TMI Blog2015 (5) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... 42,543/- Assessing Officer has pointed out this amount but has not made any addition or disallowance in this regard. But the CIT(A) picked up this issue and made a disallowance by holding that the requires details names of the employees and amount dues is not ascertainable. It was contended by the Ld. DR that there was no issue before the CIT(A) in regard to Ground No.2 but Form No.35, we clearly observe that this issue has been raised by the assessee before the CIT(A) as Ground No.1. We further note that the Assessing Officer ignored to adjudicate the allowability amount of bad debt to the employees and the CIT(A) made the addition by holding that no details and evidence have been filed in this regard without providing any opportunity of being heard for the assessee. Therefore, this issue was not properly adjudicated by the Revenue authorities below and the disallowance and addition has been made in a casual manner. We may point out that if the Assessing Officer has raised same issue it has not made any addition then the CIT(A) cannot picked up this issue making further disallowance and enhancement without adopting due opportunity of hearing of the assessee by simply holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 14A of the Act r.w.r. 8D of the IT Rules 1962 requires proper examination and verification at the end of AO and we restore the same to the file of AO with a direction that the issue should be decided afresh. - Decided in favour of assessee for statistical purposes. - ITA No. 1625/Del/2013 - - - Dated:- 29-4-2015 - Shri B.C. Meena And Shri C.M. Garg JJ. For the Appellant : Sri V.P. Gupta Anurav Kumar, Advocate Sh. Ameresh Chaudhary Sh. Subirs,ARs. For the Respondent : Shri Vikram Sahay, Sr. DR ORDER Per Shri C.M. GARG, AM: 1. This appeal has been preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-XVIII, New Delhi dated 04.01.2013 in Appeal No.315/11-12 for AY 2009-10. 2. The assessee has raised the following grounds in this appeal:- 1. That the CIT(A) erred in not correctly appreciating the facts and the documents submitted by the Appellant in respect of employment as well as aggregate payment of ₹ 12,60,194/- made to the ex-employees, namely, Ms. Christen D'Mello and Mr. Chetan Madan and upholding the disallowance by wrongly observing that appointment letter had been filed for different per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That the CIT(A) also erred in upholding the disallowance made by the Assessing Officer for amount of ₹ 82,772/- being the deposits of ₹ 10,000/- each with four Government Departments and of ₹ 5,000/- each with two Government Departments aggregating to ₹ 50,000/- and interest thereon accrued of ₹ 32,722/- which could not be recovered without appreciating that the amounts had been written off by the company in the Books of account for the reason that the same could not be recovered for quite long period and the cost of following up the recovery thereof would have been more than the amount of deposits with each of the Department and accordingly deduction for the same is allowable either as bad debts or business loss. 3. Apropos Ground no.1, the Ld. counsel for the assessee submitted that the CIT(A) has erred in not correctly appreciating the facts and the documents submitted by the assessee before the Assessing Officer as well as First Appellate Authority in respect of employment as well as aggregate payment of ₹ 12,60,194/- made to ex-employees Ms. Christen D Mello and Mr. Chetan Madan. Ld. counsel further pointed out that the CIT(A) wrongly ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, we clearly observed that the assessee company filed appointment letters of Ms. Christen D Souza and Mr. Chetan Madan before the AO and ex-gratia payment was made to the heirs of Late Ms. Christen D Mello and no evidence regarding payment to Mr. Chetan Madan has been furnished before the authorities below. However, we are of the considered view that the Assessing Officer has raised allegation against the assessee that no employee was on the role of assessee company and impugned payment has been made either on behalf of M/s Ranbaxy Laboratories Ltd. or M/s Solrex Pharmacetuicals Company but this allegation has been made on the basis of doubt without bringing out any sufficient material or evidence. In this situation, when the quantum of payment has not been doubted and the assessee company is contended that Ms. Christen D Souza worked as a Secretary from 6.10.1999 and Mr. Chetan Madan worked as marketing executive posted at Ratlam from 01.04.1997. We, therefore, are of the considered view that it would be just and proper to allow assessee to show evidence of services rendered by them and evidence payment of ex-gratia payment as claimed by the assessee for the assessment year under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eplied that the assessing Officer did not ask any detail or explanation about the amount of bad debt shown by the assessee and the Assessing Officer also did not make any disallowance in this regard but the CIT(A) enjoying co terminus powers with the AO, rightly disallowed the claim in absence of details or expenditure, names of employees and amount dues to them for the claim of bad debts, therefore, the impugned disallowance is sustainable. Ld. DR vehemently contended that the deposit and interest recoverable from Government department cannot be held as bad debt if the assessee is not making any effort to recover this amount from the relevant government department. 