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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI
Before: HON’BLE, SHRI G.D. AGRAWAL & SHRI KULDIP SINGH
Date of Hearing : 13.05.2019 Date of Order : 29.05.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, M/s. Onicra Credit Rating Agency of India Ltd. (hereinafter referred to as the ‘assessee’) by filing the present appeal sought to set aside the impugned order dated 03.02.2015 passed by the Commissioner of Income-tax (Appeals)-7, New Delhi qua the assessment year 2009-10 on the grounds inter alia that :-
“1. That on the facts as well as in law the Learned CIT (Appeal)- 7 New Delhi was not justified in confirming the addition of Rs.37,67,773/- TDS recoverable written off as bad debts U/s 36(1)(vii) of Income Tax Act, 1961.
2. That on the facts as well as in Law the Ld CIT(Appeal) - 7 was not justified in confirming the addition of Rs.2,97,785/- security deposit rent written off U/s 37(1) of the Income Tax Act, 1961.
3. That on the facts as well as in Law the Ld CIT(Appeal) - 7 was not justified in confirming the addition of Rs.36,680/- Centrum direct Ltd. (Advance given for services) written off U/s 37(1) of the Income Tax Act, 1961.
4. That on the facts as well as in Law the Ld CIT(Appeal) - 7 was not justified in confirming the addition of Rs.75,309/- Easy Link (given for services) written off U/s 37(1) of the Income Tax Act, 1961.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing officer noticed that the assessee has written off bad debts amounting to Rs.2,04,88,736/-. AO noticed from the balance sheet of the assessee that it has written off expenses under the head ‘bad debts’ on account of security deposit rent, TDS recoverable AY 2007-08, Easy link (Electrify charges from Mumbai Branch) and Centrum Direct Ltd. (advance given for services) to the tune of Rs.2,97,785/-, Rs.37,67,773/-, Rs.75,309/- and Rs.36,680/- respectively. Assessee claimed that bad debts written off because of earlier years because they are booked as revenue. Declining the contentions raised by the assessee, AO reached the conclusion that unclaimed TDS of earlier years and security deposits given to electricity etc. is not a part of the income of the earlier years; the security deposit is an advance given which does not form part of the profit and loss account. Likewise, unclaimed TDS is not part of the profit and loss account. It is also not verifiable that the unclaimed TDS which the assessee has written off as bad debt has ever shown up as income and thereby disallowed the total amount claimed by the assessee under the head ‘bad debts written off’ and thereby added to the income of the assessee.
Assessee carried the matter by way of an appeal before the ld. CIT (A) who has confirmed the additions by partly allowing the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1 5. So far as question of disallowance of amount of Rs.37,67,773/- claimed as bad debt written off on account of TDS recoverable is concerned, it is contended by the ld. AR for the assessee that the amount recorded as TDS recoverable for AYs 2007-08 to 2009-10 against the services rendered by the assessee which was duly created in the profit and loss account but TDS thereon could not be claimed as such in the income tax return filed for AY 2007-08 as TDS certificates were not issued by the client and all these amounts have been taken into income of the assessment years 2007-08 to 2009-10. So, we are of the considered view that when assessee has duly shown the amount on account of TDS recoverable in the profit and loss account which fact has otherwise not been disputed by the AO and pertains to the earlier years, we are of the considered view that the issue is required to be remanded back to the AO to decide afresh after providing an opportunity of being heard to the assessee. Ground No.1 is determined in favour of the assessee for statistical purposes.
GROUND NO.2 6. So far as confirming the addition of Rs.2,97,785/- by the ld. CIT (A) on account of security deposit rent written off under section 37(1) of the Income-tax Act, 1961 (for short ‘the Act’) is concerned, it is the case of the assessee that it has taken on rent over 100 properties in the different parts of the country out of which the company has vacated 30 properties during the year under assessment and no refund of security deposit of these 30 properties was made by the ownoer. We are of the considered view that when it is not in dispute that 100 properties were taken on rent by the assessee to carry out its business out of which 30 properties have been vacated but assessee claimed to have not got the refund of security deposit, the same is allowable revenue expenditure lost in the ordinary course of business. Moreover the AO has not questioned the books of account maintained by the assessee. So, in these circumstances, we are of the considered view that ld. CIT (A) has erred in confirming the addition which is not sustainable in the eyes of law hence it is ordered to be deleted subject to verification by the AO. Consequently, Ground No.2 is determined in favour of the assessee.
GROUND NO.3 7. Ld. CIT(A) confirmed the addition of Rs.36,680/- on account of advance given by the assessee to M/s. Centrum Direct Ltd. and written off as bad debt under section 37(1) of the Act. It is the case of the assessee that after advancing the amount of Rs.36,680/-, services were not availed due to poor quality but M/s.
Centrum Direct Ltd. has not refunded the advance and consequently it had to written off the said amount in profit and loss account. We are of the considered view that when assessee proved to have advanced the amount during the ordinary course of its business and books of account have not been disputed and due to non-availing of the services, the advance amount was not refunded, it certainly amounts to bad debt. Assessee has duly produced ledger account entry of sales and also showing debt entries during the assessment proceedings but ld. CIT (A) has confirmed the addition without deciding the issue in controversy. So, we are of the considered view that this issue also requires to be remanded back to the AO to decide afresh after examining the documents relied upon by the assessee. Consequently, Ground No.3 is determined in favour of the assessee for statistical purposes.
GROUND NO.4
Ld. CIT (A) confirmed the addition of Rs.75,309/- on account of disallowance of unrealized amount given for services to M/s. Easy Link on the ground that this debt does not form part of the previous year or earlier year. It is the case of the assessee that this unrecoverable advance is incidental to the business and deduction was alternatively admissible under section 37(1) of the Act. Undisputedly, the amount of Rs.75,309/- was advanced by the assessee to M/s. Easy Link against hire charges and electricity charges but on closer of its Bombay branch, the said amount was forfeited by M/s. Easy Link and consequently the same was written off as on 31.03.2009. When the amount of Rs.75,309/- advanced by the assessee on account of security deposit was forfeited by the owner having been given in the ordinary course of business.
Certainly it was incidental to the business and on business loss it is eligible for writing off as bad debt. Consequently, addition of Rs.75,309/- confirmed by the ld. CIT (A) is not sustainable in the eyes of law, hence ordered to be deleted. 9. Resultantly, the appeal filed by the assessee is allowed for statistical purposes. Order pronounced in open court on this 29th day of May, 2019.