Commissioner Of Income Tax v. M/S. Wackhardt International Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 44 OF 2009 Commissioner of Income Tax ... Appellant Versus M/s. Wackhardt International Ltd. Respondent Mr. Sureshkumar i/by Mr.J.S. Saluja for the Appellant. Mr. A.K. Jasani for Respondent. CORAM: F.I. REBELLO, & R.S. MOHITE, JJ. DATED: FEBRUARY 11, 2009 P.C. . The present appeal can be considered on the following questions : (1) Whether on the facts and in the circumstances of the case and in law the Hon’ble ITAT was justified in allowing the assessee’s claim of non-refund of customs duty paid u/s. 20 of the Customs Act,1962 as business loss u/s. 37(1) without appreciating the fact that assessee had not submitted any documentary evidence, either before the A.O., CIT(A) or the ITAT, in respect of re-export of consignment and claim for refund of customs duty filed before the Customs Authorities? (2) Whether on the facts and in the circumstances of the case and in law the Hon’ble ITAT was right in allowing the above expenditure as business expenditure u/s. 37(1) in A.Y.1999-2000 when the assessee had no business during the year and the only source lf income during the year was other income?" . A few facts may be set out. The assessee is exporter. He had exported certain goods which were returned and thereafter re-exported the goods. However, it was not in a position to furnish necessary documents as in the meantime the records of the assessee were lost on account of collapse of the building where the assessee maintained his records. It is the case of the assessee that they made attempts to reconstruct the records. However, as they were not in a position to reconstruct the records, they treated the said amount as bad debt for the assessment year 1996-97. The A.O. disallowed the same against which an appeal was filed to C.I.T. (A). The learned Commissioner considering the facts on record allowed the claim of the assessee. The Revenue preferred an appeal. That appeal came to be dismissed. Consequently the present appeal and the questions as framed. . The contention as urged on behalf of the Revenue is that the loss have been shown as bad debt for the financial year 1993-94 and not for the assessment year 1999-2000. In our opinion the issue is squarely covered by the judgment of this court in Lord’s Dairy Farm Ltd. Vs.Commissioner of Income Tax, Bombay North, reported in 27 ITR 700. In that case also there was defalcation between May, 1946 and April, 1947. The amount actually embezzled in the relevant accounting year 1st April, 1947 to 31st Mach, 1948. The assesssee therein claimed deduction in the assessment year 1947-48. The learned Bench of this court was pleased to hold that as the assesses wrote of this amount in the year of account, the court was entitled to presume that the amount became irrecoverable when the assessee wrote it off in its books of account and that therefore, the assessee was entitled to claim the amount. In our opinion, therefore, even if duty drawback was available for the previous assessment year, what will be relevant was when the same is treated as bad debt by the assessee in his books of account. Considering the ratio of that judgment, in our opinion, there is no infirmity in the view taken by the CIT (A) and ITAT. That question therefore, would not arise. In so far as second question is concerned, merely because there was no income in the course of assessment year 1999-2000 would not disentitle the assessee from claiming the business expenditure in the said assessment year. We find no amount became irrecoverable when the assessee wrote it off in its books of account and that therefore, the assessee was entitled to claim the amount. In our opinion, therefore, even if duty drawback was available for the previous assessment year, what will be relevant was when the same is treated as bad debt by the assessee in his books of account. Considering the ratio of that judgment, in our opinion, there is no infirmity in the view taken by the CIT (A) and ITAT. That question therefore, would not arise. In so far as second question is concerned, merely because there was no income in the course of assessment year 1999-2000 would not disentitle the assessee from claiming the business expenditure in the said assessment year. We find no infirmity with the view taken by the CIT (A) and or I.T.A.T. In the light of that, we find no merit in the appeal. Consequently, appeal dismissed. (R.S. MOHITE, J.) (R.S. MOHITE, J.)(F.I. REBELLO,J.) (F.I. REBELLO,J.) (R.S. MOHITE, J.)