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Ram Gopal Versus ITO, Ward-1 (1) , Muzaffarnagar.

2015 (9) TMI 380 - ITAT DELHI

Disallowance of amount of service tax payable u/s 43B - Held that:- Since the said amount of service tax was not received during the year, the ld. AR argued that no disallowance can be made on this score u/s 43B. For this proposition, he relied on the judgment of CIT VS. Ovira Logistics (P) Ltd. (2015 (4) TMI 684 - BOMBAY HIGH COURT). For similar proposition, he relied on the order passed by the Chennai bench of the tribunal in ACIT VS. Real Image Media Technologies (P) Ltd. (2007 (12) TMI 263 - .....

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. Decided in favour of assessee.

Addition of amount of bad debts written off in the books of account - Held that:- There is no dispute on the fact that the assessee wrote off a sum of ₹ 7.75 lac in his books of account as bad debt. The Hon’ble Supreme Court in T.R.F. Ltd. vs. CIT (2010 (2) TMI 211 - SUPREME COURT ) has held that after 1.4.1989 the assessee is not required to establish that the debt has become bad in the previous year and a deduction on account of bad debts is pe .....

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half and, once such brokerage is credited to his Profit & Loss Account and the same is taken into account in computing his income, the condition stipulated in section 36(2)(i) gets satisfied and, therefore, the write off of the debt representing the irrecoverable amount receivable from the clients against purchase of shares on their behalf is allowable as bad debt. The Hon’ble Bombay High Court in CIT vs. Shreyas S. Morakhiya (2012 (3) TMI 103 - BOMBAY HIGH COURT) has approved the view taken by .....

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source from commission income u/s 194H only if the condition enshrined in the second proviso is satisfied, i.e. sales or gross receipts must exceed the monetary limit (Rs.40 lac at that time) during the financial year preceding the financial year in which commission is paid. Thus if the assessee in question pays commission or brokerage in the previous year 2007-08 relevant to assessment year 2008-09, then, his sales, gross receipts or turnover for the previous year 2006-07 relevant to assessmen .....

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to assessment year under consideration.- Decided in favour of assessee.

Addition u/s 68 - CIT(A) deleted the addition - Held that:- The assessee furnished reconciliation before the ld. CIT(A) in respect of balances of the parties appearing in his books of account and the corresponding balances in the books of such parties. The ld. CIT(A) found reconciliation in order and, accordingly, deleted the addition. The ld. DR could not controvert any discrepancy in such reconciliation. Under .....

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6.2011 in relation to the assessment year 2008-09. 2. First ground of the assessee s appeal is against confirmation of addition of ₹ 6,20,631/-, being the amount of service tax payable u/s 43B of the Income-tax Act, 1961 (hereinafter also called the Act ). The facts apropos this ground are that the assessee is engaged in the business of sugar as a commission agent. The assessee raised bills of commission with service tax. Only commission amount was credited to the Profit & Loss Account .....

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ills on which such service tax was charged, were yet to be recovered. It was also submitted that the amount of service tax was not debited to the Profit & Loss Account and, as such, there could be no question of disallowance u/s 43A. Unconvinced with the assessee s submission, the AO made a disallowance of ₹ 6.20 lac u/s 43B of the Act towards the unpaid amount of service tax. The ld. CIT(A) upheld the assessment order on this count. The assessee is aggrieved against the confirmation o .....

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amp; Loss Account. The amount of service tax was credited in the books of account and on making payment after realization from sugar mills, the assessee was debiting the service tax account. The amount of service tax payable in the instant case represents the amount of service tax, which was billed by the assessee, but not realized up to the year ending. In other words, the amount of service tax at ₹ 6.20 lac for which disallowance has been made has neither been realized by the assessee no .....

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was not received during the year, the ld. AR argued that no disallowance can be made on this score u/s 43B. For this proposition, he relied on the judgment of the Hon ble Bombay High Court in CIT VS. Ovira Logistics (P) Ltd. (2015) 232 Taxman 240 (Bom). For similar proposition, he relied on the order passed by the Chennai bench of the tribunal in ACIT VS. Real Image Media Technologies (P) Ltd. (2008) 116 TTJ 964, in which it has been held that service-tax though billed but not received not havi .....

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ground is allowed. 4. Ground No.2 is against the confirmation of addition of ₹ 7,75,650/-, being the amount of bad debts written off in the books of account. Succinctly, the assessee claimed deduction for this sum under the head Bad debts. On being called upon to explain as to how the conditions of section 36(2) were fulfilled, the assessee stated that he was simply a commission agent of sugar mills assisting in the sale of sugar by them. As per the terms and conditions with the sugar mil .....

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ated with any evidence. The ld. CIT(A) upheld the view taken by the AO. The assessee is aggrieved against the sustenance of disallowance. 5. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact that the assessee wrote off a sum of ₹ 7.75 lac in his books of account as bad debt. The Hon ble Supreme Court in T.R.F. Ltd. vs. CIT (2010) 323 ITR 397 (SC) has held that after 1.4.1989 the assessee is not required to establish that the de .....

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s year in which the amount of such debt or part thereof was written off or any earlier year. To put it simply, the deduction on account of bad debts is permissible on write off only if the amount of debt has been taken into account in computing the income of the assessee for the instant year or an earlier year. The question arises as to whether a mere receipt of commission on total value of sales would satisfy the condition of section 36(2) in respect of the amount of sales which has become irre .....

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satisfy the condition stipulated u/s 36(2) in respect of the amount of bad debt towards non-realisation of sale value of the shares. Answering the question in affirmative, the Special Bench held that the amount receivable by the assessee share broker on account of brokerage is a part of debt receivable by him from his clients against purchase of shares on their behalf and, once such brokerage is credited to his Profit & Loss Account and the same is taken into account in computing his income, .....

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ITR 178 (Del). The facts of the instant case are, mutatis mutandis, similar to those considered and decided in the aforenoted judicial precedents. As such, the assessee deserves to succeed on this ground. It is however, made clear that any subsequent recovery from the amount written off as bad debts, is liable to be offered as income. Overturning the impugned order on this issue, we order for the deletion of addition. 6. Ground nos. 3 and 4 were not pressed by the ld. AR. The same, therefore, s .....

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s 40(a)(ia) of the Act. In reaching this conclusion, the AO relied on the order passed by him for the immediately preceding assessment year. The ld. CIT(A) deleted the disallowance. 8. We have heard the rival submissions and perused the relevant material on record. Section 194H of the Act provides that any person not being any individual or HUF, who is responsible for paying to a resident any income by way of commission or brokerage, shall, at the time of credit of such income to the account of .....

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The instant assessee is an individual. As such, he is liable to make deduction of tax at source from commission income u/s 194H only if the condition enshrined in the second proviso is satisfied. Such condition is that sales or gross receipts must exceed the monetary limit (Rs.40 lac at that time) during the financial year preceding the financial year in which commission is paid. In other words, if the assessee in question pays commission or brokerage in the previous year 2007-08 relevant to ass .....

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, there can be no obligation on the assessee to deduct tax at source on commission paid in the previous year relevant to assessment year under consideration. As such, we approve the view taken by the ld. CIT(A). It is further noticed that similar view has been taken by the tribunal in the preceding year. This ground is not allowed. 9. The only other ground which survives for consideration is against the deletion of addition of ₹ 4,89,688/- made by the AO u/s 68 of the Act. There were certa .....

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