ATCOM TECHNOLOGIES LTD,MUMBAI vs. ACIT CIR 6(1), MUMBAI

Atcom Technologies Ltd. Addl. Commissioner of Income Tax, 6-A, Lalwani Indl Estae 14 G.D. Circle 6(1) Vs. Ambedkar Mumbai Mumbai-400 031 Appellant .. Respondent PAN No. AABCA2058C Assessee by .. S/Shri K Gopal & Jitendra Singh, AR Revenue by .. Shri Rahid RAman, CIT DR Date of hearing .. 23-03-2017 Date of pronouncement .. 07-04-2017 O R D E R PER MAHAVIR SINGH, JM:

This appeal by the assessee is arising out of the order of CIT(A)-14, Mumbai, in appeal No. CIT(A)-14/Rg.6(1)/IT-331/2009-10 dated 04-12-2003. The Assessment was framed by ACIT Circle-6(1), Mumbai for the A.Y. 2004-05 vide order dated 26-11-2009 under section 143(3) read with section 263 of the Income Tax Act, 1961 (hereinafter ‘the Act’).

1.1 On the Facts and Circumstances of the Case and in Law, the Learned CIT(Appeals) has erred in upheld the disallowance of a sum of Rs.2,14,525/- under section 35D of the Income Tax Act by the Assessing Officer, in contrast of the direction of the Hon' C.I.T given vide his order dated 29.12.2008 under order passed u/s 263 of the Income Tax Act.

Atcom Technologies Ltd. AY:04-05 1.2 The claim of the appellant u/s 35D was allowed in the earlier years. Therefore, as per direction of CIT - 6, Mumbai in his order u/s 263, the claim should be allowed in the current year.”

Aggrieved assessee is in second appeal before Tribunal. 4. Even now, before us the assessee’s Counsel could not furnished any evidences in support of its claim by stating that all the records were destroyed in fire and hence no details are available with the assessee. In view of the above facts that the details are not available with the assessee, we have no reason to interfere in the order of CIT(A) and hence the same is confirmed.

Atcom Technologies Ltd. AY:04-05

2. DISALLOWANCE OF RS.52,41,50,337/- ON ACCOUNT OF BED DEBTS:

2.1 On the facts and circumstances of the case and in Law, the learned CIT (Appeals) has erred in upheld the disallowance of a sum of Rs.52,41,50,337/- on account of Bad Debts.

2.2 On the facts and circumstances of the case and in law, your appellant has fulfilled both the conditions laid down u/s 36(i)(viii) of the Income Tax Act, 1961 to eligible to claim deduction on account of bad debts. Under the provision of section 36(1)(viii) of the income tax act, the appellant is not required to prove that the debt has become bad. Once the amount has been written off as bad debts in the books of assessee, the same has to be allowed.

2.3 On the facts and circumstances of the case and in law, the learned CIT (Appeals) has rejected the claim of the appellant on the grounds that the assessee has not produce any evidence to prove its claim that the amount is shown as income in the earlier years, without considering the fact that only sundry debtors has been written off as the bad debts and the sundry debtors is created by way of sales made in the earlier years which is shown as the income in the earlier years.”

Atcom Technologies Ltd. AY:04-05 destroyed / lost in the fire. The CIT(A) confirmed the disallowance by observing in Para 6.3 and 6.4 as under: - “6.3 I have considered the facts of the case, submission of the appellant and the assessment order and the order of CIT-6, Mumbai, it is an admitted fact that the assessee has not produced any evidence to prove its claim that the amount is shown as income in the earlier years. The Hon'ble Supreme Court in the case of M/s. TRF Limited 323 ITR 397 has held that only debts which have been shown in accounts as income can be written off as bad debts. The same view i.e. debt must be shown in accounts as income of assessee has been upheld in the case of Lal Woollen and Silk Mills Pvt. Ltd. 333 ITR .254. Mere statement by appellant that the details are lost in fire is not enough to substantiate its claim.

6.4 It is a settled law that onus is on the assessee to prove his claim made by him. In the instant case, the appellant has not. been able to substantiate its claim that amount written off as debt was shown as income in earlier years. Since this has not been done by the assessee, the amount of Rs.52,41,50,337/- claimed as bad debts disallowed by A.O. is upheld.”

Aggrieved, now assessee is in second appeal before Tribunal.

3. DISALLWOANCE OF CAPITAL LOSS OF Rs. 2,26,97,997/-.

3.1 On the facts and circumstances of the case and in law, the learned CIT (Appeals) has erred in upheld the disallowance made on account of capital loss of 2,26,97,997/- 3.2 On the facts and circumstances of the case and in law, the learned CIT (Appeals) has not considered the requirements of the Accounting Standard – 16 issued by the ICAI, whereby the interest cost was capitalized in the earlier years, however as the advance given for machinery is to be written off, hence the interest portion on such advance has also written off and the same shall be available as deduction.

3.3 On the facts and circumstances of the case and in law, the learned CIT (Appeals) had erred in considering the interest expenses as capital expenditure.”

Atcom Technologies Ltd. AY:04-05 V1, Mumbai The CIT(A)-VI, Mumbai has made enhancement u/s.251 of the Act in respect of said item. Therefore, the AO. while computing income u/s.143(3) r.w.s. 263 has correctly included this item in the total income. In Ground No.1 the assessee has himself sought relief in the order u/s.143(3) r.w.s. 263 where the CIT(A) has allowed relief against the original order. The A.0. has already been directed to do the needful and therefore, in ground No.5 the assessee cannot take a contradictory stand that the amount, of capital Loss cannot be disallowed as this issue has already been adjudicated and has been held against the assessee by the CIT(A). The CIT(A) in its order No. CIT(A)-VI/ITO-6(1)(3)/166/2006- 07 dated 28.01.2008 held as under :-

"I have duly considered the submission of the Ld. A.R. However, I do not agree with the submission of the A.R. that the amount of interest incurred by the assessee on purchase of assets is allowable as per AS-16. Even the AS-16 prescribes that the amount of borrowing cost is eligible for capitalization. In this 'case, the assessee has purchased assets by borrowing funds. Hence, the interest is required to be capitalized. However, in this year, the assessee has written off this interest on the ground that the assets could not materialize and hence the interest is to be allowed as revenue expenditure. The AO has rightly disallowed the claim of the assessee as interest on borrowed funds for purchase of machinery as capital expenditure. However, while computing total income, the A.O. has mistakenly disallowed only a sum of Rs,447.59 lakhs. Since the A.R. has not given any valid reason for-rot Page 6 of 7

Atcom Technologies Ltd. AY:04-05 disallowing the entire interest expenditure capitalized in the books of accounts, the entire interest of Rs474.57 is disallowed and added to the total income of the assessee. The A.0. is directed to issue revised demand notice to the appellant. The argument of the A.R. that the interest should be allowed in amount was not allowable as the nature of expenditure was capital in nature. In the facts and circumstances of the case, the disallowance made by the A.O. is enhanced to Rs,674,57 lakhs. These grounds of appeal are disposed off accordingly. "

10. We have gone through the facts and circumstances of the case. We find that this issue has already adjudicated by the CIT(A) in appeal no. CIT(A)- vi/ITO-6(1)(3)/166/2006-07 dated 28-01-2008. Hence, the same is dismissed.