The Commissioner Of Income Tax, Coimbatore v. M/S.elgi Ultra Industries Ltd., Coimbatore-18

In the High Court of Judicature at Madras Dated : 15.6.2020 Coram : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Mrs.Justice PUSHPA SATHYANARAYANA Tax Case Appeal No.401 of 2013 The Commissioner of Income Tax, Coimbatore ...Appellant/AppellantVsM/s.Elgi Ultra Industries Ltd.,Coimbatore-18 ...Respondent/Respondent APPEAL under Section 260A of the Income Tax Act, 1961 againstthe order dated 22.11.2012 made in ITA.No.1690/Mds/2012 on thefile of the Income Tax Appellate Tribunal, Chennai 'D' Bench forthe assessment year 2009-10. ITA.No.1690/MDS/2012 against theCommissioner of Income Tax(Appeals)-I, Coimbatore order dated,13/6/2012 in P.A.No/G.I.R.No.-AAACE4566G for the Assessment year2009-2010 against the Assistant Commissioner of Income Tax,company circle-1(1). Coimbatore order dated 30/12/2011 inP.A.No/G.I.R.No.-AAACE4566G for the Assessment year 2009-10. For Appellant :Mr.T.R.Senthilkumar, SSC assistedby Ms.K.G.Usharani, SCFor Respondent:Mr.Arun Prasad Judgment was delivered by T.S.Sivagnanam,J We have heard Mr.T.R.Senthilkumar, learned Senior StandingCounsel, assisted by Ms.K.G.Usharani, learned Standing Counselappearing for the appellant – Revenue and Mr.Arun Prasad,learned counsel appearing for the respondent. 2. This appeal, filed by the Revenue under Section 260A ofthe Income Tax Act, 1961 (for short, the Act) is directedagainst the order dated 22.11.2012 made in ITA.No.1690/Mds/2012on the file of the Income Tax Appellate Tribunal, Chennai 'D'Bench (for brevity, the Tribunal) for the assessment year 2009-10. https://hcservices.ecourts.gov.in/hcservices/ 3. The appeal has been admitted on 16.9.2013 on the followingsubstantial questions of law : “i. Whether, under the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was correct in allowingthe claim of the assessee for deduction ofbad debts of Rs.421,09,445/- as 'businessloss' allowable under Section 37 followingits earlier order in ITA.No. 317/Mds/2011,which has not become final since the Revenuehas preferred further appeal before thisCourt in TCA.No.285 of 2012 ? ii. Whether, under the facts andcircumstances of the case, the Income TaxAppellate Tribunal was correct in notholding that the transaction was a shamtransaction entered into with the soleobjective of evading tax particularly whenthe respondent has offered a small portionof the income to tax in an earlier year andclaiming the entire debt in the phasedmanner in the subsequent years including theassessment year in appeal? iii. Whether, under the facts andcircumstances of the case, the Income TaxAppellate Tribunal was correct in holdingthat bad debts written off is allowableunder Section 37(1) of the Act when suchwrite off is specifically not allowed as adeduction under Section 36(1)(vii) of theAct ? Andiv. Whether, under the facts andcircumstances of the case, the Income TaxAppellate Tribunal was correct in holdingthat bad debts written off is allowableunder Section 37(1) of the Act, since thediscount on the debts taken over wasassessed as business income in the earlieryear ?” 4. It is submitted that the substantial questions of lawframed for consideration in this appeal have been decided infavour of the assessee by the Hon'ble Division Bench of thisCourt in TCA.Nos.1270 and 1271 of 2009 in the assessee's owncase by a common judgment dated 09.1.2019. 5. The relevant portions in the said judgment dated 09.1.2019read thus: “5. As regards the second substantialquestion of law, the provisions of section36(1)(vii) of the Income Tax Act, 1961provide for allowance of an amount representing bad debt or part thereof, whichis written off as irrecoverable in theaccounts of the assessee for the previousyear. 4. It is submitted that the substantial questions of lawframed for consideration in this appeal have been decided infavour of the assessee by the Hon'ble Division Bench of thisCourt in TCA.Nos.1270 and 1271 of 2009 in the assessee's owncase by a common judgment dated 09.1.2019. 5. The relevant portions in the said judgment dated 09.1.2019read thus: “5. As regards the second substantialquestion of law, the provisions of section36(1)(vii) of the Income Tax Act, 1961provide for allowance of an amount representing bad debt or part thereof, whichis written off as irrecoverable in theaccounts of the assessee for the previousyear. 6. In the present case, the admittedfact is that the assessee had taken overcertain debts from M/s.Elgi Finance Ltd. andhas offered a sum of Rs.1,74,90,872/-; andRs.87,45,435/-; as interest received inrespect of the debts in the same assessmentyears. The same have been assessed to tax.Out of the total debts, a sum of Rs.81.00lakhs and Rs.53.00 lakhs have been collectedback in the present assessment years and asum of Rs.31,91,237/-; and Rs.90,15,652/-;have been claimed as bad debts. 7. The claim was disallowed on theground that the debts have been taken overfrom the sister concerns voluntarily only asa measure of support to it and knowing fullywell that the same was irrecoverable. Thus,the claim for write off, according to theAssessing Officer, was liable to be denied.In appeal, the Commissioner of Income Tax(Appeals) allowed the claim of the assessee. 8. We find, as a matter of fact, thatthe Tribunal has taken note of the positionthat the Memorandum and Articles ofAssociation permitted the assessee to carryon the business of money lending and thetransactions in question have been held tobe in the realm of business activity. 9. There is no dispute raised beforeus on this factual position. In the light ofthe same, the second substantial question oflaw is also answered in favour of theassessee and against the Revenue. 10. Accordingly, both the Tax Case (Appeals) are dismissed.” 6. Following the said judgment, the above tax case appeal isdismissed and the substantial questions of law framed areanswered in favour of the assessee and against the Revenue. Nocosts. Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal, Chennai 'D' Bench. 2.The Assistant Commissioner of Income Tax (Appeals)I, Coimbatore. 3.The Assistant Commissioner of Income Tax, Company circle I(1), Coimbatore. Company circle I(1), Coimbatore. TCA.No.401 of 2013 RJI (CO)RV (03/09/2020)