TMI Blog2011 (8) TMI 351X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the interest was receivable discontinued the operation after 31-3-2001 and vanished - The Directors of the debtor company were also not available - The CIT(A) has given a finding that the assessee has extended money as Inter Corporate Deposit (ICD) to Digital Super Highway which is a group company of the assessee - Claim of bad debs rejected. - 1254, 1255, 2033 AND 2034 (MUM.) OF 2010 - - - Dated:- 19-8-2011 - PRAMOD KUMAR, VIJAY PAL RAO, JJ. K. Shivaram and Rahul K. Hakani for the Appellant. Smt. Kusum Ingale for the Respondent. ORDER Vijay Pal Rao, Judicial Member. These cross appeals, two by the assessee and two by the department are directed against two separate orders of CIT(A) both dated 30-12-2009 for the assessment years 2003-04 and 2006-07. 2. In appeal ITA No. 2034/M/2010 for the assessment year 2003-04, the assessee has raised following ground : "1. (i) The Hon'ble CIT(A) erred in laws and facts in upholding the disallowance of Rs. 3,59,01,115 under section 40(a) being Bandwidth charges on account of non-deduction of TDS from payment made to non-resident company. The reason given by him doing so wrong, contrary to the facts of the case a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of the assessee qua the issue of disallowance of Bandwidth charges under section 40(a) is maintainable when this issue of TDS under section 195 as well as nature of Bandwidth charges paid for providing internet through cable has been decided by CIT while passing the order under section 263 of Income-tax Act dated 5-12-2007 in view of the decision of Hon'ble jurisdictional High Court in case of Herdillia Chemicals Ltd. v. CIT [1996] 221 ITR 194/[1997] 90 Taxman 314 (Bom.). The learned AR of the assessee in response to the query of the bench has submitted that the CIT(A) while passing the order under section 263 directed the Assessing Officer to frame fresh assessment after giving the opportunity of being heard to the assessee. Therefore, the AR has contended that when the issue has been decided afresh by the Assessing Officer then there is no bar in challenging the order of the Assessing Officer passing under section 143(3) read with section 263. He further contended that in the case of Herdillia Chemicals Ltd. (supra) the appeal of the assessee was dismissed by the CIT(A) itself being not maintainable whereas in case of assessee the CIT(A) has decided the issue on merits. The le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s tax held that physical possession by the customer is not absolutely required for user of the equipment. In this case the customer had been provided with the right to use the equipment in the form bandwidth capacity/transponder and the decision of the Supreme Court in the case of BSNL which is more concerned with the definition of sale and thus does not affect the claim of the department to tax such amount as Royalty. Further the decision of Wipro Ltd. have not considered the applicability of royalty for use of equipment under Explanation 2(iva) to section 9(1)(vi). Further it has also not considered the amended below section 9(2) wherein it has been specifically brought by Finance Act, 2007 with retrospective effect from 1-4-1996 that where the income is accrued or arised in India such income shall be included in the total income of the non-resident, whether or not the non-resident has residence or place of business or business connection in India. Further there has been amendment in Explanation 2 also to section 9(1)(vi) with effect from 1-4-2002 whereby use or right to use the equipment has been brought under the definition of royalty. The decision of Skycell Communication whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on order passed under section 263 then the Assessing Officer had to perform mainly the ministerial functions with respect to the issue on disallowance by Bandwidth charges. Once the issue has been decided and definite finding has been given by the Commissioner of Income-tax in respect of disallowance of expenditure under section 40(a) then the Assessing Officer had no discretion to take any different view on the issue. Since the assessee has not challenged the order passed under section 263 dated 5-12-2007 therefore, the same has attained the finality. In these facts and circumstances, we are of the view that the decision of Hon'ble jurisdictional High Court in case of Herdillia Chemicals Ltd. (supra) is fully applicable in this case. Your lordships have observed at page No. 200 to 202 as under : "It is abundantly clear from the above extracts that the Commissioner did decide both the issues raised before him and held in no less clear terms that the Income-tax Officer had allowed excessive amount under section 80J on both the counts mentioned above. It was only after arriving at such a finding that the Commissioner withdrew the relief under section 80J of the Act granted by the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olation