF EQUITY IN TAX MATTERS. MAKING A PROVISIO N IS NOT THE SAME THING AS WRITING OFF A DEBT AS IRRECOVERAB LE. ACCORDINGLY THE ORDER PASSED BY THE LD. CIT(A) IN UPH OLDING THE DISALLOWANCE DOES NOT CALL FOR ANY INTERFERENCE. THE GRO UND TAKEN BY THE ASSESSEE IS THEREFORE REJECTED. 20. GROUND NO.3 IS IN RESPECT OF CONDONATION OF DELAY WHICH HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE VIDE PARA 3 OF THIS ORDER. ITA NO.710/M/08 A.Y:02-03 13 21. GROUND NO.4 AND 5 ARE GENERAL IN NATURE AND IN THE ABSENCE OF ANY PLEA TAKEN BY THE LD. COUNSEL FOR THE ASSESSEE THE SA ME ARE THEREFORE REJECTED. 22. IN THE RESULT THE ASSESSEES APPEAL IS PARTLY ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 9.3.2010. SD/- SD/- (T.R. SOOD) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 9.3.2010. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 4.3.10 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 5.3.10 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 9.3.10 SR.PS/PS 7. FILE SENT TO THE BENCH CLERK 10.3.10 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER