Income Tax Appellate Tribunal - Kolkata
Ito, Ward-15(1), Kolkata, Kolkata vs M/S Merlin Resources Pvt. Ltd., Kolkata on 24 July, 2019
I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011)
&
I.T.A. No.64/KOL/2017 (A.Y. 2010-2011)
Merlin Resources (P) Limited
IN THE INCOME TAX APPELLATE TRIBUNAL,
KOLKATA 'A' BENCH, KOLKATA
Before Shri P.M. Jagtap, Vice-President (KZ)
and Shri S.S. Viswanethra Ravi, Judicial Member
I.T .A. No. 90/KOL /2017
Assessment Year: 2010-2011
Income Tax Officer,.........................................................................Appellant
Ward-15(1 ), Kolkata,
Aayakar Bhawan Po orva,
E.M. By-Pass,
110, Shanti Pally, Ko lkata-700 107
-Vs.-
M/s. Merlin Resourc es Pvt. Limited,......... ..................................Respondent
9B, Wood Street, Kolkata-700 016
[PAN: AABCM7285P]
&
I.T .A. No. 64/KOL /2017
Assessment Year: 2010-2011
M/s. Merlin Resourc es Pvt. Limited,......... ..................................Appellant
9B, Wood Street, Kolkata-700 016
[PAN: AABCM7285P]
-Vs.-
Income Tax Officer,..........................................................................Respondent
Ward-8 (1), Kolk ata,
Aayakar Bhawan,
P-7, Chowringhee Square,
Kolkata-700 069
Appearances by:
Shri A.K. N ayak, CIT , D.R. & Shri C.J . Singh, JCIT, Sr. D.R., fo r the Department
Shri A.K. Tibrewal, FCA, for the assessee
Date of concluding th e hearing : Ju ne 13, 2019
Date of pronouncing the order : Ju ly 24, 2019
O R D E R
Per Shri P.M. Jagtap, Vice-President (Kolkata Zone):-
These two appeals, one filed by the assessee being ITA No. 64/KOL/2017 and the other filed by the Revenue being ITA No. 1 I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011) & I.T.A. No.64/KOL/2017 (A.Y. 2010-2011) Merlin Resources (P) Limited 90/KOL/2017, are cross appeals, which are directed against the order of ld. Commissioner of Income Tax (Appeals)-12, Kolkata dated 27.10.2016.
2. First we shall take up the Revenue's appeal being ITA No. 90/KOL/2017, which involves a common issue relating to the deletion by the ld. CIT(Appeals) of the addition of Rs.1,50,00,000/- made by the Assessing Officer on account of assessee's claim for bad debts written off.
3. The assessee in the present case is a Company, which is engaged in the business of Finance and Securities. The return of income for the year under consideration was filed by it on 21.09.2010 declaring total income at 'NIL'. In the profit & loss account filed along with the said return, a sum of Rs.1,50,00,000/- was debited by the assessee on account of bad debts written off. During the course of assessment proceedings, it was explained by the assessee that a sum of Rs.4,00,00,000/- was given as loan to M/s. Elbee Services Limited on 10.05.1997 and after providing for interest charged on the said loan, a total amount of Rs.9,85,61,855/- had become receivable from M/s. Elbee Services Limited as on 31.03.2003. It was submitted that the said receivable amount was written off in part as bad debts as follows:-
A.Y. 2006-07...............Rs.1,97,12,371/- A.Y. 2008-09...............Rs.3,80,00,000/- A.Y. 2009-10...............Rs.1,75,00,000/- A.Y. 2010-11...............Rs.1,50,00,000/- On specific query raised by the Assessing Officer, it was explained by the assessee that efforts were being made to recover the amount receivable from M/s. Elbee Services Limited and as agreed mutually between the assessee and the said party, the amount receivable in part was written off as bad debts in different years. This explanation offered by the assessee was not found satisfactory by the Assessing Officer. According to him, the action of the assessee in writing off the concerned debt only in part as 2 I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011) & I.T.A. No.64/KOL/2017 (A.Y. 2010-2011) Merlin Resources (P) Limited per the mutual understanding with the concerned debtor could not fulfil the conditions stipulated in section 36(1)(vii) read with section 36(2) of the Act as it clearly amounted to a devise reducing the taxable profit of the assessee-company. He accordingly disallowed the claim of the assessee for deduction of Rs.1,50,00,000/- on account of bad debts in the assessment completed under section 143(3) dated 28.03.2013.
