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Income Tax Appellate Tribunal, ‘’SMC’’ BENCH, AHMEDABAD
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’SMC’’ BENCH, AHMEDABAD BEFORE, SHRI RAJPAL YADAV, JUDICIAL MEMBER And SHRI WASEEM AHMED, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1785/AHD/2017 �नधा�रण वष�/Asstt. Year: 2012-2013
Vastupal Bearing Races Ltd., I.T.O, 504, Sarap Building, Vs. Ward-4(1)(4), Opp. Navjivan Press, Ahmedabad. Ashram Road, Ahmedabad. PAN: AAACV9341R
(Applicant) (Respondent) Assessee by : Shri Hem Chhajed, A.R Revenue by : Shri O.P. Pathak, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 28/03/2019 घोषणा क� तार�ख /Date of Pronouncement: 18/04/2019 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Commissioner of Income Tax (Appeals)-8, Ahmedabad, [Ld.CIT(A) in short], dated 06/06/2017 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here- in-after referred to as "the Act") dated 09/03/2015 relevant to Assessment Year (AY) 2012-13.
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The assessee has raised the following grounds of appeal:
The order passed by the Ld.CIT(A) is againt the law, equity and justice. 2. The Ld.CIT(A) has erred in law and on facts to upheld the addition made by the Ld.AO for interest income on IT Refund of Rs.28,560/- 3. The Ld.CIT(A) has erred in law and on facts to upheld the disallowance made by the Ld.AO of P.F & ESI of Rs.39,430/- 4. The Ld.CIT(A) has erred in law and on facts to upheld the disallowance made by the Ld.AO of business loss claimed u/s.37(1) of the Act of Rs.8,48,558/- 5. The appellate craves liberty to add, amend, alter ot modify all or any grounds of appeal before final appeal.
The 1st issue raised by the assessee is that the ld. CIT-A erred in 3. confirming the order of the AO by sustaining the addition of Rs. 28,560.00 on account of interest on the income tax refund.
The AO based on ITS extracted from the ITD during the assessment proceedings observed that the assessee had received interest on the income tax refund amounting to Rs. 28,560.00 which is chargeable to tax, but the same was not offered to tax. Therefore the AO made an addition of Rs. 28,560.00 to the total income of the assessee.
Aggrieved assessee preferred an appeal to learned CIT (A) who confirmed the order of the AO by observing as under:
“…During the appellate proceedings also, the AR of the appellant could not explain the same. As the interest on refund received by the appellant is not taken into account of its income by the appellant, the addition made by the AO is confirmed and appeal on this ground is dismissed…’’
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Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. The learned AR before us filed a paper book running from pages 1to 61 and submitted that it had not received any interest on the income tax refund amounting to ₹28,560.00. Therefore the same cannot be added to the total income of the assessee.
On the other hand, the learner DR vehemently supported the order of the authorities below.
We have heard the contentious and perused the materials available. The issue in the instant case relates whether the assessee has received interest on the income tax refund amounting to Rs. 28,560.00 which was not disclosed by it in its income tax return. As per the assessee it has not received the interest on the income tax refund for Rs. 28,560.00, therefore the same was not offered to tax.
8.1 However, the AO treated the interest income of the assessee based on ITS report generated from the ITD. It is an undisputed fact that the interest on the income tax refund will be credited to the account of the assessee through banking channel. Thus the ITS report cannot be conclusive evidence to hold that the assessee has received interest on the income tax refund of Rs. 28,560.00 only. In our considered view the AO should have referred the books of accounts/bank statement of the assessee to ascertain the fact that the assessee has received interest on the income tax refund. Therefore in the interest of justice and fair play, we are inclined to set aside the issue to the file of the AO to verify whether the amount of interest has been credited to the account of the assessee in the year under consideration. If yes that the same
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will be treated as income of the assessee. Accordingly, we allow the ground of the appeal of the assessee for statistical purposes.
The 2nd issue raised by the assessee is that learned CIT (A) erred in 9. upholding the order of the AO by sustaining the disallowance of ₹39,430 on account of contribution to PF and ESI.
At the outset, the learned counsel for the assessee fairly conceded that the issue is covered against the assessee. Hence, the ground of appeal of the assessee is dismissed.
The 3rd issue raised by the assessee is that learned CIT (A) erred in 11. confirming the order of the AO by disallowing the business loss of ₹8,48,558.00 under section 37(1) of the Act.
The assessee in the year under consideration has claimed a deduction of ₹8,48,558.00 by way of writing off the advances given to various parties. The assessee claimed to have given the advances in the course of the business, and such advances became irrecoverable. Therefore the same was written off as business loss.
However, the AO during the assessment proceedings observed certain facts as detailed under :
i. The assessee gave the advances to the parties known to it as it was having business dealings with such parties. ii. No prudent businessperson will advance the money to the parties which will become irrecoverable. Page 4 of 6
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iii. The advance money written off was not offered to tax in the earlier years. 14. In view of the above, the claim of the assessee was disallowed and accordingly a sum of ₹8,48,558.00 was added to the total income of the assessee.
The aggrieved assessee preferred an appeal to the learned CIT (A). The assessee before the learned CIT (A) submitted that the advances were given to the parties in the course of the business. Therefore, the same is allowable as a deduction.
However, the learned CIT (A) disregarded the contention of the assessee by observing that the amount written off was not offered to tax in the earlier year. Therefore the condition as specified under section 36(2) of the Act was not fulfilled. Accordingly, the learned CIT (A) confirmed the order of the AO.
Being aggrieved by the order of the learners ITA assessee is in appeal before us. The learned AR before us reiterated the submissions as made before the learned CIT (A). On the other hand, the learned DR vehemently supported the order of authorities below.
We have heard the rival contentions and perused the materials available on record. The controversy in the instant case relates whether the advances given in the course of the business can be allowed as bad debts though the same was not offered to tax as mandated under section 36(2) of the Act. The provisions of section 37(1) of the Act states that any revenue expenditure
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incurred wholly and exclusively for the business is eligible for deduction while computing the income under the head business and profession. In the instant case, the advances were given in the course of the business to certain parties by the assessee, and this fact has not been doubted by the authorities below. Therefore in our considered view, the same can be allowed as the expenses incurred under section 37(1) of the Act.
18.1 The assessee indeed has incurred the loss by way of giving the advances in the course of the business to certain parties which became irrecoverable. Thus the assessee is entitled to the deduction on account of such business loss. Regarding this, we find support and guidance from the order of Delhi Tribunal in the case of ITO Vs. Singh Radio Co. (India) Pvt.Ltd. reported in 59 taxman 367 wherein it was held as under: “In view of the findings of the Commissioner (Appeals) that the money received on chits by the assessee was utilised for the purpose of business and that the loss on chits was sustained during the course of business, the Commissioner (Appeals) was justified in allowing the assessee’s claim for loss. 18.2 In view of the above, we are of the considered view that the assessee is entitled to the deduction of business loss as discussed above. Hence the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the Court on 18/04/2019 at Ahmedabad.
-Sd- -Sd- (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 18/04/2019 Manish Page 6 of 6