Income Tax Appellate Tribunal - Mumbai
Lotus Energy India P.Ltd, Mumbai vs Ito 8(2)(2), Mumbai on 28 February, 2019
IN THE INCOME-TAX APPELLATE TRIBUNAL "C" BENCH MUMBAI
BEFORE SHRI G.S. PANNU, VICE-PRESIDENT AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No.3632/Mum/2015 (Assessment Year 2010-11)
M/s. Lotus Energy India ITO-8(2)
Pvt Ltd, Aayakar Bhavan,
409, Laxmi Industrial M.K. Road,
Estate, Andheri (West),
Vs. Mumbai-400020
Mumbai-400053.
PAN: AABCL0119K
Appellant Respondent
Appellant by : Shri Sanjay Parikh (AR)
Respondent by : Shri H.N. Singh CIT-DR
& Sh. Airiju Jaikaran Sr. DR
Date of Hearing : 11.01.2019
Date of Pronouncement : 28.02.2019
ORDER UNDER SECTION 254(1)OF INCOME TAX ACT
PER PAWAN SINGH, JUDICIAL MEMBER;
1. This appeal by assessee is directed against the order of ld. Commissioner of Income-Tax (Appeals)-15, Mumbai (the ld. CIT(A) dated 09.03.2015, which in turn arises from the assessment order passed under section 143(3) on 25.03.2013. The assessee has raised following ground of appeal:
1) Disallowance u/s. 40(a)(ia):
(a) The learned Commissioner of Income Tax (Appeals) - 17, Mumbai ["the Ld. CIT(A)"] erred in facts and law in sustaining the disallowance to the extent of Rs. 28,49,485/- under section 40(a)(ia) of the Act made by the learned Income Tax Officer - 8(2)(2), Mumbai ["the Id. Assessing Officer] ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd without appreciating the material placed on record substantiating the fact of reimbursement of expenses.
(b) The Id. CIT(A) erred in facts and law in sustaining the disallowance under section 40(a)(ia) of the Act despite the fact that adequate material evidencing the payment of tax made by the payee in its return of income on the income earned from assessee was placed on record.
(c) Without prejudice to lea) and 1 (b) above, the Ld. CIT(A) erred in facts and law in confirming the disallowance of Rs. 28,49,485/- under section 40(a)(ia) of the Act without appreciating that out of the said amount, the assessee has already paid Rs. 16,94,403/- in the year under consideration and the provisions of section 40(a)(ia) of the Act are applicable only to the expenditure payable at the end of the year.
2) Disallowance of interest:
(a) The Ld. CIT(A) erred in facts and law in sustaining the disallowance of interest of Rs. 7,42,500/- by adopting the rate of 16.50% for the whole year on the sum advanced for booking office premises without restricting it to the extent of interest claimed by debiting in the Profit and Loss account at the rate of 16% p.a. on pro-rata basis and allowing the consequential depreciation thereon.
(b) Without prejudice to above, the Ld. Assessing Officer shall be directed to capitalize the interest on purchase of office premises and accordingly consequential depreciation be granted.
3) Disallowance of sundry balances written off:
The Ld. CIT(A) erred in facts and law in sustaining the disallowance of sundry balances written off amounting to Rs. 23,86,242/- without appreciating that the same are allowable as business loss under the provisions of the Act.
4) All the above referred grounds be considered as independent of each other.
5) Your appellant prays that -
(a) The disallowance made u/s. 40(a)(ia) amounting to Rs. 28,49,485/- be deleted;
(b) Disallowance of interest of Rs. 7,42,500/- be deleted and restricted on prorate basis @ 16% p.a. and consequential depreciation be granted;2 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd
(c) Without prejudice to 5(b) above, interest element be capitalized and consequential depreciation be granted;
(d) The claim of sundry balances written off amounting to Rs. 23,86,242/- be allowed.
(e) Such other relief as may be deemed fit be granted.
