TMI Blog2012 (12) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... how that the assessee had taken over the amalgamating companies as a going concern. Moreover, it is not the case of the assessee that the inventories are being written off for being obsolete alone. The assessee has stated before the AO that it could not receive the amounts from various parties and when it has become bad, the same was written off. The assessee was unable to show how and why the inventories have become obsolete. The assessee failed to tender any evidence before the AO. In favour of revenue Write off the losses – Capital or revenue nature - Incurred in acquiring the assets and liabilities of the amalgamating companies – Held that:- In the present case, there was amalgamation of four companies into the assessee company. The assessee intends to write off the losses incurred by the assessee in acquiring the assets and liabilities of the amalgamating companies, which is capital in nature. In favour of revenue Bad debts – Assessee had not written off the debts in the books of account - Held that:- Assessee is claiming write off of bad debts in violation of the provisions of section 36(2)(i). The assessee has not placed on record the scheme of amalgamation either befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) To carry forward the loss computed under the normal provisions of the IT Act consequent to the above. The CIT(A) partly allowed the appeal of the assessee by allowing part of the inventories, loans advances and debtors to be written off as per the details given below:- Relief claimed Relief granted Inventories 91,28,17,863 53,76,14,307 Loans advances 37,76,35,892 30,74,52,104 Debtors written off 16,87,37,738 2,26,90,990 As regards the written off of fixed assets and capital work-in progress, the appeal of the assessee was rejected. 5. Aggrieved against this order of the CIT(A) dated 29.04.2011, both the assessee as well as department has preferred respective appeals before the Tribunal. The assessee has taken the following grounds of appeal:- 1. The CIT(A) has erred in disallowing the appellant s claim for write off of inventories to the tune of Rs. 3,75,20,03,556/- in respect of Num TV Animations. 2. The CIT(A) has erred in disallowing the appellant s claim for write off of loans and advances to the tune of Rs. 7,01,83,788/- relating to Intelvision and KSSEL o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and they are reflected in schedule 18 of the balance sheet under the heading exceptional items. The claim is not routed through P and L account. 4.1 The CIT(A) erred in allowing the assessee s claim towards inventories written off to the tune of Rs. 53,76,14,307/- 4.2 The CIT(A) failed to note that the assessee has not established as to how and why the assets have become obsolete. 4.3 It is submitted that the decision of the ITAT relied upon by the CIT(A) in the case of Kopran Drugs Ltd. Vs. ACIT ( 2 ITR (Trib) 155) cannot be said to be applicable to the facts of this case on all force since the said decision pertains to the transfer entries of share premium account to the P L account on account of write off of obsolete stocks in pursuance of a scheme of demerger and it is not so here. 5.1 The CIT(A) erred in deleting the book profits computed under section 115JB. 5.2 The CIT(A) failed to note that the loss claimed by the assessee in the return of income is not genuine. The computation of book profits is justified. 6.1 The CIT(A) erred in directing the Assessing Officer to carry forward the loss as quantified by him. 6.2 It is submitted that since the losses allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 250(Mad) The D.R. submitted that the assessee had only filed four papers before the Assessing Officer during the course of assessment including letter dated 5.8.2008 and details of assets written off for the assessment year 2006-07. Except for the four papers which are at page nos.1 to 4 of the paper book submitted by the D.R., he submitted that no other document was furnished before the Assessing Officer by the assessee . He contended that no partywise claim of advances made by different amalgamating companies was provided before the Assessing Officer. 9. The counsel appearing for the assessee in order to support her contentions relied on the paper books giving details of bad debts written off, fixed assets written off, capital work-in-progress written off, inventory written off and advances written off. In addition to the above, the counsel relied on the order passed by the Hyderabad Bench of the Tribunal in the case of Gulf Oil Corporation Ltd. Vs. ACIT., reported as 111 ITD 124 and the order of the Mumbai Bench of the Tribunal in the case of Sabra Impex Ltd. Vs. ITO reported as 141 TTJ (Mum) (UO)11. During the course of arguments, the counsel for the assessee also refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of section 115JB of the Act and has rightly observed in his order that the book profit cannot be adjusted except for the items specified in the section . The items aforementioned by the assessee are not specified in section 115JB. Therefore, the deduction claimed by the assessee in the book profit has rightly been disallowed by the Assessing Officer. The action of the Assessing Officer in rejecting the books of accounts of the assessee is in accordance with the law laid down by the Hon ble Supreme Court of India in the case of Apollo Tyres Ltd., Vs. CIT reported as 255 ITR 273(SC). 12. The CIT(A) while accepting the claim of the assessee for inventories written off as obsolete stock has erred in relying on the decision in the case of Kopran Drugs Ltd.(supra). In the aforesaid case, the assessee had acquired the business of the demerged company as a going concern. Whereas, in the instant case, the assessee has not placed on record any document to show that the assessee had taken over the amalgamating companies as a going concern. Thus, the ratio of the Kopran Drugs Ltd. case (supra) will not apply to the instant case. Moreover, it is not the case of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing write off of bad debts in violation of the provisions of section 36(2)(i) as well. The relevant extract of the provision is reproduced hereinbelow:- 36(2) (i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee In the case of the assessee, the A.R. has failed to show that the provisions of section 36(2)(i) were satisfied. The assessee has not placed on record the scheme of amalgamation either before the lower authorities or before the Tribunal. Therefore, claim of bad debts, inventories etc. of the assessee has rightly been disallowed by the Assessing Officer. 14. In our considered opinion, the CIT(A) has erred in modifying the order of the Assessing Officer which is a well reasoned and detailed order. We, therefore, set aside the order of the CIT(A) and restore the order of the Assessing Officer. Accordingly, we dismiss the appeal of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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