Income Tax Appellate Tribunal - Ahmedabad
Unifrax India Ltd.,(Formerly Orient ... vs Assessee on 21 November, 2008
आयकर अपीलीय अिधकरण,
अिधकरण, अहमदाबाद Ûयायपीठ ''ए
ए'', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD,
"A" BENCH
सव[ौी ौी जी.
जी.सी.
सी.गुƯा,
ा माननीय उपाÚय¢,
उपाÚय¢, एवं तेज राम मीणा,
मीणा, लेखा सदःय
के सम¢ ।
BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
TEJ RAM MEENA, ACCOUNTANT MEMBER)
ITA No.203/Ahd/2009
[Asstt.Year : 2005-2006]
Unifrax India Ltd. बनाम/Vs. ACIT, Range-8
(Formerly Orient Cerlane Ltd.) Ahmedabad.
30, Omkar House
C.G. Road, Ahmedabad.
PAN : AAACO 2313 B
ITA No.353/Ahd/2009
[Asstt.Year : 2005-2006]
ACIT, Range-8 बनाम/Vs. Unifrax India Ltd.
Ahmedabad. (Formerly Orient Cerlane Ltd.)
30, Omkar House
C.G. Road, Ahmedabad.
(अपीलाथȸ / Appellant) (ू×यथȸ / Respondent)
िनधा[ǐरती कȧ ओर से/ : Shri Falee H. Bilimoria with
Assessee by Ms.Sonalee Godbole
राजःव कȧ ओर से/ : Shri Rahul Kumar, CIT-DR
Revenue by
सुनवाई कȧ तारȣख/ : 27th February, 2012
Date of Hearing
घोषणा कȧ तारȣख/ : 07-03-2012
Date of Pronouncement
आदे श / O R D E R
ITA No.203 and 353/Ahd/2009
PER T.R. MEENA, ACCOUNTANT MEMBER: These are
two appeals - one by the assessee and another by the Revenue for the assessment year 2005-2006 against common order of the Commissioner of Income Tax (Appeals)-XIV, Ahmedabad dated 21.11.2008 arising out of the order of the Assessing Officer passed under Section 143(3) of the Income Tax Act, 1961. Since the assessee being same and common order of the CIT(A) is agitated upon, for the sake of convenience, we dispose of both the appeals by this consolidated order.
2. First we shall take up the assessee's appeal in ITA No.203/Ahd/2009 for the assessment year 2005-2006.
3. The first ground of the assessee's appeal reads as under:
"1. The ld.CIT(A) erred in confirming the action of the AO in disallowing the bad debts written off amounting to Rs.10,29,055/-. Having regard to the facts and circumstances of the case and the provisions of law, the appellant submits that the disallowance is unwarranted and requires to be deleted."
4. As evident from the orders of the Revenue authorities, the assessee is engaged in the business of manufacturing and trading of ceramic fiber and its allied products, vacum formed board, accessories etc. and business of providing engineering services. The case of the assessee was selected for scrutiny. In the return of income filed, the assessee claimed bad debts of Rs.10.29 lakhs and the assessee was asked to explain thereof. According to the AO, the assessee did not furnish any evidence to that effect. Accordingly, the AO following the decision of the Hon'ble jurisdictional High Court in the case of Dhall Enterprises & Engineers . Ltd. Vs. CIT, 207 CTR 729 (Guj) held that -2- ITA No.203 and 353/Ahd/2009 the conditions stipulated in Section 36(1)(vii) of the Act has not been satisfied by the assessee and therefore, the AO disallowed the claim and added to the total income of the assessee. The CIT(A) following the decision of the jurisdictional High Court in the case of Dhall Entprises (supra) confirmed the action of the AO by holding that the debt has not become bad and irrecoverable. Still aggrieved the assessee is before us.