2. The brief facts of the case are that assessee is engaged in the business of manufacturer trading of LAM Coke and trading in Aluminum Structure, Composite panel and Scrape etc., filed its return of income for assessment year 2010-11 declaring taxable income at Rs. Nil after setting off brought forward business losses of Rs. 90,89,583/-. The return of income was selected for scrutiny. The assessment was completed under section 143(3) on 25 March 2013. The assessing officer while passing the assessment order besides the other additions and disallowances, disallowed Rs. 1,21,71,665/- under section 40(a)(ia), disallowed interest expenses of Rs. 7,42,500/- under section 36(1)(iii) and disallowed sundry balances are written off of Rs. 23,86,242/- under section 36(1)(vii). On appeal before Commissioner (Appeals) the disallowance under section 40(a)(ia) was restricted to Rs. 28,49,485/- and other disallowances under section 36(1)(iii) and sundry balances written off was confirmed. Thus, further aggrieved by the order of learned Commissioner (Appeals) the assessee has filed present appeal before us.
3. We have heard the submission of learned AR of the assessee and the learned DR for the revenue. The learned AR of the assessee submits that assessee had paid clearing and forwarding expenses of Rs. 1,21,71,665/- 3 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd to M/s Esskay Shipping Private Limited (ESPL) in connection with imports. The expenditure included various expenses such as wharfage charges, stevedoring charges, port charges, detention charges, custom duty etc. During the assessment proceeding the assessee was asked to file detail of the expenses incurred and the TDS made thereon. With regard to the payment to ESPL the assessee submitted that they had deducted TDS from payments in the nature of stevedoring charges, freight charges and detention charges. However, no TDS was deducted on reimbursement of the expenses amounting to Rs. 28,49,485/- only. The assessing officer took the view that assessee could not pick and choose the nature of expenses on which TDS was required to be deducted. The assessing officer was further of the view that if some amount was not liable to tax, the receiver should have obtained TDS certificate for non-deduction of TDS under section 197, therefore, the assessing officer disallowed the entire payment made to ESPL of Rs. 1,21,71,665/-.
4. Before learned Commissioner (Appeals) the assessee furnished the breakup of payments made to ESPL, after considering the submission of the assessee ld Commissioner (Appeals) restricted disallowance to the extent of Rs. 28,49,485/-. The said amount of Rs. 28,49,485/- relates to reimbursement of expenses paid to ESPL. The learned AR for the assessee further submits that there is no income in case of reimbursement of expenses, no taxes required to be deducted at source. In support of his 4 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd submission the learned AR of the assessee relied upon the decision of Hon'ble Bombay High Court in CIT Vs Siemens Aktiongesellschaft (2009) 310 ITR 320 (Bom) and in CIT Versus Karma Energy Ltd ( 57 taxmann.com 235) (Bombay).
5. In alternative and without prejudice submissions the learned AR submits that as ESPL has paid taxes on its income, therefore, no disallowance can be made under section 40(a)(ia). In support of his submission the learned AR relied upon the decision of Kolkata Tribunal in Ranjana Roy versus ITO in ITA No. 558/Kol/2013, ITO Vs Opera Global Pvt Ltd. (2011) 30 CCH 712 (Delhi Trib) and Bridgegopal Madhusudhan Bhattad Vs ITO (2015) taxmann.com 266(Nagpur Tri).
