BERNHARD SCHULTE SHIPPING ( INDIA ) P. LTD, MUMBAI v. ACIT 10(3), MUMBAI

ITA 758/MUM/2010 | 2006-2007
Pronouncement Date: 10-12-2010 | Result: Partly Allowed

Appeal Details

RSA Number 75819914 RSA 2010
Bench Mumbai
Appeal Number ITA 758/MUM/2010
Duration Of Justice 10 month(s) 9 day(s)
Appellant BERNHARD SCHULTE SHIPPING ( INDIA ) P. LTD, MUMBAI
Respondent ACIT 10(3), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 10-12-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 10-12-2010
Date Of Final Hearing 06-12-2010
Next Hearing Date 06-12-2010
Assessment Year 2006-2007
Appeal Filed On 01-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI RAJENDRA SINGH (AM) ITA NO.758/MUM/2010 ASSESSMENT YEAR : 2006-07 BERNHARD SCHULTE SHIPPING (INDIA) PRIVATE LIMITED 401 OLYMPIA 4 TH FLOOR HIRANANDANI GARDENS POWAI MUMBAI-400 076. ..( APPELLANT ) P.A. NO. (AABCB 7797 H) VS. ASSTT. COMMISSIONER OF INCOME TAX-10(3) 4 TH FLOOR ROOM NO.473 AAYAKAR BHAVAN MUMBAI. ..( RESPONDENT ) APPELLANT BY : SHRI P.R.V. RAGHAVAN RESPONDENT BY : SHRI HA RI GOVIND SINGH O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER DATED 19.11.2009 PASSED BY THE LD. CIT(A) FOR T HE ASSESSMENT YEAR 2006-07. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COM PANY IS ENGAGED IN THE BUSINESS OF SHIP MANAGEMENT CONSULTANCY SER VICES AND BUSINESS CENTRE CHARGES FILED RETURN DECLARING A LOSS OF RS.48 88 703/-. DURING THE COURSE OF ASSESSMENT THE ASSESSING OFFICER FROM THE TAX AUDIT REPORT FILED WITH THE RET URN OF INCOME ITA NO.758/M/10 A.Y:06-07 2 OBSERVED THAT THERE IS A DELAY IN DEPOSITING EMPLOYEES CONTRIBUTION TOWARDS P.F. WITHIN THE PRESCRIBED DATE. ACCORDINGLY H E DISALLOWED RS.34 019/- IN VIEW OF THE PROVISIONS OF SECTION 36(1)(V A) R.W.S. 2(24)(X) OF THE INCOME TAX ACT 1961 (THE ACT) AND ADD ED TO THE INCOME OF THE ASSESSEE. BESIDES THIS THE ASSESSING OFFICER AL SO OBSERVED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION ON ACCOU NT OF BAD DEBTS AMOUNTING TO RS.8 59 485/-. THE ASSESSEE WAS ASKED T O SHOW AS TO WHY THIS DEDUCTION SHOULD NOT BE DISALLOWED. IN R ESPONSE THE ASSESSEE SUBMITTED THAT THESE BAD DEBTS ARE PERTAINING TO THE DISPUTE BETWEEN THE ASSESSEE COMPANY AND SHIPPING CORPORATION O F INDIA. THE DISPUTE AROSE BETWEEN THE PARTIES WITH REGARD TO CE RTAIN TECHNICAL EXPENSES EXTRAORDINARY EXPENSES AND CREW COST. BOTH THE PARTIES HAVE AGREED TO A MEDIATION PROCESS AND ARBITRATION PRO CESS IS STILL GOING ON. THE ASSESSING OFFICER AFTER CONSIDERING THE SAM E WAS OF THE VIEW THAT IT IS QUITE CLEAR THAT THE DEBTS CANNOT BE CO NSIDERED AS BAD AND THEREFORE HE DISALLOWED THE DEDUCTION ON THIS ACCO UNT TO RS.8 59 485/- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE AND ACCORDINGLY COMPLETED THE ASSESSMENT AT A LOSS OF RS.39 95 2 00/- AND BOOK PROFIT U/S.115JB AS PER ASSESSEE'S COMPUTATION (-) RS.40 44 847/- VIDE ORDER DATED 30.9.2008 PASSED U/S .143(3) OF THE ACT. 3. ON APPEAL THE LD. CIT(A) WHILE UPHOLDING THE ACT ION OF THE ASSESSING OFFICER CONFIRMED BOTH THE DISALLOWANCES AND ACCORD INGLY DISMISSED THE APPEAL. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US. ITA NO.758/M/10 A.Y:06-07 3 5. GROUND NO. A (1-5) ARE AGAINST THE SUSTENANCE OF DIS ALLOWANCE OF RS.34 019/- MADE U/S. 36(1)(VA) R.W.S. 2(24)(X) OF THE ACT. 6. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSE SSEE SUBMITS THAT SINCE THE ASSESSEE HAS DEPOSITED THE AMOUNT BEFORE TH E DUE DATE OF FILING OF THE RETURN THEREFORE IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN CIT VS. VINAY CEMENT LTD. AND CIT V S. ALOM EXTRUSIONS LTD. (2009) 319 ITR 306 (SC) THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE DELETED. HE ALSO PLACED ON RECORD THE COPY OF THE TRIBUNAL ORDER IN HIS OWN CASE FOR ASSESSMENT YEAR 2005-06 IN MISCELLANEOUS PETITION NO.264/M UM/10 ARISING OUT OF ITA NO.3681/MUM/2008 DATED 11.6.2010 WHEREIN THE TRIBUNAL HAS DELETED THE SIMILAR DISALLOWANCE MADE BY T HE ASSESSING OFFICER . THE RELIANCE WAS ALSO PLACED IN M/S. PIK PEN PRIVATE LIMITED VS. ITO IN ITA NO.6847/MUM/2008 FOR ASSESSMENT YEAR 2005 -06 ORDER DATED 28.1.2010 IN THIS REGARD. THE COPY OF THE ABO VE ORDERS OF THE TRIBUNAL WERE ALSO PLACED ON RECORD. 7. ON THE OTHER HAND THE LD. DR SUBMITS THAT SINCE THE EMPLOYEES CONTRIBUTION TOWARDS PF HAS NOT BEEN PAID WITHIN DUE D ATE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) BE UPHELD. 8. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE RIVAL P ARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THA T THERE IS NO MATERIAL ON RECORD TO SHOW AS TO WHEN THE ABOVE AMOUNT OF EMPLOYEES CONTRIBUTION TO PF RS.34 019/- WAS PAID BY THE ASSESSEE. E VEN AT THIS STAGE THE LD. COUNSEL FOR THE ASSESSEE HAS FAILED TO PLACE ON RECORD ANY ITA NO.758/M/10 A.Y:06-07 4 SUCH MATERIAL. HOWEVER HE SUBMITS THAT HE HAS NO OBJECTI ON IF THE ISSUE IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER F OR VERIFICATION. THIS BEING SO WE ARE OF THE VIEW THAT IN THE INTEREST OF JUSTICE WE CONSIDER IT FAIR AND REASONABLE THAT THE MATT ER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY W E SET ASIDE THE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCO UNT AND SEND BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHALL DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREIN ABOVE AND ACCORDING TO LAW INCLUDING THE AFORESAID DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSE E ARE THEREFORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO. B (1-5) IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF BAD DEBTS RS.8 59 485/-. 10. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT SINCE THE ASSESSEE HAS WRITTEN OFF THE ABOVE AMOUNT AS IRRECOVERABLE DEBTS THEREFORE FOLLOWING THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN CIT VS. STAR CHEMICALS (BO MBAY) (P.) LTD. (2009) 313 ITR 126 (BOM.) AND T.R.F. LTD. VS. CIT ( 2010) 323 ITR 397 (SC) THE CLAIM OF BAD DEBTS BE ALLOWED TO THE ASSE SSEE. 11. ON THE OTHER HAND LD. DR SUPPORTS THE ORDER OF TH E ASSESSING OFFICER AND THE LD. CIT(A). 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE R IVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THERE IS NO MATERIAL ON RECORD TO SHOW AS TO WHETHER THE ASSESSEE HAS P ASSED ITA NO.758/M/10 A.Y:06-07 5 RELEVANT ENTRIES IN THE BOOKS OF ACCOUNTS TO SHOW THAT TH E BAD DEBT AMOUNT OF RS.8 59 485/- IS DEBITED AND THE CUSTOMERS ACCO UNT IS CREDITED THUS CLOSING THE ACCOUNT OF CUSTOMER. 13. IN TRF LTD. SUPRA THE HON'BLE SUPREME COURT HAS OBSERVED AND HELD AS UNDER (PLACITUM 4 PAGE 398 OF ITR):- THIS POSITION IN LAW IS WELL SETTLED. AFTER APRIL 1 1989 IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH THAT THE DEBT IN FACT HAS BECOME IRRECOVERABLE. IT IS ENOU GH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERABLE IN THE ACC OUNTS OF THE ASSESSEE. HOWEVER IN THE PRESENT CASE THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER THE DEBT HAS IN FACT BEEN WRITTEN OFF IN THE ACCOUNTS OF THE AS SESSEE. WHEN A BAD DEBT OCCURS THE BAD DEBT ACCOUNT IS DEB ITED AND THE CUSTOMERS ACCOUNT IS CREDITED THUS CLOSI NG THE ACCOUNT OF THE CUSTOMER. IN THE CASE OF COMPANIES THE PROVISION IS DEDUCTED FROM SUNDRY DEBTORS. AS STAT ED ABOVE THE ASSESSING OFFICER HAS NOT EXAMINED WHETH ER IN FACT THE BAD DEBT OR PART THEREOF IS WRITTEN OF F IN THE ACCOUNTS OF THE ASSESSEE. THIS EXERCISE HAS NOT BE EN UNDERTAKEN BY THE ASSESSING OFFICER. HENCE THE MAT TER IS REMITTED TO THE ASSESSING OFFICER FOR DE NOVO CONSIDERATION OF THE ABOVEMENTIONED ASPECT ONLY THA T TOO ONLY TO THE EXTENT OF THE WRITE-OFF. 14. IN THE ABSENCE OF ANY SUCH MATERIAL OBSERVED BY THE IR LORDSHIPS WE ARE OF THE VIEW THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE MATTER PROPERLY THEREFORE IN THE INT EREST OF JUSTICE WE CONSIDER IT FAIR AND REASONABLE THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER AND ACCORDINGLY WE SET ASIDE T HE ORDERS PASSED BY THE REVENUE AUTHORITIES ON THIS ACCOUNT ALSO AND SEND BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER WHO SHAL L DECIDE THE SAME AFRESH IN THE LIGHT OF OUR OBSERVATIONS HEREINABOV E AND ACCORDING TO LAW INCLUDING THE AFORESAID DECISIONS RELIED ON BY THE LD. COUNSEL FOR ITA NO.758/M/10 A.Y:06-07 6 THE ASSESSEE. THE GROUNDS TAKEN BY THE ASSESSEE ARE THEREF ORE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 15. IN THE RESULT THE ASSESSEE'S APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10.12.2010. SD/- SD/- (RAJENDRA SINGH) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 10.12.2010. 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.