DCIT, CHENNAI vs. GLOBAL CALCIUM LIMITED, HOSUR

आदेश / O R D E R

PER MANOMOHAN DAS, J.M: This appeal by the Revenue is directed against the order of the Id. Commissioner of Income Tax (Appeals) 6 Chennai [CIT(A) dated 31-07-2019 and pertains to the Assessment Year [AY] 2014-15. The grounds of the Revenue are as under:

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"The Order of the learned Commissioner of Income Tax (Appeals) is contrary to the Law and facts of the case. 1. CIT(A) erred in directing the AO to allow the assesse's claim of write off' of "investments through NSEL of Rs. 3,20,86,8501- by holding that dues from NSEL as irrecoverable and writing of the same as bad debts is in accordance with the provisions of sec.36(1)vii) as well as sec28 of the Act. 1.1 CIT(A) ought to have appreciated the fact that AO has clearly established in the assessment order that the assessee does not qualify for deduction as per clause (i) & (ii) of sub-section (2) of section 36, as no capital was invested by the assessee on NSEL has ever been offered for taxation in any of earlier years. Further such activity cannot be classified as money lending activity. 1.2 CIT(A) omitted to consider the fact that recovery process has been initiated by NSEL and various other agencies. Since, the recovery is an ongoing process; the ultimate deficiency amount recoverable cannot be conducted in the AY: 2014-15 till the deficiency amount arrived. 1.3 As per Board's Circular No. 12/2016(F.No.279/MISC/140/20215- /T J) dt. 30./05/2016, the assessee has not fulfilled the condition as stipulated in sub section (2) of section 36 of the income tax Act, 1961. Hence, the claim of bad debt of Rs.3,20,86,850- is premature and final deficiency amount could not be arrived immediately.

2.1 As per Borad's Circular No.12/2016 (F. No.279/MISC/140/2025- IT J) dt. 30/05/2016, the assessee needs to fulfil the condition as stipulated in sub section (2) of section 36 of the Income Tax Act, 1961, for the claim of bad debt. But the assessee has not fulfilled the condition of clause (1) of sub section (2) of Section 36 of the Income Tax Act, 1961.

2.2 CIT(A) omitted to consider the fact that the assessee is a manufacturer of minerals and vitamin compounds and not money lending is the main business of the assessee.

For these and other grounds that may be adduced at the time of

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hearing, it is prayed that the Order of the learned Commissioner of Income Tax (Appeals) be set aside and that ore Assessing Officer be restored."

made investments of Rs.3,20,86,850/- through M/s. National Spot

Exchange Ltd. (NSEL). Also the assessee made advances to the tune

of Rs. 1,11,68,046- to M/s. Global Nutrition, its sister concerned entity.

The assessee write off of the invested amount of Rs. 3,20,86,850/- as

the NESL suddenly collapsed on 31-07-2013. Similarly, the amount of

Rs.1,11,68,046/- also write off as M/s Global Nutrition not in a position

to repay that amount. The assessee filed its return of income for the

AY 2014-15 on 25-09-2014 declaring a total income of Rs.

7,3162,020/-. At the same time the assessee claimed deduction of the

aforesaid write off amounts. The case was selected for scrutiny under

CASS and statutory notices was issued and served upon the

assessee. The assessee responded to the notices and filed the

necessary details as well as relevant documents. The Id. Assessment

Officer [AO] completed the assessment u/s. 143(3) of the Act. The Id.

AO vide order dated 30-12-2016 inter alia disallowed the claim of

deductions and added the said amount to the total income of the

assessee. They are: (i) Disallowance of write off of investments

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through NSEL Rs.3,20,86,850 and (ii) write off of advance of

Rs.1,11,68,046/-.

CIT(A). The Id. CIT(A) vide order dated 31-07-2019 decided the

appeal in favour of the assessee.

the Tribunal.

materials on record. In respect of the issue of disallowance of write

off of investments through NSEL for Rs.3,20,86,850/-, we observe

that the Id. Assessing Officer [AO] disallowed the claim of the

assessee by observing that as the process of recovery of money

has been started, it is premature for the assessee to write off the

invested amount of Rs.3,20,86,850/- which is not acceptable to us.

As per our observation the starting of process to recover the write off

amount does not mean that entire invested amount has been

recovered. The assessee had taken into consideration the situation

arisen from the sudden break down of the NSEL. The assessee took

a commercial decision to write off the invested amount. The situation

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which was prevailing at the time of break down of NSEL has

compelled the assessee to write off the invested amount. Again,

write off of amount does not mean that the assessee has

abandoned its claim over the write off amount. Therefore, recovery

process would be going on and process of recovery is not a

guarantee that the assessee will get back the entire invested

amount. If any recovery will take place, then, that recovered amount

would be the profit of the assessee for that year and would be the

subject of the Income Tax Act, 1961. The assessee cannot wait for

an indefinite period for taking a decision whether the account should

be classified as bad or not. The assessee has taken into

consideration the situation which was arisen after sudden collapse

of the NSEL while taking a decision for classification of the amount

as bad debt. Nobody except the assessee can fix a time line for

classifying the invested amount as bad debt. It is up to the owner of

the money, like the assessee to take a decision by taking into

consideration about the prevailing situation of the invested money.

Therefore, our considered opinion is that, the Id. CIT(A) is fully

justified by deleting the disallowance of Rs.3,20,86,850/- vide his

order dated 31-07-2019. Accordingly, we decide this ground of

appeal of the Revenue in favour of the assessee.

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by the Id. AO. This issue is related to the making of advances by the

assessee company to M/s Global Nutrition, a sister concern of the

assessee. We observe that, although M/s Global Nutrition is a sister

concern of the assessee company, it is a different entity legally. It

took advances from the assessee company for its business

purposes. However, they are not in a position to repay the advanced

amount to the assessee company. Therefore, the assessee

company classified the amount as "bad debt". We observe that the

classification of the amount as a bad debt by the assessee company

who can also be called a creditor, it is their discretion. That decision

to write off the amount was taken by the assessee by applying its

commercial wisdom. The assessee company taken into

consideration about the financial position of M/s Global Nutrition and

accordingly, took a decision to treat the amount granted to M/s

Global Nutrition as bad debt. The Id. CIT(A) considered the reasons

for such classification by the assessee company. We also

considered the same. The Id. CIT(A) correctly decided the issue in

favour of the assessee. The write off amounts are allowable loss.

Accordingly, we decide this ground of the Revenue in favour of the

assessee.

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Order pronounced on 29th December, 2023.

Sd/- Sd/- (मंजुनाथ. जी) (मनोमोहन दास) (Manjunatha. G) (Manomohan Das) �ाियक सद�/Judicial Member लेखा लेखा सद�य लेखा लेखा सद�य सद�य /Accountant Member सद�य चे�ई/Chennai, �दनांक/Dated: 29th December, 2023. EDN/-

आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ*/Appellant 2. ,-थ*/Respondent 3. आयकर आयु./CIT 4. िवभागीय ,ितिनिध/DR 5. गाड( फाईल/GF