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2016 (9) TMI 591 - ITAT KOLKATA

2016 (9) TMI 591 - ITAT KOLKATA - TMI - Claim of bad debts and advances written off - trading loss u/s 28 - Held that:- It is not in dispute that the assessee had advanced the monies to them in the normal course of business and had offered interest income in the earlier years as income from business which has also been accepted as such by the ld AO in the assessment proceedings u/s 143(3) of the Act for the Asst Year 2001-02. We find that the assessee had preferred civil suits against these two .....

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vt Ltd, we find that the assessee had offered the sales in the year of supplies made to that party and had written off as irrecoverable in the year under appeal. The assessee had duly complied with the provisions of section 36(1)(vii) read with section 36(2) of the Act and accordingly we hold that the ld CITA had rightly deleted the disallowance made on that count. - With regard to amounts due from Pennzol Investment & Trading Co Pvt ltd, we find that the trade advances against supplies give .....

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was paid in the normal course of business and write off of the same is an allowable trading loss u/s 28 of the Act. - I.T.A No. 64/Kol/2014 - Dated:- 3-8-2016 - Shri M. Balaganesh, AM & Shri S. S. Viswanethra Ravi, JM For The Appellant: Shri A. K. Sinha, Addl. CIT. DR For The Respondent: Shri S. M. Surana, Advocate ORDER Per Shri M. Balaganesh, AM: This appeal by revenue is arising out of order of CIT(A)-XII, Kolkata vide appeal No. 638/XII/08-09 dated 30.10.2013. Assessment was framed by AC .....

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supply of Industrial Gases. It was submitted that the assessee is the only company in India which is manufacturing and supplying fuel in the form of Liquid Hydrogen to Indian Space Research Organisation (ISRO) at Mahendragiri. It is a sensitive national importance project and Liquid Hydrogen is used as a fuel in the space crafts / satellites which ISRO sends in the space. The assessee in its usual course of business made advance payments to certain suppliers / contractors against the order. Out .....

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riting off the aforesaid amounts in its books as under:- Ameri Gas Private Ltd. -Rs. 10,14,051.51 The amount is due to assessee from 1996 from the Ameri Gas Private Limited in respect of work done by the assessee company for preparation and supply of Voters Identity Cards on behalf of Ameri Gas Private Limited against the order received by them from the Government of India. In fact, in the Profit & Loss Account for the year ended March, 1996, the assessee had offered the amount of ₹ 1, .....

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to write off the same. But out of ₹ 1,54,09,751.55 only ₹ 10,14,051.51 was not recoverable. Pennzol Investment & Trading Co. Pvt. Ltd. : ₹ 16,90,920.44 The assessee company bought Industrial Gases from Pennzol Investment & Trading Company Private Limited and marketed the same in Hyderabad. Such sale was shown as income in the relevant year s profit & Loss Account. During the course of business, assessee had to give to the said Company an advance in the current accou .....

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see s best efforts, became time barred, it had no choice, but to write off. It is also stated that this amount is also advanced during the course of business and sale against the purchase of industrial gases as shown in the Profit & Loss Account in number of years. M/s. Deepak Jhunjhunwala - ₹ 46,39,780/- & M/s. C.K.Tibrewala & Co. - ₹ 10,15,493/- The amounts of ₹ 46,39,780/- and ₹ 10,15,493/- from M/s. Deepak Jhunjhunwala & Company and M/s. C.K Tibrewala .....

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are received from the parties, the same would be credited to the Profit & Loss A/c as bad debts recovered. However, the chances of recovering these amounts appear to be extremely remote. There is no element of interest in the case of Deepak Jhunjhunwala accounts and in the case of C. K. Tibrewala & Co. the principal amount is ₹ 10,00,000/- and the interest is ₹ 15,493/- written off as bad debts. Earnest Money - ₹ 6874.28 The amount was required to be paid as Earnest Mon .....

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the Ld. CIT(A) has erred in not considering the fact that in order for a debt to be considered bad or irrecoverable, the conditions a) The amount being written off should have been offered to tax as an income in earlier year. b) The first condition being fulfilled, the debt must have gone bad. Which are mutually exclusive, must be fulfilled separately. 2. that the business of the assessee co. not being money lending, allowing bad debt as trading liability is bad in law. 3. that the debt totalin .....

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accepted by the ld AO in scrutiny assessment proceedings completed u/s 143(3) of the Act dated 18.3.2004 for the Asst Year 2001-02. The amounts were advanced to them in the normal course of business with a view to earn higher rate of interest and hence it was purely a business call taken by the assessee to lend the same with partial and nil security. It was argued that the decision to write off the said advances were taken by the assessee during the year under appeal after taking all the necessa .....

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security available with that party was sold and appropriated towards the loan account. Parallely the assessee had preferred a civil suit against those two parties which are still pending in the courts. The assessee had taken a conscious decision to write off the balances outstanding in their accounts as there are no assets / property in their names for confiscation. Hence the assessee had proved the irrecoverability status in order to claim the same as a trading loss u/s 28 of the Act. With rega .....

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ounts due from Pennzol Investment & Trading Pvt Ltd in the sum of ₹ 16,92,920/- from 1996 onwards, the assessee used to buy Industrial Gases from the said party and for that party this amount was paid on account. Since the party closes their business in 1998 , the above amount could not be recovered from them either in goods or in physical payment. Since the debts were time barred, the assessee had no other option but to write off the same. He argued that admittedly this advance was pa .....

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the parties whose accounts are written off . The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find that the assessee had taken sufficient steps for recovery of the advances given to M/s Deepak Jhunjhunwala and M/s C.K.Tibrewala & Co and all the efforts to recover the dues from the said parties got jeopardized and even the shares that were held as securities were sold and appropriated towards the loan account (in the case of Deep .....

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