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2015 (3) TMI 643 - ITAT KOLKATA

2015 (3) TMI 643 - ITAT KOLKATA - TMI - Disallowance of Bad Debts - failure of the Appellant to prove revenue recognition of such debts in earlier years - Held that:- We note that assessee has claimed before the ld. CIT(A) that details of bad debt were furnished by the assessee regarding offer for taxation in the respective year and all such debts carried over for long periods arising out of hotel operations. However, we find that the detailed as referred in the above submissions have not been p .....

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e remitted to the file of the AO to make factual examination of the assessee’s claim after giving the assessee adequate opportunity of being heard. - Decided in favour of assessee for statistical purposes.

Deduction u/s. 43B of municipal taxes - CIT(A) allowed the claim - Held that:- CIT(A) has allowed the impugned payment on the basis of provisions of section 43B of the I.T Act 1961. The said section mandates that the statutory dues should be allowed if they are paid during the year .....

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not been made before the due date of filing of return. The revenue has taken the ground that the said amount should not be allowed if it was paid in subsequent financial year. We find that this ground is not sustainable as section 43B itself mandates that the amount involved can be allowed if the same is paid after the close of the financial year, but before the due date of filing of return. Hence, we do not find any infirmity in the order of the ld.CIT(A) - Decided against revenue.

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ditors have not mentioned any short coming on that account, in assessee’s books, in their Audit report. We find that AO’s remand report indicates that the bills submitted in this regard were not proper inasmuch as names, addresses or bills of suppliers etc were not mentioned in the vouchers. This finding of the AO cannot be dislodged only by plea that the accounts of the assessee were audited and the auditors have not pointed out any short coming. Income tax laws do not provide that the auditors .....

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Ltd for operation of hotel of the assessee and also to render supervisory services. The amount paid was based upon percentage of gross revenue and gross operating profit. The ld. CIT(A) has given a finding that after availing services of the above referred reputed hotel chain the business position of the assessee in subsequent years improved. In such situation, it cannot be said that the amount paid as management fee, was not allowable. The ld.CIT(A) has rightly held that management fee is direc .....

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uired. In this respect, we also refer to the case of CIT Vs. Walchand & Co. Pvt. Ltd reported in (1967 (3) TMI 2 - SUPREME Court). In this case, it was held that in applying the test of commercial expediency for determining whether the expenditure was wholly and exclusively made out for business reasonableness has to be judged from the point of view of businessman. - Decided against revenue. - ITA No. 964/Kol/2011 , ITA No. 954/Kol/2011 - Dated:- 5-3-2015 - Shri Mahavir Singh And Shri Shamim Yah .....

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te for the commissioner of Income-Tax (Appeals) to pass order confirming disallowance of Bad Debts of ₹ 1037344 alleging failure of the Appellant to prove revenue recognition of such debts in earlier years without considering the statement submitted to such effect during the course of appeal proceedings on 02.09.2009. 2. Whether on the facts and in the circumstances of the case was it justified for the Commissioner of Income Tax (Appeals) to confirm disallowance of Bad Debts of ₹ 103 .....

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is being disallowed and added back to the total income. 4. Against the above order, the assessee appealed before the ld.CIT(A). The ld.CIT(A) reproduced the following submissions of the assessee:- 01. The statement to such effect is not appropriate in view of the fact, that full details thereof were furnished during the course of assessment proceedings. Details of Bad Debts was furnished both in assessment proceedings and also in appeal proceeding. Debts which were written off as bad in the pre .....

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written off the debt as bad debt in the books of account. The amendment has also done away with the requirement of establishing that the debt has become bad. 02. Mumbai Bench H (Special Bench of the Tribunal in the case of Dy. CIT, Special Range 27 V Oman International Bank SAOG (2006) 100 ITD 285 held that : The earlier expression any debt or part thereof, which is established to have become a bad debt in the previous year has been conspicuously omitted by the amendment and substituted by the e .....

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which is established to have become bad debt . When the amendment has been brought to cure a defect and the amendment has omitted the expression which has made way for such defect, there is no reason to ponder over the past and to decide the matter still under the law as stood prior to amendment. 03. The aforesaid decision of the Mumbai Bench of the Tribunal has been approved by Bombay High Court in the case of Director of Income Tax (International Taxation) Vs. Oman International Bank (2009) 31 .....

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hat the amount written of as bad debts was ever offered by it for taxation. He further observed as under:- For the allowability of a debt as bad it requires to be proved that the amount of that debt was taken into income of the assessee in an earlier year. In the instant case since the assessee did not do so, its claim of bad debts cannot be allowed. For the above discussion the disallowance of ₹ 10,37,344/- made by the AO is confirmed. This ground is, thus, dismissed. 5. Against the above .....

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sion in the case of Oman International Bank (supra) [ITAT Mumbai Bench, Mumbai] the same is allowable. However, it is also settled that bad debt claimed by the assessee is allowable only if the amount of bad debt was taken into account in the income of the assessee in the earlier years. We find that the AO had made disallowance of bad debt on the ground that the assessee has failed to furnish any details in support of the claim. We find that the nature of the claim could not be ascertained in th .....

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e amount of bad debts was taken into income of the assessee in the earlier years. We find that there is contradiction between the submissions of the assessee and the finding of the ld.CIT(A) as to whether the details were furnished that the income relating to bad debts were offered for taxation in the earlier years. In this view of the matter, in our considered opinion the issue needs to be remitted to the file of the AO to make factual examination of the assessee s claim after giving the assess .....