4. The disallowance made by the Assessing Officer on account of its claim for bad debts written off was challenged by the assessee in the appeal filed before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the disallowance made by the Assessing Officer on account of bad debts written off for the following reasons given in paragraph no. 4.2 of his impugned order:-
"4.2. I have carefully considered the facts of th e case. The Assessing officer has observed th at th e appellant h as given loan of Rs.4 cro re to Elbee Services (P) Ltd on 10.05.1997 which was being writ ten off in parts starting fro m F.Y.2005-
06. A part of the same loan h ad been written off in the immediately preceding year as well. Th e issue came up before the CIT(A)-3, Kolkata in appeal no. 21/CIT(A)/Cir- 8/14-15(11-12)/Kol for the A.Y.2009-10. In his o rder dated 29.01.2015 disposing off the said appeal, Ld. CIT(A)-3, Kolkata after discussing fact ual and legal position, deleted the disallowance observing th at the section 36(1)(vii) of Income Tax Act has been amended w.e.f. 1.4.1989, He hel d the view that as per t he amended section as held by Hon'ble Supreme Court in the case of T.R.F. Lt d v CIT(2010) 323 ITR 397, the assessee h as not to est ablish t hat the debt has become irrecoverable in the year in which it is written off. The only condition is that the debt should be written off in the books of accounts. Since in the case of the appellant it is not in dispute that th e appellant has writt en off the debt of Rs.1 ,75,00,000/- which relates to its mo ney lending business, in its books of accounts hence, he was of the view that the write off of bad debt of Rs.1 ,75,00,000/- is an allowable deduct ion and acco rdingly, the AO was not justified in disallowing Rs.1,75,0 0,000/- and th us th is ground of the appeal was allowed by the CIT (A)-3 .
The material facts in the year under considerat ion are identical. Th e assessee h as cl aimed a bad debt of 3 I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011) & I.T.A. No.64/KOL/2017 (A.Y. 2010-2011) Merlin Resources (P) Limited Rs.1 ,50,00,000/- under sec 36(1 )(vii) of th e I.T Act . I agree with the reasoning given by Ld.C IT (A)-3 in A.Y 09-10, therefo re, the disallowance of Rs. 1,50 ,00,0 00/- is delet ed".
Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
5. At the time of hearing before the Tribunal, ld. Representatives of both the sides have agreed that this issue is squarely covered in favour of the assessee by the decision of the Tribunal rendered in assessee's own case for A.Y. 2009-10 vide its order dated September 22, 2017 passed in ITA No. 383/KOL/2015, wherein the action of the ld. CIT(Appeals) in deleting the similar disallowance made by the Assessing Officer on account of bad debts written off comprising the part amount receivable from M/s. Elbee Services Limited was upheld by the Tribunal for the following reasons given in paragraph no. 6 of its order:-
"6. As regards the revenue's appeal , it is observed that the issue involved therein rel ating to the assessee's cl aim fo r deduct ion on account of bad debts writt en off is sq uarely covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of TRF Ltd. (supra) as rightly held by the Ld. C IT (A). Even the CBDT h as accepted this posit ion and issued a circular no 12/2016 on 30.05.2016 directing that if any appeal is al ready filed by the revenue on this issue befo re any Court or Tribunal, t he same may be withdrawn. We acco rdingly t reat the appeal filed by the revenue on this issue as withdrawn and dismiss the same" .
6. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar to A.Y. 2009-10, we respectfully follow the order of Coordinate Bench of this Tribunal for A.Y. 2009-10 and uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer on account of bad debts written off. The appeal of the Revenue is accordingly dismissed.
7. Now we take up the assessee's appeal being ITA No. 64/KOL/2017, wherein the following grounds are raised by the assessee:-
4I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011) & I.T.A. No.64/KOL/2017 (A.Y. 2010-2011) Merlin Resources (P) Limited "(1) Fo r th at Id. CIT (A) erred in holding th e disallowance of Rs.10 ,77,574/- u/s 1 4A read with Rule 8 D(2)(iii) out of administrative expenses.
(2) Fo r th at the Id AO made an error while computi ng the total Income by not reducing the provision for diminut ion in th e val ue of quoted sh ares written back not claimed for deduct ion in earlier years of Rs.94,96,110/- alongwith the reduction effected by him of the pro visio n for NPA written back. Further and in any event and without prejudice to the afo resaid, the Id AO / ld. C IT(A) erred in not deduct ing the pro visio n for diminution in the value of quoted sh ares written back amo unting to Rs.94 ,96,110/- while comput ing total inco me.
(3) Fo r th at the ld. AO C IT(A) erred in not setting off/carrying forward the unabso rbed brought forward losses of Rs.10,64,09,676/- under th e head 'Busines s' and of Rs.2 ,36,650/- to wards unabsorbed depreciation of earlier years with the impugned inco me for the year under consideration.
(4) The purpo rted findings of the lower autho ritie s is without any materials and are contrary to the facts of the case and are arbit rary, unreasonable, erroneous and perverse .
(5) For that the Id AO erred in initiating penalty proceeding u/s. 271(1)( c).
(6) Fo r that the order appealed against is otherwise erroneous on fact s and/or in l aw".