5. The learned counsel for the assessee submitted that the assessee has furnished all the details viz. statement of bad debts written off during the year giving the name of the party, invoice number and the date when the accounted as sales and also the amount written off and the reasons for write off. The learned counsel for the assessee also drew of our attention to page no.53 to 55 of the paper books, wherein the detailed break up of the bad debts written during the year with name of the party, amount, invoice number and the reasons for write off. He submitted that despite various reminders (copies of which are part of the record), the parties have not come forward to settle issue, which itself showed that the assessee has taken diligent efforts to recover of its payment. He further submitted that looking to the smallness of the amount to be recovered from the parties, which are spread across the country, legal proceedings against them would be a costly affair for the assessee-company and the business prudence would not suggest that also. The learned counsel for the assessee also relied on the decision of the Hon'ble Supreme Court in the case of T.R.F. Ltd. Vs. CIT, 323 ITR 397 (SC). The learned DR, on the other hand, relied on the orders of the AO and the CIT(A) and submitted that the debt has not become 'bad' during the previous year and no -3- ITA No.203 and 353/Ahd/2009 evidence has been produced by the assessee and that conditions stipulated in Section 36(1)(vii) have also not been fulfilled by the assessee and therefore the Revenue authorities are rightly disallowed claim of the assessee.
6. We have heard both the parties and perused the orders of the AO and the CIT(A) and also the material available on record. The assessee has written off bad debts as irrecoverable in its books of accounts. The factum of the transactions and the figures of the amounts shown by the assessee in respect of bad debts have not been disputed by the Revenue authorities. The assessee has submitted the details of bad debts containing names of the parties, amounts and invoices number with date and also the reasons for the write off of the impugned amounts. Copies of the letters issued by the assessee on the parties have demonstrated the seriousness and diligent effort put in by the assessee to recover the amounts from the respective parties. The complete details of each and every bad debt were furnished to the AO and the size amounts various from Rs.530/- to Rs.4,11,000/- and in certain cases, the amounts were so small that any legal proceedings would be costly on the assessee, as the parties spread across the country. The assessee has submitted that no such disallowances were made in the past assessments or in the subsequent assessment years. The Revenue authorities are more attracted by the fact that the assessee has not complied with stipulations provided in Section 36(1)(vii) of the Act. We also find that the claim of the assessee also gets support from the recent decision of the Hon'ble Apex Court in the case of T.R.F. Ltd. Vs. CIT, 323 ITR 397 (SC) wherein Their Lordship held as under:
-4-ITA No.203 and 353/Ahd/2009 "After the amendment of section 36(1)(vii) of the Income Tax Act, 1961 with effect from April 1, 1989, in order to obtain a deduction in relation to bad debts, 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."
In this view of the matter and respectfully following the decision of the Hon'ble Apex Court cited supra, we hold that the Revenue authorities are not justified in disallowing bad debts written off amounting to Rs.10,29,055/- and we delete the addition and accordingly the Ground No.1 of the assessee is allowed.
7. The Ground No.2 of the assessee's appeal reads as under:
"2. The ld.CIT(A) erred in confirming the action of the AO in disallowing sales commission paid to various sales agents during the year aggregating to Rs.44,84,775/-. Having regard to the facts and circumstances of the case, the appellant submits that the disallownace is unjustified and unwarranted and requires to be deleted."
8. In the return of income the assessee claimed payment of commission of Rs.44.84 lakhs for the services rendered by various parties for the sale of the assessee-company. The assessee was asked to explain such payments with supporting evidences. The AO has not satisfied with explanation and details filed by the assessee and disallowed the sales commission. The CIT(A) has confirmed the same. The assessee is in second appeal before us.
9. At the outset, the learned counsel for the assessee drew our attention to letter of the counsel dated 2-12-2011 filed in the matter, wherein the learned counsel, on behalf of the assessee, has requested -5- ITA No.203 and 353/Ahd/2009 for admission of additional evidences as the same could not be produced before the Revenue authorities. The learned counsel submitted that these evidences are very much necessary and relevant for establishment of the claim of the assessee and require to be admitted in the interest of substantial justice.