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5/- pertaining to the previous years 1997-98 to 2001- 02 and actually paid in the previous year 2003-04 in computing the total income for the previous year 2002-03 relevant to the assessment year 2003-04. 2. That on the facts and circumstances of the case and in law,, the ld.CIT(A) erred in allowing expenditure incurred on account of Decorative expenses (Rs.2,38,347/-), Music & Concert (Rs.5,51,880/-), Pest Control (Rs.1,02,950/-), Plant & Flower (Rs.3,87,527/-), cleaning charges (Rs.5,3 .....

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disallowance of ₹ 54,17,874/- by observing as under:- As per the Profit & Loss a/c the assessee has debited ₹ 76,41,979/- on account of Rates & Taxes. However, as per point 8 of the Notes on account a sum of ₹ 48,65,858/- relates to earlier years. From the details of Rates & Taxes the following is reproduced below- 3.03.2003 Income tax [inadmissible] Rs.12,695/- Luxury Tax 2000-01 ₹ 2,186/- Professional-tax, 2001-02 ₹ 380/- WBST, 1996-96 to 1999-2000 Rs. .....

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ct. The assessee failed to furnish any satisfactory explanation or any evidence to prove that the said liabilities crystallized during the current financial year. Any delayed payment which was not added back u/s. 43B earlier is not allowability deduction even on payment basis, if it is not proved that the liability arose during the year. Since the assessee company could not produce any evidence in support of its claim, expenses of ₹ 54,17,874/- relating to earlier years on account of rates .....

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O has not considered such pertinent fact. Furthermore, the tenancy arrangement under which the assessee is occupying the building and carrying on business of Peerless Inn at Kolkata evidences that Municipal Taxes will have to be paid by the assessee. Furthermore, similar payments have not been disallowed by the AO in the assessments of succeeding assessment years though the same were claimed by the assessee. In the remand report dated 30.09.2009, the AO has admitted that the payment of Luxury ta .....

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ed under section 43B of the Act. The disallowance in assessment in respect of Municipal Corporation Tax is thereby deleted. The Income tax paid of ₹ 12,695/- is not an allowable expenditure, therefore, the disallowance of the same is confirmed. This ground is, hence, partly allowed. 11. Against the above order, the revenue is in appeal before us. 12. We have heard both the counsel and perused the record. We find that the ld.CIT(A) has allowed the impugned payment on the basis of provisions .....

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amount involved is allowable as per provisions of section 43B of the Act. It is not the case of the revenue that the concerned payment has not been made before the due date of filing of return. The revenue has taken the ground that the said amount should not be allowed if it was paid in subsequent financial year. We find that this ground is not sustainable as section 43B itself mandates that the amount involved can be allowed if the same is paid after the close of the financial year, but before .....

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#8377; 14,92,721/-. Since no explanation was offered regarding the difference of ₹ 40,87,354/-, the AO added the same as unexplained. 14. In the appellate proceedings, the assessee submitted the details which were remanded by the ld.CIT(A) to the AO. Ld. CIT(A) observed as under:- The details furnished by the assessee were sent to the AO for his comments. The AO in his remand report dated 24.05.2007 stated that though the details of the expenses have been furnished during the appellate pro .....

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hotel occupancy and business. The AO s objection that no names, addresses or bills or suppliers, etc. are furnished by the assessee is not good because the accounts of the assessee are subjected to audit and the Auditors had not mentioned any short coming on that account, in assessee s books, in their Audit Report. 15. Accordingly, the ld.CIT(A) granted part relief to the assessee. 16. Against the above order, the revenue is in appeal before us. 17. We have heard both the counsel and perused the .....

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ks, in their Audit report. We find that AO s remand report indicates that the bills submitted in this regard were not proper inasmuch as names, addresses or bills of suppliers etc were not mentioned in the vouchers. This finding of the AO cannot be dislodged only by plea that the accounts of the assessee were audited and the auditors have not pointed out any short coming. Income tax laws do not provide that the auditors report should be treated as sacrosanct and the AO need not make proper exami .....

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Ltd for operating hotel Peerless Inn and a sum of ₹ 23,17,827/- was paid to that company towards Management fees. The AO observed from the details before him that the assessee had also paid Director s Remuneration of ₹ 7,68,000/- and Director s Fees of ₹ 1,38,000/- during the relevant year. The AO also noted that employee s cost was also borne by the assessee. Therefore, the AO formed the view that the Operating Agency did not carry out the agreement and also for the reason tha .....

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ld.CIT(A) reproduced the submissions of the assessee in this regard and concluded as under :- The assessee has explained that the Agreement with Sarovar Park Plaza Hotels and Resorts Pvt. Ltd entails that responsibility for operation of hotel Peerless Inn, Kolkata and also to render supervisory services. The agreement provides that the operator shall operate the Hotel and shall also render supervisory services. The operator apart from exclusive operation and supervision is also responsible for ( .....

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observed that the said agreement did not provide for employee s cost to be borne by the Operator. Director s Remuneration or Director s Fees are paid to the Directors of the company which is an allowable expenditure. The improvement of business position of the assessee in the subsequent years evidences that association of Operating Agent has proved to be advantageous. It is also pertinent to note that in the assessments of subsequent assessment years, no part of payment of Management Fees has be .....

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