GEO FOUNDATION AND STRUCTURES PRIVATE LTD,ERNAKULAM vs. ACIT, CIRCLE-1(2), KOCHI

Brief facts of the case are that the appellant is a company incorporated under the provisions of Companies Act, 1956. It is engaged in the business of execution of civil contracts. The return of income for AY 2012-13 was filed on 29.09.2012 declaring total income of Rs. 4,60,66,461/-. Against the said return of income, the Geo Foundation and Structures Pvt. Ltd. assessment was completed by the ACIT, Corporate Circle-1(2), Kochi (hereinafter called "the AO") vide order dated 23.03.2015 passed u/s. 143(3) of the Income Tax Act, 1961 (the Act) at a total income of Rs. 24,11,26,360/- after making several disallowances aggregating to a sum of Rs. 19,50,59,894/-. The disallowances, inter alia, includes disallowance on account of bad debts of Rs. 1,39,02,125/- and loss on sale of assets of Rs. 25,38,250/-, with which, we are concerned. The AO disallowed the loss on sale of fixed assets debited to the Profit & Loss A/c. by holding that the same is not eligible as it is capital in nature. In respect of bad debts of Rs. 1,39,02,125/-, the factual background leading to the above addition is that during the previous relevant to the assessment year under consideration, the appellant had written off the following amounts due from several parties as extracted in para 7 of the amt order: -

Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.

Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.

Ground No. 3 challenges the disallowance of loss on sale of fixed assets of Rs. 25,38,250/-. Admittedly, these assets form part of fixed assets on which claim for depreciation was allowed. Since it is Geo Foundation and Structures Pvt. Ltd. not capital nature it cannot be allowed as deduction. We did not find any illegality in the orders of the learned lower authorities. Accordingly. This ground of appeal stands dismissed.

Ground of appeal No. 4 challenges the disallowance of claim of bad debts of Rs. 1,39,02,125/-. It is claimed that since the advanced was made during the course of business of the appellant and the same was written off in the books of account, the same should be allowed. On a perusal of the assessment order, it would reveal that the AO had disallowed the claim solely on the ground that the loss incurred on account of write off of the advance paid to Mr. B. Venkataram Reddy towards acquisition of land, is capital in nature. Before the AO no plea was taken that this advance was made towards acquisition of land which constitutes stock-in-trade in the hands of the assessee. Nowhere this plea was taken before the AO. However, before the CIT(A), the appellant took a plea that the advance was made towards acquisition of land which constitute part of business of the appellant. However, no material was placed before us to show that this advance was made for acquisition of stock-in-trade. Therefore, without entering into the debate whether the debt had been written off or not, it is suffice to hold that the condition precedent for allowance of bad debts, i.e. debt in the ordinary course does not stand satisfied. Therefore, the claim cannot be allowed.