Income Tax Appellate Tribunal - Ahmedabad
Navjivan Roller Flour & Pulse Mills ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH " C "
Before Shri G.D. AGARWAL, VICE-PRESIDENT (AZ) and
Shri MUKUL Kr. SHRAWAT, JUDICIAL MEMBER
Date of hearing : 2/5/11 Drafted on: 3/5/11
Sl. ITA No(s) / Assessment Appeal(s) / CO(s) by
No(s). CO No(s) Year(s)
Appellant (s) Respondent(s)
1. 2695/Ahd/2009 2003-04 The Asst.CIT M/s.Navjivan
CC-1, Baroda Roller Four & Pulse
Mills Pvt.Ltd.
Kumbharwada,
Opp.Market Yard
Dahod
PAN :AAACN 7117 Q
2. 2696/Ahd/2009 2004-05 -do- -do-
3. 2697/Ahd/2009 2005-06 -do- -do-
4. CO No.260/Ahd/09 2003-04 Assessee Revenue
(o/o.ITA 2695/A/09)
5. CO No.261/Ahd/09 Assessee Revenue
(o/o.ITA 2696/A/09)
6. CO No.262/Ahd/09 Assessee Revenue
(o/o.ITA 2697/A/09)
Revenue by : Shri N.S. Dayam, CIT-D.R.
Assessee by : Shri Vijay Ranjan
ORDER
PER BENCH :
All the three appeals have been filed by the Revenue arising from the orders of Learned CIT(Appeals)-IV, Ahmedabad all identically dated 10/07/2009 and on the other hand the respondent-assessee has filed cross objections for the three years involved. For all the years grounds, of the Revenue are identical to be decided as follows:-
ITA Nos.2695-2697/Ahd/2009 (By Revenue) & CO Nos.290-292/Ahd/2009 (By Assessee) ACIT vs. M/s.Navjivan Rollor
-Flour & Pulse Pvt.Ltd.
Asst.Years - 2003-04 to 2005-06 -2- Assessment Year 2003-04 (ITA No.2695/Ahd/2009)
1) The Ld. CIT(A) has erred in law and on facts and circumstances of the case in deleting the addition of Rs.4,96,505/- (A.Y.2004-05 Rs.2,05,980/- & A.Y. 2005-06 Rs.2,79,355/-) on account of bad debts u/s.36(1)(vii) of the I.T. Act.
2. The Assessing Officer vide assessment order passed u/s.1153A r.w.s, 143(3) of the I.T.Act dated 24.12.2008 has held that the bad debts as claimed in the Profit & Loss Account were not allowable u/s.36(1)(vii) of the I.T.Act following the decision of Dhall Enterprises & Engineers Pvt.Ltd. vs. CIT reported at [2007]207 CTR 729 (Guj.). When the matter was carried before the first appellate authority, the Learned CIT(Appeals) has found that the sale which were made to several parties in the past could not be recovered from those parties being meagre and in the nature of "Kasar/vatav" applying the ratio laid down in the case of Badarmal Ranmal vs. ITO reported at 18 TTJ 289 he has held that the claim as written off by the assessee was also in the nature of "Kasar/vatav" and write off his allowable bad debts. Once the admitted factual position is that the assessee has written off the impugned debts as bad debts in its books of account in the year under consideration, therefore, the issue now stood covered by a latest decision of Hon'ble Supreme Court in the case of TRF Ltd.vs. CIT reported at (2010) 323 ITR 397 (SC), wherein the Hon'ble Apex Court has taken into consideration the position of law, after 01/04/1989 and held as under:-
"This position in law is well-settled. After April 1, 1989, it is not necessary for the assessee to establish that the debt, in fact, has ITA Nos.2695-2697/Ahd/2009 (By Revenue) & CO Nos.290-292/Ahd/2009 (By Assessee) ACIT vs. M/s.Navjivan Rollor
-Flour & Pulse Pvt.Ltd.
Asst.Years - 2003-04 to 2005-06 -3- become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. However, in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in the accounts of the assessee. When a bad debt occurs, the bad debt account is debited and the customer's account is credited, thus, closing the account of the customer. In the case of companies, the provision is deducted from sundry debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee. This exercise has not been undertaken by the Assessing Officer. Hence, the matter is remitted to the Assessing Officer for de novo consideration of the abovementioned aspect only and that too only to the extent of the write-off."
2.1. Once the Hon'ble Apex Court has held that it is enough if the bad debt is written-off as irrecoverable in the accounts of the assessee, then it is not necessary for the assessee to establish that the debt, in fact, had become irrecoverable. Therefore, this ground of the Revenue is dismissed.
3. Ground No.2 (extracted from ITA No.2695/Ahd/2009 -A.Y.2003-04)
2) The Ld. CIT(A) has erred in law and on facts and circumstances of the case in deleting the addition of Rs.7,57,407/- (for A.Y. 2004-05 Rs.7,37,447 and for A.Y. 2005-06 Rs.8,21,136) on account of disallowance of ITA Nos.2695-2697/Ahd/2009 (By Revenue) & CO Nos.290-292/Ahd/2009 (By Assessee) ACIT vs. M/s.Navjivan Rollor
-Flour & Pulse Pvt.Ltd.
Asst.Years - 2003-04 to 2005-06 -4- payment made to persons specified u/s.40A(2)(b) of the I.T. Act.
