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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI AMARJIT SINGH & KAVITHA RAJAGOPAL
ORDER Per Kavitha Rajagopal (JM):
This appeal has been filed by the assessee company as against the order of Ld.CIT(A) under section 143(3) of the I.T. Act relevant to A.Y. 2009-10. 2. It is submitted that the said appeal was filed on various grounds and the same was decided by the Hon’ble ITAT on 08/08/2019 alongwith the Revenue’s appeal in by way of a consolidated order. It is pertinent to point out that while passing the said order, the Hon’ble ITAT Bench “B”, Mumbai inadvertently omitted to dispose of Ground No.4 of ITA
2 ITA 3383/Mum/2014 No.3383/Mum/2014. Aggrieved by this, the assessee filed a petition to recall the said order dated 09/09/2019 in M.A. No.66/Mum/2020 and the Hon’ble ITAT was pleased to pass an order dated 03/12/2021 for recalling the said order for limited purpose of disposing ground No.4 of the said appeal. The assessee is before us on the following ground of appeal:- “4. On the facts and circumstances of the case and in law the learned C.I.T.(A) erred in confirming additions made to income of the appellant by the A.O. of Rs.121.48 Crores in respect of transactions with its subsidiary Airlines Allied Services Ltd (AASL).”
3. The brief facts are that the assessee is a company engaged in the business of National and International Air Transport. The assessee company filed its return of income disclosing total loss at Rs.10,64,71,48,22,431/- for A.Y. 2009-10. During the scrutiny assessment proceedings under section 143(3), various additions and disallowances were made by the Assessing Officer which was appealed before the Ld.CIT(A), who confirmed the additions made by the Assessing Officer. Aggrieved by this, the assessee was in appeal before the Hon’ble ITAT.
4. We proceed to hear the Ld.representatives only on the sole issue of transactions with assessee’s subsidiary Airline Allied Services Ltd which the assessee claims to be bad debt. The Assessing Officer decided on this issue on the background that such claim was not related to carrying on the assessee’s business, but it was of the assessee’s subsidiary companies. The Assessing Officer further proceeded to decide on that such expenditure incurred is not wholly and exclusively incidental to the business of the assessee company and, therefore, added the expenditure of Rs.121.48 crores to the total income of the Assessee. On appeal before the Ld.CIT(A), it was held that the write off of the said amount could be 3 ITA 3383/Mum/2014 recovered from assessee’s subsidiaries and Ld.CIT(A) confirmed the addition made by the Assessing Officer.
Before us, the Ld.AR contended that the assessee has written off the said amount even in the previous year and was covered by the decision of Apex Court in TRF Ltd vs CIT 323 ITR 397 (SC). The Ld.DR vehemently argued that such debt was recoverable and on the other hand, relied on the order of the lower authorities.
Having heard both the Ld.representatives and perused the material on record, we are of the considered opinion that such dues were recoverable by the assessee from Airline Allied Services Ltd on account of reimbursable costs / expenditure incurred by the subsidiary company. The transactions with the said subsidiary company was found in previous year also as per the materials available on record. It is also evident that the assessee’s Audit Committee had stated that said amount should be written off by the assessee company and the same was said to be approved by the Board of Directors in its meeting held on 24/11/2007. Since then, the said amount has been written off in its books. Similar practice also prevailed in F.Y. 2008-09. The Assessing Officer as well as the CIT(A) did not have any evidence to controvert the same. From the facts and circumstances of the case, it is seen that such addition has been made by mere surmise and conjecture.
Thus, it is a settled position in law that it is not necessary for the assessee to prove that any amount due / debt which has become irrecoverable but it has written off as irrecoverable in the assessee’s books, need not be proved as bad debt by the assessee. We would like to place reliance on the decision of Hon’ble jurisdictional High Court of Bombay in Principal Commissioner of Income-tax-10 vs Hybrid Fiannce
4 ITA 3383/Mum/2014 Services Ltd in Income-tax Appeal No. 1265 of 2017 with Income-tax Appeal No 1469 of 2017 judgement dated February 11, 2020 and Hon’ble Supreme Court in TRF Ltd vs CIT (supra). 8. From the above observation it is hereby directed to delete the addition made and ground 4 of assessee’s appeal is allowed. 9. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 06th June , 2022.