TMI Blog2021 (2) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Member For the Assessee : Shri S.N. Soparkar, Sr. A.R. And Ms. Urvashi Shodhan, A.R. For the Revenue : Shri L.P. Jain, Sr. D.R. ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- These two appeals filed by revenue for A.Y. 2001-02 2002-03, arise from order of the CIT(A)-2, Ahmedabad, in proceedings under section 143(3) r.w.s. 254 of the Income Tax Act, 1961; in short the Act . 2. Since common issues on identical facts involved in both the appeals, therefore, for the sake of convenience these appeals are adjudicated together by the taking assessment year 2001-02 as the lead case. A.Y. 2001-02 2. The solitary ground of appeal of the revenue is directed against the decision of ld. CIT(A) in allowing claim of reduction of bad debt of ₹ 2,52,41,464/-. 3. The fact in brief is that return of income of ₹ 3,74,34,040/- was filed on 30th October, 2001. The original assessment was completed u/s. 143(3) on 6th Feb, 2004 determining total income at ₹ 6,64,10,88/-0 after making various additions including disallowance of bad debt which is contested in the instant appeal of the revenue. Out of total disallowance of bad debit of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f inter corporate despot was not allowable as the main business activity of the assessee was not money lending business. Therefore, a sum of ₹ 1,37,23,684/- pertaining to bad debit on account of inter corporate deposit was disallowed and added to the total income of the assessee. 4. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is as under:- 3.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has made the disallowance of the bad debts of ₹ 2,52,41,464/- claimed by them appellant in the year under consideration in respect of three parties of which details are noted as under:- Sr. No. Particulars Nature Amount (Rs.) 1 Overseas Synthetics Ltd Bill Discounting 1,15,17,780 2 Maftatlal Industries Ltd. Intercorporate deposit 83,53,68 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fresh adjudication by the AO as to whether the ratio as laid down in the case lows now relied by assessee is applicable to the facts of this case or not. For this purpose matter is restored back to the file of AO. 10. In the result assessee's ground No. 1 is allowed for statistical purpose while that of revenue's appeal is dismissed. 3.5. Thereafter, the AO has not accepted the contentions of the appellant and the disallowance of the bad debt in respect of the bill discounting business and also with regard to intercorporate deposit were 'fully disallowed with the findings in para No.3.5.1 and 3.5.2 of the assessment order. The AO has mentioned that the appellant's reliance upon the decision of Hon'ble Bombay High Court and Delhi High Court was not identical of the facts of the case. It has been observed that the main business of the assessee in those cases was share broking activities whereas in appellant's case bill discounting was not the main activity. Further held that the ld.CIT(A) had adjudicated the first ground by saying that the bill discounting cannot be equated with the business of banking and a separate category of business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 28,61,533 27,32.734 23,91,170 9,43.883 Bill discount charges 1,00,79,155 - 1,16,743 2,52,336 2,55,482 2,11, 419 64,575 Processing fees 9,00,555 - 12,66,578 31,13,569 29,86,216 26,02,589 10,08,458 1,09,79,710 3.8. Further on verification of the profit and loss account for the year under consideration it has been noticed that the appellant has shown the income from operations at Rs.l 9,27,86,096/- as per the schedule-14 to the profit and loss account. Further the details of income from operations under the schedule-14 of the various incomes as per the profit and loss account is also reproduced as under:- Schedule 14 Fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, railway receipts, bills of exchange, bills of lading, warrants, debentures and other negotiable or transferrable instrument. ' 3.11. Even otherwise also no company can undertake any business activity which is not envisaged in the Memorandum of Association. Therefore, obviously the bill discounting activities were part of its business approved as per the Memorandum of Association. Therefore, as per the provisions of Section 36(2) (i). the appellant has already offered the bill discounting income in its return of income for the preceding years as business income therefore there is no question of not granting the bad debts to the appellant as per the provisions of Section 36(l)(vii) of IT. Act. The AO's further observation that the bill discounting was not the main activity rather it was a secondary activity would not the material to decide the nature of the business activities when the income derived either from main activity or from secondary activity are assessed to tax under the head of business income only. In fact the appellant had multi activities and therefore, it cannot be said that one activity was the main activity and other was the secondary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able. 3.14. Taking into account the ratio laid down by both the Hon'ble Courts the ratio is found applicable on the facts of the case in the form that the appellant has offered the bill discounting income and processing charges income in the profit and loss account of the year under consideration and of the preceding years as business income in the profit and loss account and therefore the claim of bad debt written off is fully covered in view of Section 36(2)(i) of I.T. Act. Even the appellant company has recovered a sum of ₹ 40 lakhs against the above bad debts in the subsequent' year i.e. in F.Y. 2004-05 relevant to A.Y. 2005-06 and the same has been shown as other income in the profit and loss account of that year. Since the recovery of bad debt of ₹ 40 lakhs has already been offered for taxation in A.Y. 2005-06, therefore, the same would cause the double taxation of the similar amount. It is worth here to mention that the appellant was. assessed in the same tax bracket in the year under consideration and in the aforesaid assessment year, therefore, it was tax neutral. Moreover the. income shown by the appellant towards bad debt recovery of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest income of ₹ 44,11,036/-and from Precisions Fastners the interest income was at ₹ 17,00,248/- in the preceding years. Not only that the appellant has also recovered ₹ 83 lakhs from Mafatlal Industries against the above bad debt in F.Y. 2011-12 i.e. A.Y. 2012-13 and the same has been offered for taxation in the profit and loss account. Similarly in the case of Precisions Fastners also the appellant has recovered ₹ 32,22,000/- in June, 2003 and the same has been duly offered as income of A.Y. 2004-05. 3.16. The intercorporate deposits is one of the business activity of the appellant as per the Memorandum of the Association of the appellant company of which relevant clause Is reproduced as under. - 18. To open and operate current, overdrafts, loan, cash credit or deposit or any type of accounts with any banks, company, firm, association or person, 3.17. As per the business activities the recoveries of the bad debt have been shown, as business income in the profit and loss account of the respective years and offered for taxation. Therefore the addition made by the AO would cause the double taxation of the same amount which is uncoile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls available on record, gone through the orders of authorities below and judgments cited by Ld. AR of the assessee. We find that basis of disallowance of bad debt made by Assessing Officer is this that deduction is allowable to the assessee u/s. 36(2) r.w.s. 36(1)(vii) of the Act in respect of interest portion only and not for the principal portion. Accordingly, out of the total amount of ₹ 7,45,968/-, he has allowed the deduction of ₹ 1,1 1,895/- being interest portion of hire charges and lease charges and disallowed the principal portion of ₹ 6,34,073/-. In para-3.2 of the order of Ld. CIT(A) also, it is noted by him that the AO has disallowed ₹ 6,34,073/- pertaining to principal portion of lease transaction because the said amount has never been offered as income by the assessee. Now, in the light of this fact, we examine the applicability of the judgment of Hon'ble Bombay High Court rendered in the case of Shreyas S Morakhia (supra) and we find that in this judgment, Hon'ble Bombay High Court has followed the decision of Hon'ble Delhi High Court rendered in the case of CIT v. Bonanza Portfolio Ltd. (2010) 320 ITR 178 (Del) and the relevant po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal of the Revenue. Accordingly, this appeal of the revenue is dismissed. ITA No. 939/Ahd/2018 A.Y. 2002-03 7. Without reiterating the facts as discussed above for assessment year 2001-02, the ld. CIT(A) has deleted the disallowance of claim of bad debit amounting to ₹ 2,71,07,143/- with reference to hire purchases and ₹ 1,20,45,621/- with reference to bill discounting. The ld. CIT(A) in his findings given at page no. 20 and 21 of his order has produced the details demonstrating that assessee has offered the income from hire purchase and income from bill discounting in the preceding year and in the year under consideration. The ld. CIT(A) has also held that the facts of the case are similar to the fact of A.Y. 2004-05 wherein the bad debt written off in the case of business of hire purchase were allowed. As the facts and issue involved in ground of appeal vide ITA No. 2951/Ahd/2016 Assessment Year 2001-02 are similar as in ITA No. 939/Ahd/2018 Assessment Year 2002-03 therefore after applying the decision adjudicated vide ITA No. 2951/Ahd/2016 as supra in this order, this appeal of the revenue stands dismissed. 8. In the result, both the appeals f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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