3.1. It was noticed by the Assessing Officer that payment of interest was made to certain persons which were covered by the persons prescribed u/s.40A(2)(b) of the I.T.Act. As per Assessing Officer, on comparison of the interest to directors and relatives it was found that higher interest rate by 1% per annum was paid to such specified persons. The explanation of the assessee was that the interest on those deposits was on higher rate owing to the fact that those deposits were kept for a long period. The Assessing Officer has invoked the provisions of the said section and held that the interest was excessive and the payment of interest should be uniform rate, hence, computed a disallowance accordingly for all the years. When the matter was carried before the first appellate authority, the ld.CIT(A) has held that a rate of interest paid to directors and family members @ 11% was marginally higher than the rate of interest paid to others at 10%. According to him, it was not excessive especially when no evidence or comparable instance was furnished by the Revenue Department. The disallowance was held as unjustified. Now Revenue is before us.
4. At the outset, from the side of the respondent-assessee an order of ITAT "A" Bench Ahmedabad in the case of Shri Ramesh Kantilal Sheth vs. ITO bearing ITA No.109/Ahd/2006 for Assessment Year 2002-03 dated 05/12/2008 has been filed, wherein almost on identical facts it was held as under:-
ITA Nos.2695-2697/Ahd/2009 (By Revenue) & CO Nos.290-292/Ahd/2009 (By Assessee) ACIT vs. M/s.Navjivan Rollor
-Flour & Pulse Pvt.Ltd.
Asst.Years - 2003-04 to 2005-06 -5- "4. We have heard both the parties. At the time of hearing it was submitted that this Tribunal, in identical circumstances, has allowed the claim of the assessee in its order dated 25-4-2008 (A.Y. 2000-01). The Tribunal has made the following observations in the aforesaid case:
"5. Having considered the rival submissions and the facts and circumstances of the case, we are of the opinion that so far as payment of interest is concerned, it is to be paid as per mutual consent of the parties and the business exigency or expediency and, therefore, it is prerogative of the business man to see as to what rate the interest should be paid so that its business gets maximum benefit and the Revenue has no part to play in this respect. Many a times, specially, when a business man has to seek loan from private parties, he failed to get because of so many reasons and in that situation, he has no option but to approach the close relative and friends and if in that situation, he is compelled to pay interest at a marginally higher rate, there is no illegality in accepting the loans and pay a little bit higher interest. The over all position to be seen is as to whether the assessee has earned the profit or not; i.e. whether the assessee is paying interest more than the profit or not. The fact that such loans are from close relatives and friends, in our opinion, is of no use to come to the conclusion that he should not have paid interest on such a higher rate.
6. In the present case, there is doubt that the assessee was paying interest to outsiders @ 12%, but if it had to pay interest @ 18% to the Directors, it cannot be said that the assessee was paying higher interest to the Directors intentionally. The Revenue, in the present case, has not disputed the assessee's claim that the interest to Directors as well as the outsiders was being paid as per mutual consent and if that was the case, then in our opinion, the assessee had not committed any default which could clothe the Assessing Officer to invoke the provisions of ITA Nos.2695-2697/Ahd/2009 (By Revenue) & CO Nos.290-292/Ahd/2009 (By Assessee) ACIT vs. M/s.Navjivan Rollor
-Flour & Pulse Pvt.Ltd.
Asst.Years - 2003-04 to 2005-06 -6- section 40A(2)(b) of the Act. Consequently, we do not see any infirmity in the order of the Learned CIT(Appeals), which is confirmed."
5. The material facts in the present case are similar to these involved in the aforesaid case decided by this Tribunal. In this view of the matter, ground No.1 taken by the assessee is allowed and therefore, ground No.2 taken by the assessee does not require any adjudication by us."
4.1. The issue appears to be covered in favour of the assessee by the aforesaid decision of the Tribunal specially when the Revenue Department has not furnished any cogent material or comparable instances through which it could be established that the payment of interest was excessive or unreasonable. We, therefore, find no force in this ground of the Revenue and hereby dismiss the ground for all the three years.
5. Ground Nos.3 & 4 are general in nature require no independen3t adjudication.
6. Cross Objections by the Assessee (CO Nos.260, 261 & 262/Ahd/2009) 6.1. In the cross objections in all the grounds, the cross objector has primarily challenged the validity of the assessment framed u/s.153A of the I.T.Act. However, during the course of hearing, the Ld. Learned ITA Nos.2695-2697/Ahd/2009 (By Revenue) & CO Nos.290-292/Ahd/2009 (By Assessee) ACIT vs. M/s.Navjivan Rollor
-Flour & Pulse Pvt.Ltd.
Asst.Years - 2003-04 to 2005-06 -7- Authorised Representative Mr. Vijay Ranjan has expressed not to press all the three COs. Therefore, these cross objections are dismissed as withdrawn.
7. In the result, Revenue's appeals are dismissed and Cross Objections filed by the assessee are dismissed as withdrawn. Order signed, dated and pronounced in the Court on 20/ 5 /2011.
Sd/- Sd/- ( G.D. AGARWAL ) ( MUKUL Kr. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER Ahmedabad; Dated 20/ 05 /2011 T.C. NAIR, Sr. PS Copy of the Order forwarded to : 1. The Assessee. 2. The Department. 3. The CIT Concerned. 4. The ld. CIT(Appeals)-VI, Ahmedabad
5. The DR, Ahmedabad Bench 6. The Guard File.
BY ORDER, स×याǒपत ूित //True Copy// (Dy./Asstt.Registrar), ITAT, Ahmedabad
1. Date of dictation.......................2/5/11
2. Date on which the typed draft is placed before the Dictating Member 3/5/11.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S......20/05/2011
6. Date on which the file goes to the Bench Clerk.................. 20/05/2011
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................