8. We have heard the arguments of both the sides and also perused the relevant material available on record. At the time of hearing before the Tribunal, the ld. Counsel for the assessee has not pressed Grounds No. 4, 5 & 6 of the assessee's appeal. The same are accordingly dismissed as not pressed.
9. As regards the issue involved in Ground No. 1 relating to the disallowance of Rs.10,77,574/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) under section 14A read with Rule 8D(2)(iii), the limited contention raised by the ld. Counsel for the assessee is that no exempt income was actually earned by the assessee during the year under consideration and, therefore, the disallowance 5 I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011) & I.T.A. No.64/KOL/2017 (A.Y. 2010-2011) Merlin Resources (P) Limited made under section 14A read with Rule 8D(2)(iii) is not sustainable. The ld. D.R., on the other hand, has contended that this claim is being made on behalf of the assessee for the first time before the Tribunal and, therefore, the Assessing Officer may be given an opportunity to verify the same. We find merit in this contention of the ld. D.R. The impugned order of the ld. CIT(Appeals) on this issue is accordingly set aside and the matter is restored to the file of the Assessing Officer for verifying the claim of the assessee made for the first time before the Tribunal and decide the issue accordingly. Ground No. 1 of the assessee's appeal is accordingly treated as allowed for statistical purposes.
10. As regards the issue involved in Ground No. 2, the ld. Counsel for the assessee has contended that the provision made for diminution in the value of quoted shares in the earlier years was never claimed by the assessee as deduction and, therefore, no addition could be made on account of write back of the said provision in the year under consideration. He has contended that this issue may also be verified by the Assessing Officer and relief can be allowed on such verification. The ld. D.R., on the other hand, has invited our attention to the paragraph no. 6.2 of the impugned order of the ld. CIT(Appeals) to show that the direction was already given by the ld. CIT(Appeals) to the Assessing Officer to verify this claim of the assessee and allow relief accordingly. However, as rightly pointed out by the ld. Counsel for the assessee, the said direction was given by the ld. CIT(Appeals) in the context of computation of book profit under section 115JB while the issue as raised in Ground No. 2 now is in relation to similar relief being claimed by the assessee while computing the income under the normal provisions of the Act. We accordingly direct the Assessing Officer to verify the claim of the assessee of having not claimed any deduction in the earlier years on account of the provision made for diminution in the value of quote d shares and if it is found correct on such verification, the Assessing Officer 6 I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011) & I.T.A. No.64/KOL/2017 (A.Y. 2010-2011) Merlin Resources (P) Limited shall delete the addition made on account of write back of the said provision in the year under consideration while computing the total income of the assessee under the normal provisions of the Act. Ground No. 2 of the assessee's appeal is accordingly treated as allowed for statistical purposes.
11. As regards the issue involved in Ground No. 3, the ld. Counsel for the assessee has submitted that specific ground was raised by the assessee in the appeal filed before the ld. CIT(Appeals) claiming the set off and carry forward of brought forward losses and unabsorbed depreciation but the same was not decided by the ld. CIT(Appeals) vide his impugned order. He has contended that since this issue involves verification of the relevant facts and figures from the record, the matter may be sent back to the Assessing Officer for such verification. Since the ld. D.R. has also agreed for sending the matter back to the Assessing Officer for verification, we direct the Assessing Officer to consider the claim of the assessee for the set off/carry forward of the brought forward losses and unabsorbed depreciation after due verification of the relevant facts and figures. Ground No. 3 of the assessee's appeal is accordingly treated as allowed for statistical purposes.
12. In the result, the appeal of the Revenue is dismissed, while the appeal of the assessee is treated as allowed for statistical purposes.
Order pronounced in the open Court on July 24, 2019.
Sd/- Sd/-
(S.S. Viswanethra Ravi) (P.M. Jagtap)
Judicial Member Vice-President (KZ)
Kolkata, the 24 t h day of July, 2019
Copies to : (1) Income Tax Officer,
Ward-15(1 ), Kolkata,
Aayakar Bhawan Po orva,
E.M. By-Pass,
110, Shanti Pally, Ko lkata-700 107
7
I.T.A. No. 90/KOL/2017 (A.Y : 2010-2011)
&
I.T.A. No.64/KOL/2017 (A.Y. 2010-2011)
Merlin Resources (P) Limited
(2) Income Tax Officer,
Ward-8 (1), Kolk ata,
Aayakar Bhawan, P-7, Chowringhee Squ are,
Kolkata-700 069
(3) M/s. Merlin Resourc es Pvt. Limited,
9B, Wood Street, Kolkata-700 016
(4) Commissioner of Inco me T ax (Appeals)-12, Kolkata, (5) Commissio ner of Income Tax- , (6) The Depart ment al Represent ative (7) Guard File By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. 8