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Income Tax Appellate Tribunal, “A” BENCH, PUNE
Before: SHRI D. KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
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.
The solitary issue raised in this appeal by the Revenue is against deleting addition of Rs.1,49,24,586/- on account of ‘Bad Debts written off’.
2 ITA No. 163/PUN/2016, A.Y. 2010-11
The brief facts of the case as emanating from records are : The
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.
Shri A.K. Modi representing the Department submitted that the
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.)
On the other hand, Shri Sunil Ganoo appearing on behalf of the
assessee vehemently supported the order of Commissioner of Income Tax
(Appeals) and prayed for dismissing the appeal of Revenue.
We have heard the submissions made by representatives of rival
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.
We have also considered the decision rendered in the case of Tube
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.
In the result, the appeal of Revenue is dismissed.
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