The Principal Commissioner of Income TAx-I vs. Global Calcium Pvt Ltd

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TCA/138/2024HC Madras15 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the Revenue. The dismissal was based on the submission by the Revenue's Senior Standing Counsel that the matter was covered under the Low Tax Effect as per Circular No. 9/2024 dated 17.09.2024. Consequently, the substantial questions of law arising in the appeal were kept open to be decided at a later point in time. No order was made as to costs. The judgment does not provide any findings or reasoning on the merits of the substantial questions of law raised.

What were the facts?

The appeal was filed by the Principal Commissioner of Income Tax – 1, Chennai (Revenue) against an order of the Income Tax Appellate Tribunal (ITAT), Chennai. The ITAT's order, dated 29.12.2023, was passed in ITA No. 2918/CHNY/2019. The assessee is M/s. Global Calcium Pvt. Ltd. The appeal concerns assessment years not explicitly stated but relates to the deductibility of certain write-offs. The ITAT had upheld a decision of the CIT(A) which directed the Assessing Officer to allow the assessee's claim for write-off of dues from NSEL as irrecoverable bad debts under Section 36(1)(vii) and Section 28 of the Income Tax Act, 1961. The Revenue contested this, particularly regarding advances to a sister concern and bad debts amounting to Rs. 111,68,046/- and Rs. 320,86,950/-, respectively.

What were the issues?

The High Court had to decide four substantial questions of law: 1. Whether the Tribunal was justified in upholding the CIT(A)'s direction to allow the assessee's claim to write off dues from NSEL as irrecoverable bad debts under Section 36(1)(vii) and Section 28 of the Income Tax Act, 1961. 2. Whether the Tribunal's reasoning was proper, given the Assessing Officer's finding that the assessee did not qualify for deduction under Section 36(2)(i) and (ii) as no capital was invested in NSEL, the amount was never offered for taxation, and the activity was not money lending. 3. Whether the Tribunal was justified in allowing the write-off of advances of Rs. 111,68,046/- to a sister concern, classifying them as strategic business loans eligible for deduction under Section 36(1)(vii) and Section 28, despite the assessee being a manufacturer and not in money lending. 4. Whether the claim for bad debts of Rs. 320,86,950/- should be allowed when Section 36(2) conditions were not satisfied, and the claim was premature given substantial amounts confiscated and available for distribution under court monitoring. The Revenue argued that the assessee did not qualify for deduction under Section 36(2)(i) and (ii) as no capital was invested in NSEL, and the activity was not money lending. The Revenue also contended that the bad debt claim was premature. The judgment does not record specific arguments from the assessee.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 36(1)(vii),Section 28,Section 36(2)(i),Section 36(2)(ii)

AI-generated summary — verify with the full judgment below

T.C.A.No.138 of 2024 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 15.10.2024 CORAM : THE HONOURABLE MR.JUSTICE R. SURESH KUMAR AND THE HONOURABLE MR.JUSTICE C. SARAVANAN T.C.A.No.138 of 2024 Principal Commissioner of Income Tax – 1 Chennai. .. Appellant Vs. M/s. Global Calcium Pvt. Ltd. No.125 and 126, SIPCOT Industrial Complex Hosur – 635 126 PAN: AAACG2998-N .. Respondent Prayer: Appeal filed under Section 260-A of the Income Tax Act, 1961, against the order of Income Tax Appellate Tribunal, Madras “C”

Bench,

Chennai

dated

29.12.2023

passed

in I.T.A.No.2918/CHNY/2019. For the Appellant : Mr.T.Ravikumar Senior Standing Counsel JUDGMENT (Order of the Court was made by R.SURESH KUMAR, J.) The present tax case appeal was admitted on 23.07.2024 by this Court on the following substantial questions of law:- "1. Whether on the facts and circumstances of the case, the Tribunal was justified in upholding the decision of CIT (A) who had directed the Page 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.138 of 2024 Assessing Officer to allow the Assessee claim to write off through NSEL by holding that the dues from NSEL were irrecoverable and that the same was bad debts in accordance with the provisions of Section 36(1)(vii) as well as Section 28 of the Income Tax Act, 1961? 2. Whether the reasoning and finding of the Tribunal is proper especially when the Assessing Officer had clearly established in the Assessment Order that the Assessee did not qualify for deduction as per Section 36(2)(i) and (ii) of the Act as no capital was invested by the Assessee on NSEL and never been offered for taxation in any of the earlier years and such activity cannot be classified as money lending activity? 3. Whether the Tribunal was justified in allowing the write off of advances of Rs.111,68,046/- by holding that the advancing loans/ICDS to its sister concern was a strategic business loans and that when written off in the books would be eligible for deduction not only under Section 36(1)(vii) but also under Section 28 of the Act especially when the Assessee was a manufacturer of minerals and vitamins component and was not in money lending activity? Page 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.138 of 2024 4. Whether the claim of the Assessee in respect of bad debts amounting to Rs.320,86,950/- is to be allowed especially when the conditions stipulated under Section 36(2) were not satisfied and that the claim made was a premature claim since nearly Rs.5600 crores has been confiscated and were available for distribution and was monitored by the Mumbai High Court Committee and other Agencies?" 2. It is submitted by the learned Senior Standing Counsel appearing for the appellant Revenue that this matter is covered under the Low Tax Effect as per the recent Circular dated 17.09.2024, in Circular No.9/2024. 3. Hence, this appeal stands dismissed, as covered under the low tax effect and the substantial questions of law arising in this appeal are kept open to be decided at the later point of time. There shall be no order as to costs. (R.S.K., J.) (C.S.N, J) 15.10.2024 Neutral Citation:Yes/No drm Page 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.138 of 2024 R. SURESH KUMAR, J. AND C. SARAVANAN

, J.

(drm) T.C.A.No.138 of 2024 15.10.2024 Page 4 of 4 https://www.mhc.tn.gov.in/judis

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