from the text of the order and the determination of the questions arising therein by the Commissioner. It is neither proper no permissible to pick out any part of the order, and in the case of a remand order the operative part thereof and to read the same without regard to the questions decided therein to support the contention that all issues are left open for determination by the authorities below. The Tribunal, in this case, in our opinion, was right in holding that the revisional order, wherein a definite finding is recorded on both the points at issue, having become final on account of the failure of the assessee to pursue the statutory remedies provided in the Act against that order, the assessee cannot be allowed to challenge such concluded findings collaterally in all appeal filed against the fresh order passed by the Income-tax Officer with a view to giving effect to the same. In our opinion, though an appeal in maintainable from the fresh order passed by the Income-tax Officer to give effect to a revisional order or an appellate order, only such issues can be agitated in such appeal which have not attained finality by virtue of earlier orders of the revisional o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has claimed bad debts amounting to Rs. 6,41,46,828. This amount includes the bad debts written off Rs. 5,69,19,203, interest receivable written off Rs. 68,12,232 and advances/deposits written off Rs. 4,15,393. The Assessing Officer disallowed the said claim of Rs. 6,41,46,828 and added back to the income of the assessee. On appeal the CIT(A) deleted the addition made by the Assessing Officer on account of bad debts written off out of the debtors of the sale to the extent of Rs. 5,69,19,203, however, the CIT(A) sustained the disallowances made by the Assessing Officer on account of the interest receivable of Rs. 68.12 lakhs written off as well as advances/deposits written off Rs. 4.15 lakhs. Thus, both the assessee as well as revenue are in appeal. The assessee aggrieved by confirmation of the disallowance of interest written off and disallowances towards advances/charges whereas the revenue is aggrieved against the deletion of disallowances on account of bad debts written off pertaining to the sales. 12. We have heard learned AR as well as learned Departmental Representative and considered the relevant record. The learned AR of the assessee has submitted that the issue of bad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was receivable discontinued operations after 31-3-2001 and vanished and its directions were also not available. The amounts were not recoverable and turned bad. Hence appellant has written off the interest receivable. Appellant also stated to have enclosed a letter in support of non-recoverability and claimed the allowance under section 36/37 of the Act. Facts and material on record are considered. The letter of non-recoverability is actually copy of a letter written by the appellant to the Assessing Officer narrating difficulties in payment of taxes and for non-levy of penalty. The party name of Digital Superhighway has not been mentioned anywhere in the said letter. It is also observed that the said company was extended monies by appellant as inter corporate deposits. Digital Superhighway was a group company for the appellant. Appellant's argument, therefore, that the money was not recoverable as that said company had discontinued operations and had vanished and its directors were not available is not an acceptable argument. The write-off of interest of Rs. 68.12 lakhs is therefore held not allowable and disallowance and by Assessing Officer upheld." 15. The assessee contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of Rs. 5,57,81,59,748." 20. Ground No. 1 is common in both assessment years except the quantum of addition whereas Ground No. 2 regarding addition on account of subscription income for the assessment year 2006-07. 21. Ground No. 1 is regarding disallowance of bad debts. We have heard the learned DR as well as learned AR and considered the relevant record. This amount written off represents the trade debts which is not disputed by the revenue. However, the Assessing Officer disallowed the same on the ground that the assessee failed to prove that what steps were taken to recover the debts. At the out set we note that in view of the decision of Hon'ble Supreme Court in case TRF Ltd. (supra), the assessee is not required to establish that the debts have actually gone bad and it is enough if bad debts is written off as irrecoverable in the accounts of the assessee. Accordingly, we do not find any reason to interfere with the impugned order of the CIT(A) qua this issue. 22. For the assessment year 2006-07 the revenue has raised another ground regarding deletion of addition on account of subscription income. We have heard the learned DR as well as AR and considered the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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