New User   Login      
Tax Management India .com TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (3) TMI 317 - ITAT PUNE

2016 (3) TMI 317 - ITAT PUNE - TMI - Disallowance of labour welfare expenses - Held that:- The said expenditure has been incurred towards Corporate Social Responsibility. The said expenditure incurred by the assessee has not been disputed by the Department. The only objection raised is that it is not on account of business expediency. The Corporate Social Responsibility discharged by the assessee shows its sensitivity towards the society at large. Such expenditures need not be measured in the te .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

or The Assessee : Shri C.H. Naniwadekar For The Revenue : Shri Hitendra Ninawe ORDER PER VIKAS AWASTHY, JM : ITA No. 870/PN/2014 has been filed by the Revenue against the order of Commissioner of Income Tax (Appeals)-III, Pune dated 19-02-2014 for the assessment year 2009-10. The assessee has filed cross appeal against the said order of Commissioner of Income Tax (Appeals) in ITA No. 919/PN/2014. 2. The facts of the case as emanating from the records are: The assessee company filed its return of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order partly accepted the appeal of the assessee. Now, both the Revenue and the assessee are in appeal against the findings of Commissioner of Income Tax (Appeals) before the Tribunal. ITA No. 870/PN/2014 (Appeal by the Revenue) 3. First, we will take up the appeal of Revenue. The Revenue in appeal has raised 5 grounds. All the grounds in the appeal of the Revenue relate to the wr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

come Tax (Appeals) accepted the contentions of the assessee in the light of decision rendered in the case of South India Surgical Co. Ltd. Vs. Assistant Commissioner of Income Tax reported as 287 ITR 62 (Mad) and the decision of Hon'ble Supreme Court of India in the case of TRF Ltd. Vs. CIT reported as 323 ITR 397 (SC). 4. Shri Hitendra Ninawe representing the Department submitted that a perusal of the impugned order would show that the Commissioner of Income Tax (Appeals) while allowing the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he debts have become bad. The ld. DR vehemently supported the findings of the Assessing Officer and prayed for reversing the findings of the Commissioner of Income Tax (Appeals) on this issue. 5. Shri C.H. Naniwadekar appearing on behalf of the assessee submitted that the identical issue relating to write off of bad debts was raised before the Tribunal in assessee s own case in ITA No. 1623/PN/2012 and ITA No. 1639/PN/2012 for the assessment year 2007-08 decide on 31-10-2013. The Tribunal after .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

acts and in the circumstances of the case, learned CIT(A) has erred in deleting the addition made by the Assessing Officer by disallowing the assessee's claim of bad debts amounting to ₹ 40,45,951/-. 2. On the facts and in the circumstances of the case, learned CIT(A) has erred in holding that after the amendment to section 36(1)(vii) (w.e.f. 01.04.1989), the assessee need not demonstrate to the tax authorities that debt has become bad whereas the real objective of this amendment was t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

aves to add, amend or alter any of the above grounds of appeal. 7. We find that the issue raised by the Department in present appeal is similar to the issue that was raised in the assessment year 2007-08. The Tribunal adjudicated the matter as follows: 9. We have carefully considered the rival submissions. Section 36(1)(vii) of the Act provides that subject to the provisions of sub-section (2) of section 36 of the Act, the amount of any bad debt or part thereof which is written-off as irrecovera .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an earlier previous year. 10. With respect to the aforesaid statutory requirement there is no dispute in the present case. Firstly, the debts in question have been written-off as irrecoverable in the accounts of the assessee; and, secondly it is also not in dispute that the same have already been taken into account in computing the income of the assessee in the preceding years. However, the stand of the Revenue is that, on facts, assessee has not been able to establish that the debts have become .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the provisions of section 36(1)(vii) of the Act which existed prior to 01.04.1989 with that which are on statute post-01.04.1989. Assessment years before the Hon ble Supreme Court were 1990-91 and 1993-94, i.e. both post- 01.04.1989. As per the Hon ble Supreme Court, prior to 01.04.1989, every assessee had to establish, as matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. Further, explaining the provisions of section 36(1)(vii) of the Act as amended w.e. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