10. After hearing both the sides, we find merit in the contentions of the learned counsel for the assessee. We find that for some reasons the assessee could not produce the said evidences, viz. confirmations from the sales agents, agent-wise party-wise statement of commission paid etc. before the Revenue authorities for adjudication of its claim and seems to be crucial to decide the issue. Therefore, in the interest of justice, we set aside the issue back to the file of the AO with direction to the assessee to produce all the evidences before the AO. The AO will consider the issue on the basis of the said additional evidences and decide the issue in accordance with law. Needless to say, the AO will give adequate opportunity of being heard to the assessee and the assessee will co-operate with the Revenue authorities in the matter.
11. The Ground No.3 of the assessee's appeal reads as under:
"2. The ld.CIT(A) erred in confirming the action of the AO in allocating notional expenditure aggregating to Rs.95,512/- towards the earning of dividend income in an arbitrary and adhoc manner and disallowing the same under Section 14A of the Act. Having regard to the facts and circumstances of the case, the appellant submits that the notional and arbitrary disallownace be deleted."-6-
ITA No.203 and 353/Ahd/2009
12. At the time of hearing, the learned counsel for the assessee has not pressed this ground for adjudication, hence dismissed.
13. In the result, the assessee's appeal is partly allowed for statistical purpose.
ITA No.353/Ahd/2009 (Revenue's appeal)14. The first ground of the Revenue's appeal reads as under:
"1. The ld.CIT(A) has erred in law and on facts in directing to delete the disallowance of Rs.8,18,202/- made by the AO on account of provision for bad debts."
15. The assessee claimed provision of bad debts of Rs.8,18,202/-. When the AO asked for explanation and to justify for the impugned provision, the assessee explained that the same remained un-recovered for the last one year, hence the provision. The AO has not satisfied with the explanation of the assessee and hence the claim of the assessee was disallowed. The CIT(A) however accepted the claim of the assessee by holding that the impugned amount has already been disallowed by the assessee in earlier years and therefore on write back of the said amount, the same cannot be treated as income, and hence disallowed made by the AO was deleted.
16. Before us, the learned DR relied on the order of the AO while the learned counsel for the assessee submitted that the provision for doubtful debts written back of Rs.8,18,202/- was disallowed by the assessee in the earlier assessment years. The learned counsel for the assessee submitted that the ITAT, Ahmedabad Bench in assessee's -7- ITA No.203 and 353/Ahd/2009 own case for A.Y.2001-2002 in ITA No.3535/Ahd/2004 dated 11-02- 2005 and for A.Y.2003-2004 in ITA No.1736/Ahd/2006 dated 24-7- 2009 similar issue has been decided in favour of the assessee. He further submitted that the relevant details evidencing the fact that the provision for doubtful debts was disallowed by the assessee and offered to tax in the earlier assessment years were furnished before the Revenue authorities and the CIT(A) has rightly allowed the claim of the assessee.
17. We have considered rival submissions and perused the orders of the authorities below. The CIT(A) has recorded a finding that from the statements of income and other details filed, the assessee suo moto disallowed the provision for doubtful debts and therefore written back of the said amount, could not be treated as income. The learned counsel for the assessee drew our attention to the orders of the ITAT, Ahmedabad for the assessment year 2001-2002 and 2003-2004 cited supra to support its case that similar issue was decided in favour of the assessee and the department's appeal against the decision of the Tribunal before the Hon'ble High Court of Court (PB No.31) was dismissed. These facts have not been disputed by the Revenue. Therefore, when the impugned provision for doubtful debts was disallowed by the assessee itself and offered to tax in the earlier assessment years, the same cannot be taxed as the same was written back. In view of these facts, we do not find any infirmity in the action of the AO in disallowing the impugned claim of the assessee. Accordingly, we uphold the order of the CIT(A) on this issue and dismiss the ground no.1 of the Revenue.
-8-ITA No.203 and 353/Ahd/2009
18. The Ground No.2 of the Revenue's appeal reads as under:
"1. The ld.CIT(A) has erred in law and on facts in directing to delete the disallowance of Rs.6,77,248/- made by the AO on account of inflation of purchase in respect of material purchased from Indian Rare Earth Ltd."
