The Commissioner Of Income Tax-6 v. M/S.laxmi Ventures (Bombay

(-1-) IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1240 OF 2008 The Commissioner of Income Tax-6..Appellant Vs. M/s.Laxmi Ventures (Bombay) Pvt. Ltd. ..Respondent Mr. Suresh Kumar for the Appellant. Mr. Deepak Tralshawala with Mr. V.S. Hadade, for the respondent. CORAM: F.I. R.S.MOHITE, JJ. DATED: 5th January, 2009 P.C.: . Revenue has preferred this Appeal on the following questions:- (A) Whether on the facts and in the circumstances of the case and in law, the Hon’ble I.T.A.T. is justified in deleting the addition of Rs.53,59,424/- made by the A.O.on account of bad debts arising out sale of machinery for making cigarettes to M/.ATC even though no efforts were made by the assessee to recover this amount and the debt was written off as bad debt in the year of inception of debt itself? (B) "Whether on the facts and in the (-2-) circumstances of the case and in law, the Hon’ble I.T.A.T. is justified in deleting the addition of Rs.1,62,687/- made by the A.O. on account of bad debts arising out of sale of equipments to M/s.ATC even though no efforts were made by the assessee to recover this amount? (B) "Whether on the facts and in the circumstances of the case and in law, the Hon’ble I.T.A.T. is justified in setting aside the issue of disallowance of interest u/s.14A to the file of the assessing officer though no further factual material was placed before it? (B) "Whether on the facts and in the circumstances of the case and in law, the Hon’ble I.T.A.T. is justified in directing the A.O. to allow deduction u/s.43B of the I.T. Act in respect of payments of Provident Fund dues and ESIC dues made during the grace period under the relevant statutes.? 2. In the instant case we are concerned with assessment year 2001-02. The assessee had supplied during the previous year machinery to one M/s.ATC. (-3-) The operation of that company came to a grinding halt due to the withdrawing of Excise incentives with retrospective effect by the Central Government. The assessee was not in a position to refund the excise duty. The machinery was seized by the Central Excise Department and in these circumstances the production came to a halt. The assessee therefore treated that debt as bad debt in its books of account. The Tribunal followed the decision in case of DCIT vs. Oman International Bank SAOG reported in 1000 ITD 285 (Mum) (SB). 3. It is sought to be contended on behalf of the appellant, by placing reliance on the judgment of this Court in Raja Bhadur Mukundlal Bansilal vs. Commissioner of Income Tax, (1952) 022 ITR 0094 which was delivered under the old Indian Income Tax Act that it is not the choice of the assessee to treat a debt as a bad debt. On consideration of the judgment we find that in fact the learned Division Bench of this Court observed that an amount becomes irrecoverable or a debt becomes a bad debt when the creditor has no reasonable expectations of recovering it from the debtor or when there is no ray of hope at all on which the creditor can rely for recovering the amount from his debtor. . In our opinion considering the provisions of (-4-) the Income Tax Act 1961 as it now stands the question of law as framed in A and B are no longer res integra, having been considered by this Court in Income Tax Appeal Lodging No.1915 of 2007 in the case of the Commissioner of Income Tax vs. M/s.Star Chemicals (Bombay) P.Ltd. The question of law (A) and (B) would then not survive. 4. In so far as Question (C) is concerned, we find from the order of the Tribunal that the Tribunal in paragraph 11 has referred the matter back to the file of the Assessing Officer to decide the issue afresh. In the light of that, in our ray of hope at all on which the creditor can rely for recovering the amount from his debtor. . In our opinion considering the provisions of (-4-) the Income Tax Act 1961 as it now stands the question of law as framed in A and B are no longer res integra, having been considered by this Court in Income Tax Appeal Lodging No.1915 of 2007 in the case of the Commissioner of Income Tax vs. M/s.Star Chemicals (Bombay) P.Ltd. The question of law (A) and (B) would then not survive. 4. In so far as Question (C) is concerned, we find from the order of the Tribunal that the Tribunal in paragraph 11 has referred the matter back to the file of the Assessing Officer to decide the issue afresh. In the light of that, in our opinion, the said question also would also not arise. 5. In so far as Question (D) is concerned, we again find that the Tribunal in para.18 has observed that the CIT (A) has directed the Assessing Officer to allow all the payments made within the grace period but not the payments made beyond the grace period, with a direction to the Assessing Officer to confirm the same after verification. In other words it is only those payments which were made within grace period which were to be allowed and not otherwise. The Revenue had not preferred any Appeal against that order of C.I.T. before I.T.A.T. The Question (D), therefore, also would not arise. (-5-) 6. In the light of that we find no merits in this Appeal which is accordingly dismissed. (R.S.MOHITE, J.) (F.I.REBELLO, J.) (R.S.MOHITE, J.) (F.I.REBELLO, J.)