Income Tax Appellate Tribunal - Ahmedabad
Gujarat Gas Financial Services Ltd.,, ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A" AHMEDABAD
Before Shri, A.K.Garodia, Accountant Member and
Shri Kul Bharat, Judicial Member
IT A No.149/ Ahd/2008
Assessment Year :2004-05
Gujarat Gas Financial V/s. Asstt. Commissioner of
Services Limited., Income-tax, Circle-4,
2, Shantisadan Society, Ahmedabad
Nr. Parimal Garden,
Ellisbridge, Ahm edabad
[PAN No. AAACG 5558 E]
.
अपीलाथȸ/Appellant .. ू×यथȸ/Respondent)
अपीलाथȸ कȧ ओर से/By Appellant Shri S.N.Soparkar, SR-AR
ू×यथȸ कȧ ओर से/By Respondent Shri Rahul Kumar, Sr-DR
सुनवाई कȧ तारȣख/Date of Hearing 17-01-2013
घोषणा कȧ तारȣख/Date of Pronouncement 08-03-2013
आदे श/O R D E R
PER Kul Bharat, Judicial Member:-
This appeal by assessee is directed against the order of Commissioner of Income-tax(Appeals)-VIII, Ahmedabad ('CIT(A)' for short) dated 30-11-2007 pertaining to assessment year (AY) 2004-05. The assessee has raised the following grounds of appeal:-
"1. The Order passed by CIT(Appeals) is bad in law and on facts and hence, it is submitted that the same be cancelled and be suitably modified.
2. The learned CIT(Appeals) has gross erred in law and on facts of the case in confirming disallowance of the claim for deduction of bad debts amounting to Rs.6,34,073/-. The learned CIT(A) has confirmed the disallowance holding that the appellant assessee is not in the business of money lending or banking business. While confirming the appellant's claim for bad debts amounting to Rs.6,34,073/-, the learned CIT(Appeals) has grossly erred in law and on facts of the case in not appreciating the fact that the debt in question arose in the normal course of the appellant's business of hire purchase and ITA No.149/Ahd/2008 A..Y.2004-05 G.G.F.S. Ltd. v. ACIT, Cir-4, A'bd Page 2 leasing and that the income which accrued on account of such hire purchase/leasing had already been accounted from in the earlier years.
3. The learned CIT(Appeals) has grossly erred in law and on facts of the case in not considering the appellant's alternate plea that in case the claim for deduction of Rs.6,34,073/- is not deductible as bad debt u/s. 36(1)(vii) r.w.s. 36(2) the same is eligible for deduction u/s. 28 of the Income Tax Act. It is therefore prayed that the order of the Ld. CIT(A) be modified and the claim for bad debt of Rs.6,34,073/- be may be allowed either u/s. 36(1)(vii) or Section 28 of the Income Tax Act."
2. All the issues are inter-connected, hence, they are heard together and are being disposed off by a consolidated order for the sake of convenience. Briefly stated facts are that assessee-company is a limited company and is engaged in the business of leasing and hire purchase of equipments, investment, stock trading of shares and securities etc., During the year under consideration, the case of assessee was selected for scrutiny assessment and while framing the assessment u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') the Assessing Officer disallowed Rs.6,43,073/- being the principal portion of the lease transaction out of the total bad debt of Rs.7,45,968/-. Against this addition, assessee field appeal before Ld. CIT(A) who after considering the submissions of assessee confirmed the action of Assessing Officer.
3. Now, assessee feeling aggrieved by this order of Ld. CIT(A) preferred appeal before the Tribunal.
4. Ld. Sr-AR Shri S.N.Soparkar, for the assessee submitted that issue involved in this case is squarely covered by the judgment of Hon'ble Bombay High Court rendered in the case of CIT, Central II v. Shreyas S. Morakhia (2012) 19 taxmann. Commissioner 64 (Bom.) He also placed reliance on the decision of the Hon'ble Co-ordinate Bench ITA No.149/Ahd/2008 A..Y.2004-05 G.G.F.S. Ltd. v. ACIT, Cir-4, A'bd Page 3 rendered in the case of DCIT v. Wall Street Finance Ltd. in ITA No. 7022/Mum/2008 dated 30-04-2010, whereas Ld. SR-DR, Shri Rahul Kumar for the Revenue supported the orders of authorities below.