6. On the other hand the learned AR for the revenue supported the order of lower authorities.
7. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on the case law relied by lower authorities and the learned AR of the assessee during submission before us. During the assessment proceeding the assessing officer noted that the assessee has debited expenses of Rs.28,49,485 /- on account of wharfage charges, stevedoring charges, port charges, detention charges. On the said payment the assessee has not deducted tax from the hire charges, lighterage charges, wharfage charges port charges and on rent. The assessees deducted the tax from some of the 5 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd selected items and exclude the remaining in its compatible with the existing provision of the law. The assessing officer was of the view that the entire payment to ESPL was liable for tax deduction as per the provisions of section 194C, thus the entire payments made to ESPL was disallowed, consisting the impugned disallowances. Before learned Commissioner (Appeals) the assessee contended that ESPL have raised separate debit note for all the reimbursement and the assessee had satisfied itself about the reimbursement of the actual expenses as all the debit notes are supported by invoices of the service provided. There is no markup on any of the reimbursement; therefore, the assessee was not required to deduct tax at source on such reimbursement. The assessee also contended that the recipient was acting only as a conduit for receiving the payment and as per section 194I; the deduction is to be made by the payee on such income which income assessable as rent in term of the said section. Even so far as section 194C is concerned, the responsibility of the person paying any sum to the contactor and when the amount was reimbursed by the assessee it was not paid to the contractor but to the party who had to make the payment to the contractor.
8. The learned Commissioner (Appeals) after considering the contention of assessee noted that ESPL is a clearing and forwarding agents and was reimbursed all the expenses paid on behalf of the assessee. The assessee against the copy of debit notes issued by ESPL, which indicate that the 6 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd amount paid to ESPL, was reimbursement of expenses. Further the claim of the assessee that reimbursement is without any markup is not supported by any evidence on record. No such contract was produced before the learned Commissioner (Appeals) and in absence of any contract, the learned Commissioner (Appeals) concluded that it was difficult to ascertain whether the reimbursement of expenses contain any markup or there is any profit element embedded in such reimbursement. It was also concluded that the income tax return of ESPL filed by assessee does not indicate whether ESPL had included the said income in its return of income as contended by the assessee. In absence of any evidence to substantiate that there is contact between the assessee and ESPL, the claim of assessee that the expenses was paid on account of reimbursement was not accepted.
9. We have noted that the claim of assessee was not accepted in absence of any evidence in the form of contract about the reimbursement of expenses. Before us the ld AR for the assessee has made two fold submissions that (i) the expenses was paid on account of reimbursement, therefore, no TDS was require to be made and (ii) that the receipt has included the said payment in its return and has paid the tax on such income. Therefore, Considering the second contention of the assessee in view of the decision of Tribunal in Ranjana Roy versus ITO (supra), in ITO Vs Opera Global Pvt Ltd. (supra) and in Bridgegopal 7 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd Madhusudhan Bhattad Vs ITO (supra) that when the recipient has paid tax on the income no disallowance can be made in the hand of payer. Hence, this issue is restored to the file of assessing officer to verify the facts if the recipient has included that payment in its income and paid the tax and pass the order in accordance with law. Needless to order that before passing the order the assessing officer shall grant opportunity of hearing to the assessee and to furnish necessary evidences. In the result this ground of appeal is allowed for statistical purpose.
10. Ground No. 2 relates to disallowance of interest expenses of Rs. 7,42,500/-. The learned AR of the assessee submits that assessee debited interest and financial charges of Rs. 81,21,205/- towards the interest paid to Bank and on unsecured loans. During the assessment the assessing officer noted that assessee had given loan and advances of Rs.4,74,11,238/- the assessing officer took the view that interest-bearing funds were diverted to non-interest bearing loans and advances. The assessee before the assessing officer has specifically contended that all the loans and advances were made for the purpose of its business. With regard to the loans to M/s Lotus Grhinirman Private Ltd it was submitted that the same was for booking property and copy of allotment letter was filed before assessing officer. Before the assessing officer the assessee vide its letter dated 18 February 2013 and 21 March 2013 contended that the advance to Lotus Grhinirman Private Ltd was out of refund received 8 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd from Lotus Venture Private Ltd and not of borrowed funds. The assessing officer disallowed the interest expenses of Rs. 28,70,901/- with regard to the entire loan and advances. However, the learned Commissioner (Appeals) confirmed the disallowance to the extent of Rs. 7,42,500/- being the interest on advances given to s Lotus Grhinirman Private Ltd. The learned AR of the assessee submits that assessee has own funds of Rs. 5,68,63,512/- as recorded by learned Commissioner (Appeals) in its order. Since the funds were more than advance was given to Lotus Grhinirman Private Ltd, it can safely be presumed that advances was out of own funds.
