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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY, JM & SHRI MANOJ KUMAR AGGARWAL, AM
Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeal by revenue for Assessment Year [AY] 2009-2010 assails the order of Ld. Commissioner of Income Tax (Appeals)-7, [CIT(A)], Mumbai dated 14/08/2012 qua relief provided to the assessee by Ld. CIT(A) against certain disallowances made by AO against ‘Bad Debts’ and ‘Rent payments’. 2. Briefly stated, the assessee, being resident corporate assessee, was subjected to an assessment u/s 143(3) for impugned AY wherein the total income of the assessee was determined at Rs.1,37,01,290/- after certain adjustments and disallowances as against returned income of Rs.66,74,732/- e-filed by the assessee on 30/09/2009. During Assessment proceedings, it was noticed that the assessee claimed an expenditure of Rs.62,33,713/- under the head ‘claims payable’, which were nothing but bad debts written off by the assessee. However, the AO rejected the claim of the assessee on the premises that the assessee failed to substantiate the fact that these debts were offered to tax in earlier years. Further, the assessee claimed certain amount under the head ‘rent’ which included an amount of Rs.3,10,000/- paid to ‘Regional Office Pay & Accounts’ on behalf of an entity namely Shanlok Enterprises. The same was also disallowed on the premises that the same was incurred on behalf of a third party and not incurred for the assessee’s business. Aggrieved, the assessee contested both the additions before Ld. CIT(A) successfully vide order dated 14/08/2012 wherein the Ld. CIT(A) after considering the various contentions deleted both the additions against which the revenue is in appeal before us. 3. The Ld. Departmental Representative assailed the findings of the Ld. CIT(A) on the ground that the assessee could not substantiate the fact Texool Limited Assessment Year:2009-10 whether the debts written off were offered to tax in earlier years and the Ld. CIT(A) provided relief to the assessee without due verification of the same. Further, the rent was paid on behalf of a third person purportedly for the use of his premises. However, the assessee could not produce any lease agreements with the said party and also could not substantiate the fact whether he has used the premises for his business purposes and hence rightly suffered disallowance at the hands of AO. Per Contra, Ld. Counsel for Assessee [AR] placed reliance on the stand of Ld. CIT(A) and contended that the assessee has written off sundry debtors in his books of accounts which in itself is sufficient to claim the Bad debts as no other conditions is required to be fulfilled in this regard as per the relevant provisions of section 36(i)(vii). These debts were shown as Sundry debtors in the Balance Sheet of earlier years and hence, the bad debts written off were allowable to the assessee. Regarding rental payment, it was contended that the assessee was operating in Kandla Special Economic Zone and was allotted land by the authority. However the allotted premises was not sufficient to fulfill the requirements of the assessee and therefore, the assessee took an adjacent premises from Shanlok Enterprises on rent under oral agreement and paid the said amount directly to the authority on behalf of this entity. Nevertheless, the premises was used for the business purposes of the assesse and hence, he was eligible to claim the same.
We have heard the rival contentions and perused the relevant material on record. So far as regarding the bad debts claim Is concerned, we find strength in the arguments of Ld. AR that the only requirement to claim the Bad Debts is that the same are written off as recoverable in the books of accounts and the assessee need not prove that the debts, in fact, have become actually bad. However, such write off could be claimed by assessee only if revenue Texool Limited Assessment Year:2009-10 qua those bad debts was offered to tax in the year of write off or in earlier years. The Ld. AR could not conclusively prove this point during proceeding before us and merely stated that these were sundry debtors written off. Therefore, in principle, while holding that the bad debts claim of the assessee was allowable, being written off as irrecoverable in the books of accounts, we restore the matter back to the file of AO for limited purpose of verifying whether the revenue qua those debts was offered to tax either in impugned AY or in earlier AY. The assessee is directed to substantiate his claim in this regard before Ld. AO failing which the AO shall be at liberty to adjudicate the same on the basis of material available on record. The first ground of assessee’s appeal stands allowed for statistical purposes.
Regarding rental payments, we find no illegality in direct payment by assessee to the authority on behalf of the lessor under an oral agreement. However, the payment by assessee on behalf of lessor constitutes ‘rental income’ in the hands of the lessor. Therefore, if the lessor has offered the same in his return of income, the assessee’s claim gains strength and becomes admissible. Therefore, this matter is also restored back to the file of Ld. AO to verify whether the stated entity has offered the impugned payments made by the assessee in his return of income or not. If yes, then the claim of the assessee becomes admissible. The assessee is also directed to provide necessary documents in this regard and substantiate his claim failing which the Ld. AO shall be at liberty to decide the same in accordance with law. This ground of assessee’s appeal also stands allowed for statistical purposes. Texool Limited Assessment Year:2009-10 6. In nutshell, the assessee’s appeal stands allowed for statistical purposes.
Order pronounced in the open court on 28th April, 2017.
Sd/- Sd/- (Saktijit Dey) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member मुंबई Mumbai; िदनांक Dated : 28 .04.2017 Sr.PS:- Thirumalesh
आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. ��थ� / The Respondent 2. आयकर आयु�(अपील) / The CIT(A) 3. आयकर आयु� / CIT – concerned 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai 5. गाड� फाईल / Guard File 6. आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai Texool Limited Assessment Year:2009-10 आयकर अपीलीय अिधकरण “ई” �ायपीठ मुंबई म�।
IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI �ी श��जीत दे,�ाियक सद� एवं �ी मनोज कुमार अ�वाल, लेखा सद� के सम� ।
BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./ (िनधा�रण वष� / Assessment Year: 2009-10) Assistant Commissioner of Texool Limited Income Tax 6 Jenkins House Circle 3(3) Henry Road बनाम/ Road.No. 609, 6th Floor Colaba Vs. Aayakar Bhavan Mumbai – 400005 M.K.Road Mumbai – 400 020 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. AAACT-1453-B (अपीलाथ� /Appellant) (��थ� / Respondent) : अपीलाथ� की ओर से / Appellant by : Dr. A.K.Nayak, Ld. DR ��थ� की ओर से/Respondent by : Shri Baldev U. Idnani, Ld. AR
C O R R I G E N D U M
It is noticed that certain unforeseen typographical errors have occurred in the above order passed by the co-ordinate Bench of Tribunal on 28/04/2017 which are being sought to be rectified by way of this corrigendum. Texool Limited Assessment Year:2009-10 2. The relevant modifications in the above order are carried out as under:- (a) Para-4 Line-4 of the Order read as follows:
“……same are written off as recoverable in the books.” The same is replaced by following words:- “……..same are written off as irrecoverable in the books.” (b) Last Line of Para-4 of the Order read as follows: “…… assessee’s appeal stands allowed for statistical purposes.” The same is replaced by following words:- “…… revenue’s appeal stands allowed for statistical purposes”. (c) Last Line of Para-5 of the Order read as follows: “…… ground of assessee’s appeal also stands allowed for statistical purposes”. The same is replaced by following words:- “…… ground of revenue’s appeal also stands allowed for statistical purposes”. (d) Para-6 of the Order read as follows: “…… the assessee’s appeal stands allowed for statistical purposes” The same is replaced by following words:- “…… the revenue’s appeal stands allowed for statistical purposes”