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Income Tax Appellate Tribunal, KOLKATA BENCH “A” KOLKATA
Before: Shri N.V.Vasudevan & Shri Waseem Ahmed
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-XX, Kolkata dated 02.01.2014. Assessment was framed by ACIT, Range-2, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 27.12.2010 for assessment year 2008-09. The ground raised by the Revenue per its appeal is as under:-
1. That on the facts and circumstances of the case, the Ld. CIT(A) is not justified in deleting disallowances of Rs.49,51,430/- and Rs.13,61,849/- (wrongly written Rs.13,48,719/-) on written-off of advance on account of Railway indent booking and advance for Railway freight for transportation of goods respectively while there is no provision for allowing write-off of advances made previously.”
A.Y. 2008-09 DCIT Cir-2, Kol. Vs. M/s Navyug Enterprises Pvt Ltd. Page 2 Shri Sallong Yaden, Ld. Senior Departmental Representative represented on behalf of Revenue and Shri Ravi Tulsiyan, Ld. Authorized Representative appeared on behalf of assessee.
Only issue raised by Revenue in this appeal is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for ₹49,51,430/- and ₹13,61,849/- on account of advances given to the railways for booking.
Facts in brief are that assessee in the present case is a Private Limited Company and engaged in export business. The assessee, in the year under consideration has filed its return declaring total income of ₹1,40,35,050/- comprising of business income, house property income and other source of income. Subsequently the case was selected scrutiny under CASS module and accordingly notice u/s. 143(2) was issued upon the assessee. The assessment was framed u/s. 143(3) of the Act at a total income of ₹2,17,05,050/- after making certain additions / disallowances.
The assessee, in the year under consideration has written off the advance given to the railways for indent bookings and railway freight for ₹49,51,430/- and ₹13,61,849/- respectively. On question by AO for the aforesaid written off amount, assessee replied that both advances were made for the transportation of goods but goods were not transported through railway, therefore, the advances became irrecoverable and accordingly the same was forfeited by railways. Further, assessee submitted that advances were given in the course of trading activities and therefore eligible for deduction. However, AO disregarded the plea of assessee by observing that there is no provision for allowing deduction of the advance written off u/s 36(1)(vii) of the Act. It was also observed by AO that advances were given by assessee in earlier years and these are also not eligible for deduction u/s 37(1) of the Act. The aforesaid amount was disallowed and added back to the total income of assessee.
Aggrieved, assessee preferred an appeal before Ld. CIT(A), whereas assessee submitted that advances were given to railways in ordinary course of business. The aforesaid amount represented the loss incidental to the A.Y. 2008-09 DCIT Cir-2, Kol. Vs. M/s Navyug Enterprises Pvt Ltd. Page 3 business of assessee. Therefore, same is allowable as deduction u/s. 37(1) of the Act. After considering the submission of assessee, Ld. CIT(A) deleted the addition made by AO by observing as under:- “… … a payment of Rs.49,51,430/- and Rs.13,48,719/- was made to the Railways on account of Railway Indent Bookings for the purpose of carrying of goods. The deposits were adjustable against subsequent bills raise by the Railways on account of Transportation of goods through the rakes, however, due to failure to make the transportation of goods, the amount of Rs.49,51,430/- was forfeited by the Railways during the year. Further, the amount of Rs.13,48,719/- was also could not be adjusted against actual transportation the appellant treated it as non recoverable and accordingly written off both the amounts in the books of account. I find from the fact that the deposits/advances was made towards transport expenses to be made as per Railway Indent Booking System. The deposits were made during the A.Y 2006-07 and 2005-06 respectively for the purpose of expenses to be incurred in the year in which transportation of goods take place. During the year under consideration, the amount of Rs.49,51,430/- was forfeited by the Railways and Rs.13,48,719.- was written off due to non adjustment against actual transportation. I find merit in the argument of the appellant that the amounts incidental to the business f the appellant are allowable expenditure u/s. 28 of the IT Act. It was the consistent business practice of the appellant to make deposits with the railways for future transportation of goods. The claim of expenditure was being made in the year of actual transportation of goods but due to non adjustment of the amount against actual transportation, the same became non recoverable during the year and thereby, written off in the books of account. In view of the facts and circumstances of the case and case laws cited in para 3-1 by the appellant, the AO is directed to delete the addition of Rs.49,51,430/- and Rs.13,48,719/- respectively.”