5. We have heard the rival submissions, perused the materials available on record, gone through the orders of authorities below and judgments cited by Ld. AR of the assessee. We find that basis of disallowance of bad debt made by Assessing Officer is this that deduction is allowable to the assessee u/s. 36(2) r.w.s. 36(1)(vii) of the Act in respect of interest portion only and not for the principal portion. Accordingly, out of the total amount of Rs.7,45,968/-, he has allowed the deduction of Rs.1,11,895/- being interest portion of hire charges and lease charges and disallowed the principal portion of Rs.6,34,073/-. In para-3.2 of the order of Ld. CIT(A) also, it is noted by him that the AO has disallowed Rs.6,34,073/- pertaining to principal portion of lease transaction because the said amount has never been offered as income by the assessee. Now, in the light of this fact, we examine the applicability of the judgment of Hon'ble Bombay High Court rendered in the case of Shreyas S Morakhia (supra) and we find that in this judgment, Hon'ble Bombay High Court has followed the decision of Hon'ble Delhi High Court rendered in the case of CIT v. Bonanza Portfolio Ltd. (2010) 320 ITR 178 (Del) and the relevant portion of the judgment of Hon'ble Delhi High court is as under:-
"... the money receivable from the client has to be treated as "debt" and since it became bad, it was rightly considered as "bad debt" and claimed as such by the assessee in the books of account. Since this bad debt occurred in the year in question, it was shown by the assessee in that manner. Since the brokerage payable by the client is a part of the debt and that debt had been taken into account in the computation of the income, the conditions stipulated in sub-section (2) of section 36 read with section 36(1)(vii) stand satisfied in this case."ITA No.149/Ahd/2008 A..Y.2004-05
G.G.F.S. Ltd. v. ACIT, Cir-4, A'bd Page 4
6. We are of the considered opinion that in the facts of the present case as noted above, some portion that is interest portion of lease rental income were duly offered to tax by the assessee and therefore, as per these two judgments of Hon'ble Bombay High Court and Hon'ble Delhi High Court cited by Ld. AR of the assessee, the assessee is eligible for deduction on account of bad debts, as claimed by the assessee because the interest income offered to tax by the assessee out of lease rental income is a part of the debt and therefore, a part of the debt has been taken into account in the computation of income and as a result, the conditions stipulated in sub-section-2 of Section 36 of the Act stand satisfied in the present case. Respectfully following these two judgments of Hon'ble Bombay High Court and Hon'ble Delhi High Court, we delete the disallowance of part of bad debt made by the Assessing Officer and confirmed by the Ld. CIT(A). This ground of assessee's appeal is allowed.
6. In the result, assessee's appeal is allowed. Order pronounced in Open Court on the date mentioned hereinabove at caption page.
Sd/- Sd/-
(A.K.Garodia) (Kul Bharat)
(Accountant Member) (Judicial Member)
Ahmedabad,
*Dkp
Ǒदनांकः-08/03/2013 अहमदाबाद ।
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, /True Copy/ उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, ITA No.149/Ahd/2008 A..Y.2004-05 G.G.F.S. Ltd. v. ACIT, Cir-4, A'bd Page 5 अहमदाबाद ।
Strengthen preparation & delivery of orders in the ITAT
1) date of taking dictation 05/03
2) direct dictation by Member straight on No computer/laptop/dragon dictate
3) date of typing & draft order place before Member 05/03 4) date of correction 06/03
5) date of further correction --
6) date of initial sign by Members 07/03 7) order uploaded on --
8) original dictation pad-part has been enclosed in the file Yes
9) final order and 2nd copy send to Bench Clerk on 11/03