11. The ld. AR for the assessee without prejudice to his right contended that assessee had sufficient own funds to invest in Lotus Grhinirman Private Ltd and hence no disallowance of interest was called for. In support of his submission the learned AR of the assessee relied upon the decision of Bombay High Court in case of CIT Vs Reliance Utilities and Power Ltd 313 ITR 340 (Bombay). The learned AR of the assessee prayed for deleting the entire disallowances.
12. On the other hand the learned AR for the revenue relied upon the order of lower authorities.
13. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have also deliberated on the various case laws relied by lower authorities. During the assessment the 9 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd assessing officer noted that the assessee has debited interest and financial charges of Rs. 81,21,205/- being interest paid on bank and unsecured loans. The balance-sheet of the assessee shows the substantial amount of this interest-bearing capital was invested loan and advances of Rs.4,74,11,238/-. The assessing officer took the view that assessee is using interest-bearing advances for the purpose of advancing interest free loans. Therefore, the assessing officer issued show cause notice why the proportionate interest should not be disallowed under section 36(1)(iii). The assessee filed its reply dated 18.02.2013 and contended that such loan Advocate advances include advances given to s Lotus Grhinirman Private Ltd, a sister concern for booking a office premises and contended that no disallowance of interest is warranted. The contention of assessee was not accepted by assessing officer holding that no evidence of booking of office was brought on record. The assessing officer also concluded that if the contention of assessee accepted that such advances were genuinely given for purchasing the office premises, till such business asset is actually purchased and used for the purpose of business, this interest component on the borrowed capital used for the purpose of fixed asset needs to be capitalized. The assessing officer on the contention of assessee that assessee claimed to have received interest at the rate of 10% on loan of Rs. 3.0 crore paid to M/s Tirupati Developers. The interest free loan and advances of Rs. 1.73 crore the assessee 10 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd contended that the rate of interest on such bank loans were ranging from 15 to 18%, the mean rate of interest was calculated by Assessing Officer at the rate of 16.5% and accordingly assessing officer disallowed interest of Rs. 28,70,901/-. The learned Commissioner (Appeals) restricted the disallowance only on the amount of Rs. 45 lakhs which was given as an advance to s Lotus Grhinirman Private Ltd. We have noted that the assessee has shown his own funds of Rs. 5.68 crore, this fact has been duly recorded and accepted by learned Commissioner (Appeals) in para 4.2 of its order. The assessee has made a booking of office premises with Lotus Grhinirman Private Ltd. We have noted that the fund advanced by assessee is of Rs. 45 lacks on account of booking of office premises. The assessee has sufficient interest free funds in the form of reserve and surplus and share capital of Rs. 5.68 Crore. Therefore, keeping in view, the ratio of the decision of Hon'ble Bombay High Court in CIT Vs Reliance Utility and Powers Ltd (supra), no interest disallowance is warranted, when the interest free funds available with the assessee is far more than the investment made by the assessee. Therefore respectfully following the decision of Hon'ble Bombay High Court, we direct the assessing officer to delete the disallowance of Rs. 7,42,500/-. In the result, ground no.2 is allowed.
