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Income Tax Appellate Tribunal, “B”, BENCH
Before: SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-21, Mumbai in appeal No.CIT(A)-21/ITO-13(1)(1)/IT-186/2015-16 dated 08/06/2017 dated (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 19/03/2015 by the ld. Income Tax Officer-13(1)(1), Mumbai (hereinafter referred to as ld. AO).
M/s. Nuance Group India Pvt.Ltd
The first issue to be decided in this appeal is as to whether the ld CITA was justified in confirming the disallowance made by the ld AO u/s 36(1)(vii) of the Act in the facts and circumstances of the case.
2.1. We have heard the rival submissions and perused the materials available on record. We find that the assessee is one of the leading airport retailers in the world. M/s Shoppers Stop Ltd, one of India‟s leading retailers , along with assessee had formed a Joint Venture called Nuance Group India Pvt Ltd (assessee herein) , for operating the Duty Free Stores at Bangalore International Airport. The assessee is engaged in duty free retailing mainly in high end brands in liquor, perfumes, confectionary, tobacco, fashion and electronics at Bangalore International Airport. The ld AO during the course of assessment proceedings called for the details of bad and doubtful debts of Rs 1,22,45,414/- from the assessee. On perusal of the details, the ld AO observed that during the year under consideration, the assessee exported goods of tobacco , perfumes and cosmetics worth Rs 1,22,45,414/- ( $272K) to The Nuance Group AG (TNG) , Switzerland in the month of April 2011. The moment, the goods were exported, the assessee had duly shown the same as export sales by offering to income. The assessee explained that these goods were non-moving in its duty free store and there were no buyers for the same. When its sister concern TNG, Switzerland, offered to buy the said goods from the assessee at prevailing market prices, the assessee immediately utilized the the opportunity and exported the said non-moving goods to TNG Switzerland. The assessee duly complied with the customs formalities by fulfilling all the export documentation procedures etc. The assessee was making follow up with its sister concern for receipt of export proceeds in respect of goods exported in April 2011. Later an intimation was received from the sister concern i.e
M/s. Nuance Group India Pvt.Ltd TNG on 18.9.2011 that the goods are not in saleable condition and the same could not be sold to the buyer identified for selling the goods. It was stated in the said communication that TNG Switzerland would make its best efforts to sell those goods to some other customers. But later, on 24.11.2011, TNG confirmed that the goods have turned bad and were becoming hazardous warranting immediate destruction and also expressed its inability to sell those goods and make payment to the assessee. Hence the export debts become irrecoverable to the assessee company. Accordingly, the assessee had no choice but to make provision for the same as bad and doubtful debts pending approval from Reserve Bank of India (RBI). The assessee accordingly debited the profit and loss account a sum of Rs 1,22,45,414/- on account of bad and doubtful debts written off by correspondingly crediting to provision for bad and doubtful debts instead of the concerned debtors account itself. This is evident from the audited financial statements for the year ended 31.3.2012 enclosed in page 34 of the paper book. We find that the assessee had applied for approval from RBI requesting for write off of export debt vide letter dated 13.2.2015 (i.e falling in Asst Year 2015-16 ) and RBI had granted approval for write off vide its letter dated 6.3.2015 (i.e in Asst Year 2015- 16). We have gone through these correspondences which are enclosed in pages 93 to 97 of the paper book filed before us.
2.2. It is a fact that the assessee had not realized the export proceeds from TNG Switzerland. We find that the ld AR stated that the assessee had duly offered the export sales as its income at the time of export of goods in the month of April 2011 and the same is included in the total export sales reported by the assessee. We find that the assessee had filed additional evidences to substantiate the same. There is no requirement of verification of any facts by the ld AO as the same are staring on us.