9. In this regard to issue of allowability of ₹ 2,42,543/-, we clearly observed that the Assessing Officer has pointed out this amount but has not made any addition or disallowance in this regard. But the CIT(A) picked up this issue and made a disallowance by holding that the requires details names of the employees and amount dues is not ascertainable. It was contended by the Ld. DR that there was no issue before the CIT(A) in regard to Ground No.2 but Form No.35, we clearly observe that this issue has been rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amounts receivable from the Government of India. The assessee has satisfied all the conditions for writing off of the debts as provided under s. 36(1) of the Income-tax Act, 1961. When the debts are so written off, it has been held by the Hon ble Bombay High Court in the case of Director of IT (International Taxation) vs. Oman International Bank SAOG (2009) 223 CTR (Bom) 382 : (2009) 21 DTR (Bom) 193 : (2009) 313 ITR 128 (Bom), that the bad debts are deductible. This judgment of the Hon ble Bombay High Court has been upheld by the Hon ble Supreme Court by dismissing the SLP filed by the Revenue [(2009) 313 ITR (St.) 3]. There is no distinction between private debts and Government debts for the purpose of s. 36(1) of the Act. So also there is no guarantee that the assessee may get the payment from the Government companies within a reasonable time. Therefore, Government debts as such do not make any difference in the present case. The CIT(A)) has rightly deleted the addition. 12. In view of above, we are inclined to hold that the CIT(A) was not justified in holding that the government departmental dues cannot be claimed as irrecoverable, until and unless such a decision is ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration of rival submissions and contention, at the very outset, we note that the Hon ble jurisdictional Delhi High Court in Company Petition No.385 of 2012 judgment dated 07.12.2012 has sanctioned the claim of amalgamation u/s 391 394 of the Companies Act 1956 between the assessee company and other four companies in to Ranbaxy Drug Ltd. lying their respective share holders and creditors. From the order of the Hon ble Punjab Haryana High Court dated 06.0.2013 in Company Petition No.80 of 2012 (O M) connected with company petition no. 57 of 2012, we also observed that the scheme of amalgamation of the assessee company and Solrex Pharmaceuticals company Ltd. has been sanctioned. In the light of these judgments, we in safely noted that the assessee company and M/s Solrex Pharmaceuticals Ltd. have been amalgamated with Ranbaxy Drug Ltd. subsequently. 16. In view of decision of ITAT Bench in the case of M/s Gillette Group India Pvt. Ltd. (supra), we respectfully accept this preposition that the disallowance u/s 14A r.w.r. 8D of the IT Rules cannot exceed the amount which has been actually claimed by the assessee in the P L account on general and administrative expenses. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 14A does not envisage any such exception. The provisions of section 14A, controls the computation of income under the provisions of the Act and has overriding effect over other provisions. Therefore, even if the expenditure is allowable under any other provision of the Act, disallowance is made because of the overriding effect of section 14A of the Act. 5.3 The Legislature by using the expression expenditure in relation to income which does not form part of the total income in section 14A of the Act, in no way indicates that it does not encompass disallowance of expenditure incurred in relation to the income in the absence of actual receipt of income during the relevant previous year. On the contrary, the term in relation to is wide enough to include in its sweep expenditure both for making or earning income and incurred wholly and exclusively for the purposes of business carried on by the assessee . When there is no income, it cannot form part of anything and certainly it does not, in any case form part of total income. When dividend is not taxable at all, the interest pertaining to that would also not be allowable because there is no taxable income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis; iii) The provisions of sub section (2) and (3) of Section 14A of the Income Tax Act 1961 are constitutionally valid; iv) The provisions of Rule 80 of the Income Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008 are not ultra vires the provisions of Section 14A, more particularly sub section (2) and do not offend Article 14 of the Constitution; v) The provisions of Rule 80 of the Income Tax Rules which have been notified with effect from 24 March 2008 shall apply with effect from Assessment Year 2008-09; In ACIT v Citicorp Finance (India) Limited [300 ITR 398(AT Mum)) it was held that the provisions of sub sections (2) (3) are procedural in nature and therefore section 14A will apply to all pending matters. The Hon'ble Calcutta High Court in Dhanuka Sons vs. CIT 12 Taxmann.com 227 (Cal.) held that: In our opinion, the mere fact that those shares were old ones and not acquired recently is immaterial. It is for the assessee to show the source of acquisition of those shares by production of materials that those were acquired from the funds available in the hands of the assessee at the relevant point of time without taking benefit of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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