14. Ground No.3 relates to disallowance sundry balance written off. The ld. AR of the assessee submits that the assessee written off sundry balances 11 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd of Rs. 25,86,229/-. The Assessing Officer disallowed the entire claim holding that the assessee has not furnished detailed for justifying the decision of write off, the Assessing Officer also noted that certain write off were pertaining to Cenvat Duty, Education Cess etc. Before the ld. Commissioner (Appeals), the assessee furnished complete details of write off. For write off of Cenvat Duty, it was submitted that same was excess credit not utilized pertaining to aluminum business. The aluminum business was not doing well, operation reduced considerably and ultimately it was closed. Such write off was allowable in view of Rule 11 of Cenvat Credit Rules, 2004. The ld. Commissioner (Appeals)allowed bad debts of Rs. 3.99 lakhs only. The ld. Commissioner (Appeals) while confirming the action of Assessing Officer to the extent of Rs. 25,86,229/- concluded that assessee not furnish the relevant rules. The ld. AR further submits that the assessee suffered loss in the course of business and was accordingly the claim of written off is allowable. In support of his submission, the ld. AR relied upon the decision of Hon'ble Supreme Court in Badridas Daga v. CIT [1958] 34 ITR 10 (SC). For Cenvat Credit which cannot be utilized and was claimed as business loss, the ld. AR relied upon the decision of Tribunal in Girdhar Fibres Pvt. Ltd. v. ACIT [ITA No. 2027/Ahd/2009], M/s. Mohan Spinning Mills v. ACIT [ITA No. 1212/Chd/2011] & NCS Distilleries P. Ltd. v. ITO [ITA No. 699/Hyd/2012.
12 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd
15. On the other hand, the ld. DR for the revenue relied upon the order of lower authorities.
16. We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment, the Assessing Officer noted that the assessee debited sundry written off of Rs. 25,86,229/-. The assessee was asked to furnish the details. The assessee filed its reply and contended that assessee fulfill the condition prescribed under section 36(1)(vii) and section 36(2). No evidence was furnished by assessee. The Assessing Officer noted that the assessee write off of consist Cenvat Duty of Rs. 12,82,353/-, Education Cess, Excise Duty etc. required specific explanation how the same can be claimed as debts. No details were furnished by Assessing Officer, therefore, the Assessing Officer disallowed the written off of sundry balances. Before the ld. Commissioner (Appeals), the assessee contended that written off balances of Rs. 25,86,229/- consist of Cenvat Duty, Education Cess, Excise Duty etc. of Rs. 13,74,030/- and sundry debtor written of is Rs. 12,12,199/-. The details were also furnished along with the ledger copies of such parties reflecting write off made in the books of account and ledger reflecting accounting of income in earlier years and explaining the fact as to why the balance written of be allowed. The details of sundry balance written of is recorded by ld. Commissioner (Appeals) in para 5.2 of its order in the following manner:
13 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd
Sr. Particulars Amount Remarks
No. (Rs.)
1 Mohd. Mustaq Ali 1,00,000 Advance was given for purchasing
steam coal. However, the same
could not be recovered despite best
efforts and hence claimed as
business loss u/s. 28 or sec. 37 of
the Act.
2 M.S. Inter-Trade 3,99,987 On perusal of the ledger of the said
Company party, Your honour would find that
consistently, the appellant has been
showing sales to this party and has
even offered the same to tax. Hence,
the conditions prescribed in section
36(2) is complied and so the claim
of bad debts be allowed.
3 Manglam Ceramic P. 4,70,192 Advance was given for purchasing
Ltd. stores consumable. However, the
same could not be recovered despite
best efforts and hence claimed as
business loss u/s. 28 or sec. 37 of
the Act.
4 N.R. International Ltd. 2,42,020 Advance was given for purchasing
LAM Coke. However, the same
could not be recovered despite best
efforts and hence claimed as
business loss u/s. 28 or sec. 37 of
the Act.
5 Cenvat Duty (FY 07-08) 12,82,35 Since excess credit was available
3 then the excise duty payable, the
said credit could not be utilized
6 Edu. Cess 2% (RM) 16,500 further in view of the decline in
(1199-FY 09-10 and turnover of aluminium business
balance for AY 07-08. which finally got discontinued in FY 10-11. In view of the scheme of 7 Edu. Cess 2% (S.Tax) of 60 Rule 11 of CENVAT Credit Rules FY 07-08.