19. The assessee has shown purchase of Rs.49,97,408/- from M/s.Indian Rare Earths Ltd. during the relevant year. The AO on verification with the said party found that the assessee has shown an inflated purchase of Rs.6,77,248/- , to which the assessee has explained that the said Indian Rare Earth Ltd. has not shown three bills totaling to Rs.6,77,248/- hence the difference. Not satisfied with the reply of the assessee, the AO held the same to be non-genuine /bogus purchase and disallowed Rs.6,77,248/- and added to the income of the assessee. The CIT(A) on verification of the details found that the assessee had purchased the material from two other units of Indian Rare Earths Ltd. and the purchases were genuine and according the learned CIT(A) deleted the disallowance. Before us, both the parties relied on the respective orders of the Revenue authorities to support their case.
20. After hearing both the sides and perusal of the orders of the Revenue authorities and material placed on record, we find that the assessee has filed all the necessary details in respect of inflated figure of Rs.6,77,248/-. These details were considered by the CIT(A) as he observed in the impugned order that the assessee has furnished all necessary details regarding the purchase of materials from three units of IRE. The AO has made enquiry only with one unit of the IRE instead of three units and presumed that the assessee has inflated the purchase. This difference of figure in purchase was due to purchase -9- ITA No.203 and 353/Ahd/2009 from two other units of the IRE, which the AO ignored, though, the CIT(A) forwarded confirmation letters from these two other units to the AO by merely stating that the same could not be admitted as additional evidence. In this view of the matter, we are not inclined to interfere with the order of the CIT(A) on this issue, which is confirmed and the ground no.2 of the Revenue is rejected.
21. The Ground No.3 of the Revenue's appeal reads as under:
"3. The ld.CIT(A) has erred in law and on facts in directing to delete the disallowance of Rs.11,09,471/- made by the AO out of travelling expenses."
22. The assessee has claimed travelling and conveyance expenses to the extent of Rs.65,94,145/-. Out of that amount, according to the AO, the assessee has not properly explained expenses of Rs.11,09,471/- with supporting evidences, therefore, the AO disallowed traveling expenses to the extent of Rs.11,09,471/- and added to the total income of the assessee. The CIT(A) convinced with the contention of the assessee that the expenses of Rs.11,09,471/- was incurred by the assessee towards fuel and vehicle repair expenses, and included in the above claim of Rs.65,94,145/-. The ld. CIT(A) held that the expenses incurred by the assessee is wholly and exclusively for the business purpose, and thus allowed the claim of the assessee. Before us, both the parties relied on respective orders of the Revenue authorities.
23. We have heard both the parties, perused the orders of the AO and the CIT(A). The learned CIT(A) has observed in his order that the assessee has furnished the details with supporting evidences in -10- ITA No.203 and 353/Ahd/2009 respect of travelling expenses which was also included the expenditure on fuel and repair & maintenance of vehicles. These observations of the learned CIT(A) have not been controverted by the learned DR. Therefore, since the learned CIT(A)'s finding is based on the details furnished before him, and he found the same to be correct and proper, we do not find any justification in reversing the order of the CIT(A) on this issue. Accordingly, we confirm the order of the ld.CIT(A) on this issue and dismiss the Ground no.3 of the Revenue.
24. The Ground No.4 and 5 of the Revenue's appeal are general in nature and hence dismissed.
25. In the result, the assessee's appeal is partly allowed for statistical purpose and the Revenue's appeal is dismissed.
Order pronounced in Open Court on the date mentioned hereinabove.
Sd/- Sd/-
जी.
जी.सी.
(जी सी.गुƯा/G.C.
ा GUPTA) तेज राम मीणा / TEJ RAM MEENA)
(ते
उपाÚय¢ /VICE-PRESIDENT लेखा सदःय /ACCOUNTANT MEMBER
Copy of the order forwarded to:
1) : Appellant
2) : Respondent
3) : CIT(A)
4) : CIT concerned
5) : DR, ITAT.
BY ORDER
DR/AR, ITAT, AHMEDABAD
1. Date of dictation : 28-02-2012
2. Date on which the typed draft is placed : 02-03-2012
before the Dictating Member.
-11-