M/s. Nuance Group India Pvt.Ltd Hence we admit those additional evidences and accept the contention of the ld AR that assessee had indeed reflected the export sales of Rs 1,22,45,414/- in the total sales credited to the profit and loss account. This would amount to compliance made by the assessee in terms of section 36(2) of the Act. It is not in dispute that the goods were not in saleable condition by TNG Switzerland and accordingly, there is no possibility of recovery of dues for the same by the assessee company towards export proceeds. But it cannot be brushed aside that the assessee had only made provision for bad and doubtful debts in its books of accounts instead of crediting the concerned debtors account. Hence the assessee is not entitled for deduction u/s 36(1)(vii) of the Act. Moreover, the assessee had made provision for bad and doubtful debts in respect of the export proceeds, which could be ultimately written off only after obtaining the prior permission of the RBI. We find that the RBI had granted permission to the assessee only on 6.3.2015 as stated by the assessee vide its letter addressed before the ld CITA enclosed in page 93 of the paper book. Hence the assessee would be entitled for deduction u/s 36(1)(vii) of the Act only in Asst Year 2015-16 and not in Asst Year 2012-13. Accordingly, we hold that the action of the lower authorities does not call for any interference and hence Ground No. 1.1. raised by the assessee is dismissed.
The next issue to be decided in this appeal is as to whether the ld CITA was justified in not giving the benefit of brought forward losses for Asst Year 2007-08 in the facts and circumstances of the case.
3.1. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee comprising of pages 1 to 97 of the paper book in respect of this issue.
M/s. Nuance Group India Pvt.Ltd The dispute pertains to claim of benefit of brought forward losses of Asst Year 2007-08 in the sum of Rs 1,81,66,000/-. The ld AO had observed that from the verification of the electronic return filed for Asst Year 2007- 08 under the head „details of losses to be carried forward to future years‟, current year lossess carried forward figure was reflected at Nil. Accordingly, he concluded that no losses for Asst Year 2007-08 were available for set off in future years. We find that the assessee had claimed the set off of brought forward business loss from Asst Years 2007-08 and 2008-09 amounting to Rs 1,81,66,000/- and Rs 2,05,25,198/- respectively against the business income of Rs 3,86,91,198/- for Asst Year 2012-13. The ld AR in this regard submitted before the ld CITA as under:-
“5.3.It is observed from the e-return filed for current year AY 2012-13 Schedule BFLA that Rs 386,91,199 is claimed as brought forward loss set off and losses carried forward of Rs 41,80,12,284/- after setoff and it comprises of Rs NIL for AY 2007-08 and Rs 57,44,118 for AY 2008-09 Rs.17,26,27,315/- for A.Y. 2009-10 and Rs.18,82,18,023/- for A.Y. 2010- 11 and Rs 5,14,22,828 for AY 2011-12 has been mentioned. However, in the computation of income the assessee has claimed set off of brought forward loss for A.Y. 2007-08 of Rs 1,81,66,000 which the assessing officer has not allowed. The appellant has admitted in submission filed that the return filed for AY 2007-08 in Schedule CFL details of losses carried forward for AY 2007-08 was mentioned as NIL. It has however submitted that this was a mistake and in subsequent year such claim is mentioned in the e-return filed.”
3.2. We find that the ld CITA had not taken cognizance of the submission of the assessee and merely stated that in the absence of revised return filed by the assessee, the claim cannot be entertained. We have perused the electronic return of income for the Asst Year 2007-08 which are enclosed in pages 64.3 to 64.26 of the paper book. We find that the assessee had fully reflected the loss for the Asst Year 2007-08 at Rs
M/s. Nuance Group India Pvt.Ltd 1,78,49,000/- while typing the figures of the profit and loss account enclosed in page 64.8 of the paper book for the Asst Year 2007-08. We find from Schedule CYLA “Details of Income after Set off of current year losses” for Asst Year 2007-08, the business loss figure of Asst Year 2007- 08 was not reflected thereon by the assessee. We find that merely because the same is not reflected in the relevant column, the claim of the assessee cannot be ignored, provided it is found to be legitimate. Hence in the interest of justice and fairplay, we deem it fit and appropriate, to remand this issue to the file of ld AO for denovo adjudication of verification of brought forward losses from Asst Year 2007-08 onwards so that the correct loss figure could be determined by the ld AO for consequential set off, if any, against the future income including the income for the year under consideration. Accordingly, the Ground No. 1.2 raised by the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on this 21/08/2019