Commissioner Of Income Tax-I, Ludhiana v. M/S Kings Exports, B

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH I.T.A. No. 486 of 2009 DATE OF DECISION: 25.8.2009 Commissioner of Income Tax-I, Ludhiana ..........Appellant Versus M/s Kings Exports, B-4, Friend Indl. Colony, ..........RespondentSherpur, Opp. Aarti Steels, Ludhiana CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MRS. JUSTICE DAYA CHAUDHARY Present:-Mr. Rajesh Sethi, Advocatefor the appellant. **** ADARSH KUMAR GOEL, J. (Oral) 1.The revenue has preferred this appeal under Section 260A ofthe Income Tax Act, 1961 (for short, “the Act”) against the order of IncomeTax Appellate Tribunal, Chandigarh Bench (B), Chandigarh dated29.1.2009 passed in ITA No. 980/Chandi/2008 for the assessment year2005-06, proposing to raise following substantial question of law:- “Whether on the facts and in law, the Hon'ble IncomeTax Appellate Tribunal was justified in restricting theaddition of Rs.8,37,978/- instead of Rs.29,25,622/- madeby the Assessing Officer in view of the provisions ofSection 14A of the Income Tax Act, 1961 by disallowingthe deduction claimed on account of 'Bad Debts' writtenoff u/s 36(1)(vii) of the I.T.Act, 1961 as these 'BadDebts” written off included incomes not received, which were declared on accrual basis in Asstt. Years 2000-01,2002-03 and 2003-04 and deduction u/s 80HHC wasclaimed on the same by the assessee in the respectiveyears? 2.The assessee is engaged in manufacturing and export ofengineering goods. The Assessing Officer disallowed claim for bad debtsunder Section 36(1)(vii) on the ground that the assessee had claimeddeductions under Section 80HHC and in such a situation claim for baddebts will be hit by Section 14A of the Act. The CIT(A) partly upheld theclaim of the assessee with the following observations:- “Coming to the application of provisions of Section 14Aof the Act, though the A.O. Is of the view that theprovision of this section is applicable in the facts andcircumstances of the appellant's case, I do not agreewith him. First of all, this amount cannot be said to beexpenditure incurred for earning some income which donot form part of total income of the appellant. Suchincomes are generally incomes enumerated in section10 of the Act. Clearly, the income earned by theappellant from the export sales could not be said to beincome which do not form part of the total income. Evenotherwise, as rightly pointed out by the ld. Counsel in thewritten submissions above, entire income from exportsales was not exempt and further the bad debts cannotbe said to be an expenditure incurred by an assesseefor earning some income. Anyhow, this amount beingnot relatable to any income which does not form part ofthe total income for the appellant for the respectiveassessment years, no part of the same could be disallowed under the provisions of section 14A of theAct. Therefore, the disallowance made by the AO evenon the basis of this alternative argument cannot besustained.” 3.The Tribunal affirmed the above view. 4.We have heard learned counsel for the revenue. 5.On perusal of Section 80HHC and Section 14A, it is clear thatexpenditure incurred from export income cannot be held to be for earningincome which does not form part of total income, which concept is dealtwith under Section 10 of the Act. Section 80HHC deals with deduction ofthe element of profit from export from taxable income. 6.In these circumstances, no substantial question of law arises. 7.The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 25, 2009(DAYA CHAUDHARY)poojaJUDGE Note:-Whether this case is to be referred to the Reporter .......Yes/No