(Transitional Provisions), the
8 Excise Duty 8% FY 09- 53,468 appellant was deprived of any credit
10) and hence, the same was written off.
Accordingly, the said write off be
9 Higher Education Cess 5,213 allowed as business loss u/s. 28 or
1% on sales (FY 09-10) section 37 of the Act. Please refer
page no. 260 of Paper Book for
10 Higher Education Cess 16,433 Rule 11
1% (RM) (8864 of FY
09-10 and balance of FY
07-08
14
ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd
Total 25,86,229
17. Alternatively, the assessee also submitted that write off of Cenvat Duty was allowable as business loss under section 28 or 37 of the Act. The contention of assessee was not accepted by ld. Commissioner (Appeals) except in case of M/s Inter Trade for Rs. 3,99,987/- holding that the condition prescribed under section 36(1)(vii) r.w.s. 36(2) are fulfilled to that claim only. For remaining claim, the ld. Commissioner (Appeals) concluded that the assessee given advances to the various parties for purchasing raw-material and supply could not be procured. The assessee was not able to produce evidence to show how the advances given to various suppliers have become bad or irrecoverable. The assessee failed to adduce evidence that advances were given in normal business and have become irrecoverable despite efforts. For Cenvat Credit, the ld. Commissioner (Appeals) concluded that the assessee failed to provide relevant rules and deprived from claiming Cenvat Credit.
18. We have noted that the co-ordinate bench of Hyderabad Tribunal in NCS Distilleries P. Ltd. vs. ITO (supra) on similar issues related with the write off of Cenvat credit, while referring the decision of Mohan Spinning Mills (supra) and the Girdhar Fibres Pvt. Ltd. (supra) passed the following order:
6. Having heard the submissions of both the sides and considering the facts of the case as narrated before the authorities, it was observed that the aforesaid amount of the Excise Duty credit (CENVAT Credit) written off was 15 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd allowable as deduction. On this issue, Coordinate Bench at Chandigarh in the case of M/s.Mohan Spinning Mills (supra) has opined as under :-
"7. We have heard the rival contentions and perused the record. The issue arising in the present appeal is in respect of the deduction claimed on account of CENVAT amounting to Rs.35,94,577. The assessee was engaged in the business of manufacturing and trading of yarn and fibre. The yarn manufactured by the assessee was an excisable item. The assessee was paying excise duty on the raw material purchased i.e. acrylic yarn/fibre and polyester yarn/fibre. In turn, assessee was liable to pay duty on its manufactured items. The rate of excise duty payable on the raw material was higher and the assessee was depositing the excise duty in PLA account which in turn was adjustable against the excise duty payable on the finished products. The excise duty payable on the finished products was on the lower side and consequently over the period of years the assessee had credit of excise duty resulting in accumulation of CENVAT."
"10. Various tests have been laid down by various High Courts and the Apex Court in relation to the allowability of expenditure under section 37(1) of the Act while computing the income from profits and gains of business or profession. In the facts of the present case, the assessee had paid CENVAT on purchase of raw material which was deposited in its PLA account for claiming the benefit of set off against the excise duty payable on the manufactured items i.e. branded yearn. The assessee was paying higher rate of excise duty on the raw material purchased by it as against the rate of excise duty applicable on the manufactured items, consequently credit of excise duty was available with the assessee. The said excise duty paid from year to year was not claimed as an expenditure but was carried forward from year to year to be adjusted against the excise duty payable by the assessee on its manufactured items. However, during the year under consideration the assessee closed down its manufacturing unit and consequently the benefit of the CENVAT credit remained un- adjusted. Once the manufacturing unit of the assessee is closed down, admittedly the benefit of CENVAT credit not availed of against the excise duty payable on manufactured items, cannot be utilized by the assessee and the said write off of CENVAT credit, is allowable as expenditure in the year under consideration on the closure of the business. The write off of CENVAT credit by the assessee in its books of account is thus allowable as business expenditure under the provisions of section 37(1) of the Act relatable to the year, in which the manufacturing activities are closed down by the assessee. Accordingly, we direct the Assessing Officer to allow the claim of the assessee in respect of write off of CENVAT credit of Rs.35,94,577/-. Ground No.1 raised by the assessee is thus allowed."
