ASSISTANT COMMISSIONER OF INCOME-TAX vs. CHATRAPATI SAMBHAJI RAJE SAKHAR UDYOG LTD., AURANGABAD

आदेश आदेश / ORDER आदेश आदेश

PER VIKAS AWASTHY, JM :

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-I, Aurangabad dated 27-11-2015 for the assessment year 2010-11.

2 ITA No. 163/PUN/2016, A.Y. 2010-11

assessee is engaged in the business of manufacture and sale of Sugar,

Alcohol and its bi-products. During the course of assessment proceedings,

the Assessing Officer made addition of Rs.1,49,24,586/- after disallowing

the assessee’s claim of expenditure under the head “Loan written off”.

Aggrieved by the assessment order dated 17-09-2014 passed

u/s.143(3) r.w.s.147 of the Income Tax Act, 1961 (herein after referred to

as ‘the Act’), the assessee filed appeal before the Commissioner of Income

Tax (Appeals). The Commissioner of Income Tax (Appeals) after

considering the facts of the case and various judgments allowed the

assessee’s claim of bad debts written off. Against the order of

Commissioner of Income Tax (Appeals), the Revenue is in appeal before the

Tribunal.

CIT(A) has erred in deleting the addition. The assessee has failed to show

that the debts have actually become bad. Further, the assessee has also

failed to show the efforts made to recover the loans declared as bad debts

before writing off. The ld. Departmental Representative vehemently

supported the finding of Assessing Officer and prayed for setting aside the

impugned order. The ld. Departmental Representative submitted that out

of Rs.1,49,24,586/- written off as bad debt, the assessee has paid

Rs.1,01,03,075/- as advance to contractors. Hence, the said amount

cannot be considered under the head sundry debtors, consequently non

recovery of the same cannot be categorized as bad debt. In support of his

submissions, the ld. Departmental Representative placed reliance on the

3 ITA No. 163/PUN/2016, A.Y. 2010-11

judgment of Hon’ble Madras High Court in the case of Tube Investments of

India Ltd. Vs. JCIT reported as 67 taxmann.com 59 (Mad.)

assessee vehemently supported the order of Commissioner of Income Tax

(Appeals) and prayed for dismissing the appeal of Revenue.

sides and have perused the orders of the authorities below. A perusal of

the impugned order shows that the assessee has written off

Rs.1,49,24,591/- in the profit and loss account. Out of the above said

amount Rs.48,21,516/- relates to sundry debtors and the balance

Rs.1,01,03,075/- is advances given to the harvesting and transport

contractors and suppliers.

In so far as writing off of bad debts Rs.48,21,516/- is concerned, the

Commissioner of Income Tax (Appeals) has granted relief to the assessee by

following the judgment of Hon’ble Supreme Court of India in the case of

TRF Ltd. Vs. CIT reported on 323 ITR 397. The Hon’ble Apex Court has

held that after the amendment of section 36(1)(vii) w.e.f. 01-04-1989, it is

not necessary for the assessee to establish that the debt in fact has become

irrecoverable. It is enough if the bad debt is written off as irrecoverable in

the accounts of the assessee. Thus, in view of the ratio laid down by the

Hon’ble Supreme Court of India, we do not find any infirmity in the

decision of Commissioner of Income Tax (Appeals) in allowing the

assessee’s claim of writing off of Rs.48,21,516/- as bad debt.

4 ITA No. 163/PUN/2016, A.Y. 2010-11

As regards balance amount of Rs.1,01,03,075/-, the Commissioner

of Income Tax (Appeals) has held that it is an allowable business

expenditure. The Commissioner of Income Tax (Appeals) has given a

categoric finding that advances were given to the harvesting and transport

contractors during the course of business, thus, such advances have close

proximity with the business activity carried out by the assessee. The

Commissioner of Income Tax (Appeals) after considering various decisions

including the decisions rendered in the cases of Mohan Meakin Ltd. Vs.

CIT reported as 348 ITR 109 (Delhi) and Harshad J. Choksi Vs. CIT

reported as 25 taxmann.com 567 (Bom.): 349 ITR 250 (Bom.) held that the

advances given by the assessee are allowable as business expenditure. We

do not find any error in the findings of the Commissioner of Income Tax

(Appeals) in deleting the addition made by Assessing Officer. Accordingly,

the impugned order is upheld and the appeal of Revenue is dismissed

being devoid of any merit.

Investments of India Ltd. Vs. Jt. CIT (supra). We find that the same is

distinguishable on the facts. Hence, the said judgment does not support

the case of Revenue.

Order pronounced on Tuesday, the 14th day of August, 2018.

Sd/- Sd/- (डी. क�णाकरा राव/D. Karunakara Rao) (िवकास अव�थी / Vikas Awasthy) लेखा सद�य / ACCOUNTANT MEMBER �याियक सद�य / JUDICIAL MEMBER

पुणे / Pune; �दनांक / Dated : 14th August, 2018 Satish

5 ITA No. 163/PUN/2016, A.Y. 2010-11

आदेश क� �ितिलिप अ�ेिषत / Copy of the Order forwarded to : आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत आदेश क� �ितिलिप अ�ेिषत

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. आयकर आयु� (अपील) / The CIT(A)-I, Aurangabad 3. 4. The Pr. CIT-I, Aurangabad िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “A” ब�च, 5. पुणे / DR, ITAT, “A” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

आदेशानुसार / BY ORDER,

// True Copy // Senior Private Secretary, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune