Income Tax Appellate Tribunal - Ahmedabad
Gujarat Gas Finacial Services Limited, ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD
AHMEDABAD "D" BENCH
(BEFORE S/SHRI G.D.AGARWAL, VICE-PRESIDENT AND
T.K. SHARMA, JUDICIAL MEMBER)
ITA No.2343/Ahd/2006
[Asstt. Year : 2003-2004]
ACIT, Cir.4 Vs. Gujarat Gas Financial Services Ltd.
Ahmedabad. 2, Shanti Sadan Society
Nr.Parimal Garden
Ellisbridge, Ahmedabad.
(Appellant) (Respondent)
Revenue by : Shri Shailendra Sharma
Assessee by : Shri S.N.Soparkar
ORDER
PER T.K. SHARMA, JUDICIAL MEMBER : This appeal is by the Revenue
against the order of the Commissioner of Income Tax (Appeals)-VIII, Ahmedabad dated 22.08.2006 arising out of the order of the ACIT, Cir.4, Ahmedabad passed under Section 143(3) of the Income Tax Act. The sole ground raised in this appeal reads as under:
"1. The ld.CIT(A) has erred in law and on facts in directing to delete the disallowance made on account of bad debts at Rs.54,96,589/-"
2. Briefly stated facts are that the assessee is a company engaged in the business of hire purchase/lease finance etc. It is a subsidiary of Gujarat Gas Company and provides gas connection to domestic, commercial and industrial consumers on lease basis. For the assessment year in appeal, the assessee filed return of income on 21-11-2003 declaring total income at Rs.4,85,67,121/-. The AO framed assessment under Section 143(3) on 15.01.2006 on total income at Rs.5,40,63,980/-. In this assessment order, the AO disallowed the bad debt to the tune of Rs.54,33,242/- actually written off by the assessee in the books of accounts. The reasoning given by the AO in the assessment order is that the claim of bad debts in question is not acceptable as the assessee has not taken any legal action for recovery. For making disallowance in the ITA No.2343/Ahd/2006 assessment order, the AO relied upon the judgment of the Hon'ble Gujarat High Court in the case of Ahmedabad Electricity Co. Vs. CIT, 262 ITR 97. On first appeal, in the impugned order, the learned CIT(A) deleted the above said disallowance for the detailed reasoning given in para-4, which reads as under:
"4. I have carefully considered the arguments of the appellant as well as perused the assessment order. The AO disallowed the bad debt claim quoting certain steps as suggested by the Hon'ble Gujarat High Court applicable to assessment years prior to 01.04.1989. He has not disputed the write off of bad debt and offering of the same as income prior to write off in accordance with the accounting practice. He has also not given any finding that the write off was either arbitrary or irrational. The only ground on which he effected the disallowance was that various steps as to recovery of bad debt and legal actions were either not taken or inadequate. Now the appellant claims that they have satisfied the requirements of section 36(1)(vii) and the bad debt write off decision was taken on the basis of commercial pendency and also derived legal support from the subsequent decision of the Hon'ble Gujarat High Court on the amended provisions. Thus, the action of the AO is not supported by either the facts of the present case or the legal requirements so as to write off of bad debts as governed by the amended provisions. In the absence of any finding to the contrary as to omission or irrational write off the action of the AO is not sustainable. I also find that the appellant had filed a detailed reply which was extracted in para
3.1 of the assessment order disputing that the AO took a decision which is at variance with the requirements for write off of bad debts and its allowance as applicable w.e.f. 01.04.1989. In that view of the matter, the disallowance made by the AO is untenable and respectfully following the binding decision of the jurisdictional High Court, other factual requirements being not in dispute."
3. Aggrieved with the order of the CIT(A), the assessee is in appeal before us. At the time of hearing before us, the learned DR relied on the reasoning given in the assessment order by the AO and contended that the assessee could not prove the legal steps taken for recovery of debts to the tune of Rs.54,96,859/-. Therefore, following the decision of Gujarat High Court in the case of Ahmedabad Electricity Co. (supra) disallowed the claim of bad debts.
-2- ITA No.2343/Ahd/20064. On the other hand, the learned counsel for the assessee vehemently supported the order of the learned CIT(A) . The learned counsel relied on the latest decision of the Hon'ble Supreme Court in the case of T.R.F. Ltd. Vs. CIT, 323 ITR 394 (SC) wherein it is held that law after 1st April, 1989 for allowance of bad debts, the assessee is only required to establish that the debts were written off. It is not necessary to establish that the debt has in fact become irrecoverable. He accordingly submitted that the view taken by the CIT(A) be upheld.
5. After hearing both the sides, we have carefully gone through the orders of the authorities below. It is pertinent to note that the assessee has actually written off the bad debts to the tune of Rs.54,96,859/- in the books of accounts. The Hon'ble Supreme Court in the case of T.R.F. Ltd. (supra) has held as under:
"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."
We, therefore, following the decision of the Hon'ble Supreme Court inclined to uphold the order of the learned CIT(A) on this issue.
6. In result, the Revenue's appeal is dismissed.
Order pronounced in Open Court on 29th October, 2010.
Sd/- Sd/- (G.D. AGARWAL) (T.K. SHARMA) VICE-PRESIDENT JUDICIAL MEMBER Place : Ahmedabad Date : 29-10-2010 -3- ITA No.2343/Ahd/2006 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 -4-