ARVIND ANTICOR LTD.,AHMEDABAD vs. THE DY.CIT, CIRCLE-1(1)(1), AHMEDABAD

PER PRADIP KUMAR KEDIA - AM:

The captioned appeal has been filed at the instance of the assessee against the order of the CIT(A)-01, Ahmedabad (‘CIT(A)’ in short), dated 18.11.2015 arising in the assessment order dated 30.01.2015 passed by the Assessing Officer (AO) under s. 143(3) of the Income Tax Act, 1961 (the Act) concerning A.Y. 2012-13.

ITA No.156/Ahd/2016 [Arvind Anticor Ltd. vs. DCIT] A.Y. 2012-13 - 2 - 2. The substantive grounds of appeal raised by the assessee reads

as under:-

“1.The Ld. Commissioner of Income-tax (Appeals) erred in law and on facts in dismissing the appeal of the appellant in respect of disallowance of Rs. 8,69,195/- in respect of bad debts though there is no recovery of sales made during the year under consideration to M/s. KEC International Ltd. (Jabalpur) after the entry of bad debt made on 31-03-2012 and onwards up to till date. We rely on the ITAT Ahmedabad in case of Income-tax Officer, Ward 4(3), Ahmedabad vs. Icenet Net ltd. (ITA No. 1575/Ahd/2008 dated 17-08-2010). 2.The Ld. Commissioner of Income-tax (Appeals) has erred in dismissing the appeal of the appellant in respect of addition of Employees PF amount of Rs. 18,940/- and ESI amount Rs. 3564/- totaling to Rs. 22,504/- on the ground that the appellant has failed to credit the above amount within the conformity of provisions of section 36(1)(v)(f) of the Income-tax Act. Your appellant had paid the said amounts before the due date filing the return u/s. 139(1) of the Income –tax Act. Your appellant rely on the following decision in favour of the appellant that ESI/PF if it is paid on or before filing Income Tax Return is allowable. a) M/s Essae Teraoka Pvt. Ltd. vs Deputy Commissioner of Income Tax [2014 (3) TMI 386 – Kar HC] dated Feb 4, 2014 b) Commissioner of Income Tax versus M/s. State Bank of Bikaner & Jaipur and Jaipur viduyt Vitaran Nigam Ltd. [2014 (5) TMI 222 – Raj HC] dated Jan 6, 2014 c) The Commissioner of Income Tax vs M/s Kichha Sugar Company Ltd. [2013 (6) TMI 98 – Uttarakhand HC] dated May 20, 2013 d) Commissioner of Income Tax, Udaipur vs M/s. Udaipur Dugdh Utpadak Sahakari Sangh Ltd., Udaipur [2014 (8) TMI 677 – Rajasthan HC Your appellant prays to leave to add, alter and or amend all or any of the grounds of appeal before final hearing of the appeal.”

8,69,195/-. When the matter was called for hearing, the Ld. AR for

the assessee submitted that the aforesaid amount represents non-

recovery of a portion of sales made to M/s KEC International Ltd.

(Jabalpur) during the year. The Ld. AR contended that the

disallowance has been carried out by the lower authorities mainly on

the ground that the bad debt has been claimed from transactions

executed in the same year and thus deduction is not available for

alleged bad debt under section 36(1)(vii) read with section 36(2) of

ITA No.156/Ahd/2016 [Arvind Anticor Ltd. vs. DCIT] A.Y. 2012-13 - 3 - the Act. The Ld. AR submitted that such action of the Revenue is not

sustainable in law.

behalf of the Revenue gives an impression that the deduction has been

denied under 36(1)(vii) mainly on the ground that the transactions

giving rise to bad debt pertains to the Financial Year 2011-12 (A.Y.

2012-13) itself and thus premature and secondly the bona fides of debt

becoming bad is not brought on record by the assessee. We are not

impressed by either of the two grounds broadly summarized above. A

bare reading of second proviso to section 36(1)(vii) shows that no

such fetters towards allowability of bad debt in the same year of

transaction is placed by the statute. On the contrary, the proviso make

explicit that once the amount of such debt or a part thereof has been

taken into account in computing the income of the assessee of the

previous year in which the debt becomes irrevocable or of an earlier

previous year ………., the debt struck off as irrevocable is allowable

as deduction. Therefore, the Act does not make any distinction

between the bad debt arising in the same financial year or arising from

transactions executed in earlier financial years. Thus, we do not find

any force on this line of reasoning adopted by the Revenue in this

regard. We now turn to the second reasoning of the revenue

authorities that it is incumbent upon the assessee to demonstrate that

the debt has actually become bad by factual evidences. We do not

find merit in this line of argument either having regard to the decision

ITA No.156/Ahd/2016 [Arvind Anticor Ltd. vs. DCIT] A.Y. 2012-13 - 4 - of the Hon’ble High Court in the case of TRF vs CIT (2010) 323 ITR

397 (SC). Thus, the writing off the bad debt in the books of grounds

is sufficient compliance for the purposes of deduction where the

transactions giving rise to the debts were duly taken into account for

the purposes of determination of taxable income of the assessee.

Thus, we find good deal of force in the claim of the assessee.

Accordingly, Ground No. 1 concerning bad debt is allowed in favour

of the assessee.

36(1)(va) is dismissed as not pressed.

This Order pronounced in Open Court on 26/02/2019

Sd/- Sd/- (MAHAVIR PRASAD) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 26/02/2019 Tanmay True Copy आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।