April 1, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word established , which earlier existed in section 36(1)(vii) of the Income-tax Act, 1961 ( the Act , for short). 3. For the sake of clarity, we reproduce hereinbelow the provisions of section 36(1)(vii) of the Act, both prior to April 1, 1989 and post April 1, 1989 : Pre-April 1, 1989 : 36. Other deductions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, in computing the income referred to in section 28- . . (vii) subject to the provisions of sub-section (2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. 4. The position in law is well-settled. After April 1, 1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable. It is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ugned debts is concerned, there cannot be any doubt. In this context, we have perused the details of amounts due from different debtors which has been written-off as bad debts amounting to ₹ 40,89,838/-, the relevant details are at pages 4 to 9 of the Paper Book. Against each and every entry assessee has explained the reasons for treating the same as a bad debt . A perusal of the same reveals that amounts writtenoff are outstanding for recovery for periods ranging from 2 to 10 years. In-fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the concerns are otherwise financially viable does not distract from the fact that the amounts in question, which are individually of small values, were specific bills of the assessee or part thereof, which were outstanding for a long period of time and therefore considering the aforesaid aspect, on facts, the judgment of the assessee of treating them as irrecoverable cannot be faulted. Thus, in our considered opinion, the claim of the assessee for writing-off of such amounts u/s. 36(1)(vii) of .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Act. Thus, canvassing to the contrary, based on the judgment of the Hon ble Madras High Court in the case of South India Surgical Co. Ltd. (supra), in our view, does not help the Revenue. 14. In conclusion, we hold that on facts and also in law, the entire claim of the assessee for write-off of bad debts u/s. 36(1)(vii) of the Act amounting to ₹ 40,89,838/- was justified and the CIT(A) ought to have allowed it, instead of restricting it to ₹ 22,56,998/- only. Therefore, we set-aside .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8. In the result, the appeal of the Revenue is dismissed being devoid of any merit. ITA No. 919/PN/2014 (Appeal by the Assessee) 9. The assessee has impugned the findings of the Commissioner of Income Tax (Appeals) on the following grounds: 1. The learned CIT (A) erred on facts and in law in upholding disallowance of labour welfare expense amounting to ₹ 65,310 as paid to Bihar Relief Fund when it was expenses incurred to supply milk to flood affected as part of Corporate Social Responsib .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on mere surmises and conjectures. 3. The learned CIT (A) erred on facts and in law in upholding disallowance of un-reconciled balance of ₹ 35,000 of sundry creditors on the grounds that it was un-reconciled when detailed account statements along with explanations were already submitted in this behalf. 10. The ld. AR submitted that in order to discharge its Corporate Social Responsibility the assessee had contributed ₹ 65,310/- towards Bihar Relief Fund. In support of his submissions .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

considered at the time of assessment. The ld. AR referred to the bills and invoices at pages 4 to 62 of the paper book in support of his submissions. The Commissioner of Income Tax (Appeals) has also rejected the contention of the assessee in a mechanical manner without appreciating the bills and invoices furnished by the assessee. 10.2 As regards disallowance of un-reconciled balance of ₹ 35,000/- of sundry creditors the ld. AR submitted that the addition has been made by taking into acc .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

see towards Bihar Relief Fund is not out of any business expediency, therefore, the same should be disallowed. In so far as expenditure towards computer repairs is concerned the assessee was not able to substantiate the expenditure with supporting documents, therefore, the same was rightly disallowed by the authorities below. 12. Both sides heard. Orders of the authorities below perused. The first ground raised by the assessee in grounds of appeal is disallowance of labour welfare expense amount .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

id expenditure incurred by the assessee has not been disputed by the Department. The only objection raised is that it is not on account of business expediency. The Corporate Social Responsibility discharged by the assessee shows its sensitivity towards the society at large. Such expenditures need not be measured in the terms of business expediency. The Companies Act, 2013 mandates the companies to contribute 2% of the profit towards Corporate Social Responsibility. The Government also recognizes .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version