The Commissioner Of Income Tax-10 v. M/S. Jetex Carburettors Ltd

ASN IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONINCOME TAX APPEAL NO.2757 OF 2009 The Commissioner of Income Tax-10. Vs. M/s. Jetex Carburettors Ltd. ...Appellant. ...Respondent. Mr. Suresh Kumar for the Appellant. Mr. Vipul Joshi along with Mr. Sameer Dalal for the Respondent. CORAM : S.J.VAZIFDAR & M.S. SANKLECHA, JJ. DATE : 16th July, 2012 PC: This appeal by the revenue under Section 260A of the Income Tax Act,1961 (hereinafter referred to as the “said Act”) challenges the order dated 30 April, 2008 passed by the Income Tax Appellate Tribunal (hereinafter referred to as the “said Tribunal”) relating to the Assessment Year 2001-02. In this appeal, the appellant has formulated the following questions of law for consideration of this Court: a)Whether on the facts and in the circumstances of the case, the Tribunal is correct in allowing the appeal of the Assessee in respect of the bad debts when the advance given was not incidental to the business of the Assessee and in the nature of loan and the Assessee company is not money lending company but engaged in the manufacturing of the goods? b)Whether on the interpretation of Section 36(2) read with Section 36(1)(vii) of the Income Tax Act, 1961, the Tribunal is correct in law in allowing the claim of Assessee for bad debts? c)Whether the Tribunal is correct in law in allowing the claim of the Assessee of bad debts when the same was not the debt as held by the Supreme Court in case of A.V.Thomas & Co. Ltd. V/s. CIT 48 ITR 67 S.C.? d)Whether on the facts and in the circumstances of the case, the Tribunal is correct in disallowing the addition made by the A.O. u/s. 14A(2) of Rs.12,000/- being the expenditures determined for earning the dividend income which is exempted u/s 10(33)? Re.: Question (a) to (c) : 2)The respondent-assessee is engaged in the business of manufacturing and selling carburetors for two wheelers. For the Assessment Year 2001-02 (previous year ending 31[st] March, 2001) the respondent-assessee in its return of income sought a deduction of amount of Rs.11.29 lacs on account of non return of advances made to one M/s. S.V. Diecasters & Engineers from time to time beginning with the Assessment Year 1994-95. The deduction was claimed on account of bad debts under Section 36(1)(vii) of the said Act or alternatively under Section 37(1) of the said Act as an expenditure expended wholly and exclusively for the purpose of the business. M/s. S.V. Diecasters & Engineers was located very close to the respondent's plant and regularly did job work for the respondent of manufacturing castings. In the course of its business the respondent advanced the aforesaid amount of Rs.11.29 lacs to M/s. S.V. Diecasters & Engineers so as to ensure the continuance of regular job work was done by them at a very competitive rate. 3)The Assessing Officer by an order dated 30[th] January, 2004 deleted the deduction of Rs.11.29 lacs claimed by the respondent, on both grounds and added the same to its income. 4)On appeal the Commissioner of Income Tax (Appeals) by an order dated 6[th] October, 2004 allowed the respondent's appeal holding that amount of Rs.11.29 lacs is allowable as a deduction not as a bad debts but under Section 37(1) of the said Act as the amounts were advanced to M/s. S.V. Diecasters & Engineers in the normal course of business for purposes of business. 5)Being aggrieved, the revenue filed an appeal before the Tribunal. On 30[th] April, 2008, the Tribunal upheld the findings in the order dated 6[th] October, 2004 of the Commissioner of Income Tax (Appeals) and held that the amount was given to M/s. S.V. Diecasters & Engineers in the normal course of business and on account of commercial expediency. Consequently, the same was allowed as a business loss under Section 37(1) of the said Act. 5)Being aggrieved, the revenue filed an appeal before the Tribunal. On 30[th] April, 2008, the Tribunal upheld the findings in the order dated 6[th] October, 2004 of the Commissioner of Income Tax (Appeals) and held that the amount was given to M/s. S.V. Diecasters & Engineers in the normal course of business and on account of commercial expediency. Consequently, the same was allowed as a business loss under Section 37(1) of the said Act. 6)Therefore questions (a) to (c) above formulated by the revenue do not arise from the order of the Tribunal. The Commissioner of the Income Tax (Appeals) had rejected the respondent's plea for allowing deduction on account of bad debts but allowed the respondent's alternative plea for deduction as a business loss/expenditure under Section 37(1) of the said Act. The respondent had not filed any appeal against the order of the Commissioner of Income Tax (Appeals) while the appeal of the revenue was with regard to amount of Rs.29.11. lacs allowed as a deduction under Section 37(1) of the said Act as a business expenditure/loss. In view of the above, Question (a) to (c) as formulated deal with allowing of deductions as bad debts and the same do not arise from the order of the Tribunal which has allowed the deduction as business expenditure under Section 37(1) of the said Act. 7)any substantial question of law. Therefore Questions (a) to (c) are dismissed as not raising Re.: Question (d) : 8)For the Assessment year 2001-02, the respondent had earned Rs.1.20 lacs as dividend income. This dividend income was exempt from income tax under Section 10(33) of the said Act. The Assessing officer while assessing the respondent for the Assessment Year 2001-02 deducted an adhoc amount of Rs.12,000/- being 10% of Rs.1.20 lacs as the expenditure which might have been incurred towards earning the exempted income. This ad hoc deduction was done on application of Section-14A of the said Act. Being aggrieved, the respondent preferred an appeal to Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) allowed the respondent's appeal by deleting the disallowance of Rs.12,000/- on the ground that under Section 14A of the Act only direct expenses incurred for earning exempted expenses could be disallowed and in this case disallowance was ad hoc without identification of any direct expenses incurred by the respondent to earn the dividend income of 1.20 lacs. The Tribunal upheld the order and recorded a finding that the dividend income of Rs.1.20 lacs was received by the company out of the investments made in earlier years and that no specific facilities or manpower was required in the current year to receive the dividend income. We see no reason to disturb the findings of the Tribunal in the peculiar facts of the present case as it is not the case of the department that any expenses had been incurred by the respondent in relation to the earning the exempt dividend income. Further the issue whether or not expenditure was incurred in relation to earning the dividend income is a pure question of fact and the concurrent findings of the Commissioner of Income Tax (Appeals) and the Tribunal in the negative do not raise a question of law in the facts of this case. In view of the above, question (d) does not raise any substantial question of law and therefore, the same is dismissed. 10) costs. The appeal is, accordingly, dismissed. No order as to ( M.S. SANKLECHA, J. ) ( S. J. VAZIFDAR, J.)