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Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI C.N. PRASAD & SHRI RAJESH KUMAR
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 04.04.2014 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.
The sole issue raised in the various grounds of appeal by the assessee is against the confirmation of addition of Rs.2,93,15,493/- by CIT(A) as made by the AO on account of writing off the DFEC licenses beside raising the issue of non granting off sufficient opportunity.
2 M/s. Elite International Pvt. Ltd.
The facts in brief are that the assessee is engaged in the business of manufacturing of textiles made-ups and handloom products. During the year the assessee has written off Rs. 2,93,15,493/- on account of non recovery of receivable from transfer of DEFC licenses which were sold in financial year 2007-08. Upon sale of the said DEFC licenses to GHCL, income was recognized by the assessee in assessment year 2008-09. The said licenses remained unutilized for the reason that the licenses were not transferable and purchaser could not use these licenses. The amount shown as receivable was not realized and ultimately has to be written off during the year. So this is just a reversal of income which was recognized in A.Y. 2008-09 on account of sale of DFEC licenses by writing off the amount shown as receivable when the same could not be used due to technical difficulties. AO during the assessment proceedings added the same to the income of the assessee for the reasons that no details/evidences were produced in the assessment proceedings.
The ld CIT(A) also dismissed the appeal of the assessee upholding the order of AO after considering the assessee’s contentions.
After hearing both the parties and perusing the material on record, we find that the assessee sold export licenses to GHCL during the financial year 2007-08 which could not be used by the purchaser due to non transferability of the said licenses in favour of the GHCL and therefore these remained unused till the current financial year and finally expired during
3 M/s. Elite International Pvt. Ltd. the year. The said licenses were transferred because the assessee was in a very precarious financial position and and could not arrange to export the materials. It is also undisputed that the income was duly shown by the assessee in the AY 2008-09 when these licenses were sold as is clear from the records before us and amount due was shown as recoverable/receivable from GHCL. The licenses were returned and no payment was made to the assessee. During the year we observe that it is mere a reversal of income which was recognized in A.Y. 2008-09 on account of sale of GHCL licenses of Rs.2,93,15,493/- by way of writing off and has to be allowed as deduction as the recovery could not be effected due to non transferability of the licenses as is apparent from the following :-
4 M/s. Elite International Pvt. Ltd. We find from the records before us that the assessee has produced all these export licenses before the lower authorities however the assessee was denied the legitimate claim of write. It is clear from the above that the export licenses were non transferable. In view of these facts we are not in agreement with the conclusion of the ld CIT(A). In our considered view the claim of the assessee is quite legitimate and thus admissible. Accordingly we set aside the order of AO and direct the AO to allow the claim of the assessee.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 24.08.2018.