The Principal Commissioner Of Income Tax 4 v. M/S Voltamp Transformers Limited

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 700 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX 4 VersusM/S VOLTAMP TRANSFORMERS LIMITED ========================================================== Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANIand HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 25/11/2019 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1.Mrs. Mauna Bhatt, learned senior standing counsel for the appellant, has, in the context of proposed question [A], invited the attention of the court to the order dated 18.09.2013 passed by this court in Tax Appeal No.748 of 2013, to submit that this court has admitted the appeal on a similar question of law. 1.1 Under the circumstances, ADMIT. The following substantial question of law arises for consideration: (A) Whether on the facts and in the circumstances of this case, the Income Tax Appellate Tribunal was justified in upholding the deletion of addition of CENVAT receivable on Rs.2,98,57,398/- made under section 145A of the Income Tax Act, 1961? 2. Insofar as the proposed question [B] is concerned, the same relates to deletion of disallowance of Rs.69,22,190/- made under section 14A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) read with rule 8D of the Income Tax Rules, 1962 (hereinafter referred to as “the rules”). 2.1 The Assessing Officer disallowed expenses of Rs.69,22,190/- under section 14A of the Act read with rule 8D of the rules though the assessee had already disallowed Rs.20,25,500/-, being the expenditure incurred for earning exempt income, on the ground that the assessee had not provided the fund flow statement. The assessee had disallowed Rs.20,25,500/-, being the salary and other expenses incurred towards earning the exempt income. 2.2 Before the Commissioner (Appeals), the assessee had relied upon the decision of the Tribunal in its own case for assessment year 2009-10 confirming the view that the Assessing Officer should apply the working under rule 8D of C/TAXAP/700/2019 ORDER the rules, if the working done by the assessee is not found to be satisfactory. The Commissioner (Appeals) noted that, in the present case, the assessee had suo motu computed the disallowance of Rs.20,25,500/-, which is 8.50% of the exempt income. In view thereof, by following the earlier decision of the Tribunal in the assessee's own case for the assessment year 2009-10, the Commissioner (Appeals) directed the Assessing Officer to delete the additional disallowance of Rs.69,22,190/- and allowed the ground of appeal. The Tribunal, in the impugned order, has concurred with the view adopted by the Commissioner (Appeals) and followed its earlier decision in the assessee's own case for assessment year 2009-10. 2.3 Having regard to the fact that the assessee had suo motu disallowed the amount of Rs.20,25,500/-, being the expenditure incurred for earning exempt income, which was 8.50% of such income, it is not possible to state that there is any infirmity in the impugned order passed by the Tribunal upholding the order of the Commissioner (Appeals) qua this ground of appeal. Proposed question [B], therefore, does not give rise to any question of law. C/TAXAP/700/2019 ORDER 2.3 Having regard to the fact that the assessee had suo motu disallowed the amount of Rs.20,25,500/-, being the expenditure incurred for earning exempt income, which was 8.50% of such income, it is not possible to state that there is any infirmity in the impugned order passed by the Tribunal upholding the order of the Commissioner (Appeals) qua this ground of appeal. Proposed question [B], therefore, does not give rise to any question of law. C/TAXAP/700/2019 ORDER concerned, a perusal of the controversy raised vide the said question shows that it is only consequential to the ground of appeal raised vide proposed question [B]. Having regard to the fact that question [B] does not give rise to any question of law; as a necessary corollary it follows that question [C] also does not give rise to any question of law. 4.Insofar as the proposed question [D] is concerned, the same relates to disallowance of provision of doubtful debts of Rs.1,89,16,687/-. During the course of assessment proceedings, the Assessing Officer noticed on a perusal of the Profit and Loss Account that the assessee had claimed an amount of Rs.1,89,16,687/- as provision for bad and doubtful debts and had disallowed the same in terms of the provisions of section 36(1)(vii) of the Act. The assessee carried the matter in appeal before the Commissioner (Appeals), who allowed the said ground of appeal by following the decision of the Supreme Court in the case of CIT v. Vijaya Bank, 323 ITR 166. Revenue failed in its appeal before the Tribunal. 4.1 As can be seen from the order passed by the Commissioner (Appeals), she has found that in the present case, the assessee had made provision on the debit side of the profit and loss account and had reduced the doubtful debts in the balance sheet, which, therefore, amounted to actual write off. The authorised representative of the assessee had produced a copy of the annual report for the year ended 31.03.2013, wherein, in the “Notes to the Financial Statements”, at point No.23, the provision for bad and doubtful debt of Rs.1,89,16,687/- was shown as part of “other expenses” and simultaneously, at note No.13, the details of "Trade Receivable" were shown reduced byprovisionfordoubtfuldebtsof Rs.1,89,16,687/-. 4.2 In view of the above facts, the Commissioner (Appeals) was of the view that the ratio of the decision of the Supreme Court in the case of CIT v. Vijaya Bank (supra) would be applicable to the facts of the present case, and directed the Assessing Officer to verify the entries in the profit and loss account and the balance sheet to ascertainthattheassesseehas correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/ debtors on the assets side of the balance sheet, and consequently, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet is shown as net of the provision for the “impugned bad debt”. She, accordingly, held that the assessee will be entitled to the benefit of deduction under section 36(1)(vii) of the Act and allowed the ground of appeal, subject to verification by the Assessing Officer. The Tribunal, in the impugned order, has concurred with the view adopted by the Commissioner (Appeals). correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/ debtors on the assets side of the balance sheet, and consequently, at the end of the year, the figure in the loans and advances or the debtors on the assets side of the balance sheet is shown as net of the provision for the “impugned bad debt”. She, accordingly, held that the assessee will be entitled to the benefit of deduction under section 36(1)(vii) of the Act and allowed the ground of appeal, subject to verification by the Assessing Officer. The Tribunal, in the impugned order, has concurred with the view adopted by the Commissioner (Appeals). 4.3 In the light of the fact that the Commissioner (Appeals) has merely applied the decision of the Supreme Court in the case of CIT v. Vijaya Bank (supra) to the facts of the present case and directed the Assessing Officer to ascertain the entitlement of the benefit of deduction under section 36(1)(vii) of the Act, no infirmity can be said to have been committed qua this ground of appeal so as to give rise to any question of law. Accordingly, this ground of appeal is also rejected. (HARSHA DEVANI, J) PRAVIN KARUNAN (SANGEETA K. VISHEN,J)