6.1. We have also noted that the Coordinate Bench "A" Ahmedabad in the case of Girdhar Fibres Pvt. Ltd. (supra) has also opined as under:-
"9. We heard both the sides. Before us, Form E.R.1, i.e. Return of Excisable goods and availment of CENVAT credit has been placed. The explanation of the assessee was that the impugned two amounts were part of the duty which was paid by the assessee at the time of purchase of raw-16 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd
material, however, the assessee had maintained exclusive system of accounting, therefore the duty paid was not debited as a part of the purchases but a separate account was maintained and carried to the balance-sheet. The AED and NCCD were applicable on POY, i.e. raw- material. When the finished goods, i.e. texturised yarn is manufactured, the excise is levied in the form of basic duty. The assessee has adopted exclusive method of accounting, therefore debited the net purchases and those were separately recorded in the books of accounts. We find force in this argument of the assessee because while maintaining the exclusive method of accounting the assessee had a choice to increase the value of the purchases in respect of the duty paid in the form of AED & NCCD. In other words, expenditure was incurred but that expenditure could not be adjusted against the CENVAT Rules because on the finished goods, i.e. texturised yarn only the basic duty is leviable. We, therefore, hold that the amount which is now written off being part of the business expenditure, hence allowable under the provisions of the Act. In the result, we hereby reverse the findings of the authorities below and allow the ground raised by the Assessee."
7. Similar view was also taken in the case of ACIT vs. Rangoli Industries P. Ltd., ITA.No.1936/Ahd /2010 dated 11.01.2013. In the light of the above decisions on identical facts, since a view has already been taken in favour of the assessee on this issue, respectfully following that, we hereby hold that AO and ld.CIT(A) was not right in disallowing the claim. AO is directed to allow the amount as claimed, subject to assessee furnishing the details of credit year wise and other excise registers/forms to establish that Cenvat credit was available to it, before writing off the same. Accordingly, grounds raised by the assessee are allowed.
19. Considering the decision of co-ordinate bench of Tribunal held that the write off of Cenvat credit by the assessee in its books of account is thus allowable as business expenditure under the provisions of section 37(1) of the Act relatable to the year, in which the manufacturing activities are closed down by the assessee. The claim of the assessee is that they have closed down the business pertaining to the aluminum business and the excess credit of Cenvat was not utilized pertaining to that business. Therefore, we direct the Assessing Officer to verify the fact about the availability of Cenvat Credit to the assessee at the end of relevant 17 ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd Financial Year and allow write off of Cenvat credit by following the decisions of Tribunal, which we have referred in para 17 of this order.
20. So far as claim of sundry balance written off is concern. We have noted that the assessee has given advances for purchasing various materials like steam coal, LAM Coke and other store consumable. Details of which are referred at page no. 134 of Paper Book. The Hon'ble Apex Court in T.R.F. Ltd. vs. CIT [2010] 190 Taxman 391 (SC) held after 1st April 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. Considering the law laid down by Hon'ble Apex Court, the sundry balances which has been written off by the assessee in its books of account is sufficient to claim the bad debt. In the result, this part of ground of appeal is allowed in favour of assessee.
21. In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 28/02/2019.
Sd/- Sd/-
G.S. PANNU PAWAN SINGH
VICE-PRESIDENT JUDICIAL MEMBER
Mumbai, Date: 28.02.2019
SK
Copy of the Order forwarded to :
1. Assessee
2. Respondent
3. The concerned CIT(A)
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ITA No. 3632/Mum/2015 Lotus Energy India Pvt Ltd
4.The concerned CIT
5. DR "C" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai
19