M/s. JINDAL DRUGS LTD., MUMBAI v. ACIT Rg. - 3(2), MUMBAI

ITA 3917/MUM/2006 | 2002-2003
Pronouncement Date: 25-02-2010 | Result: Partly Allowed

Appeal Details

RSA Number 391719914 RSA 2006
Assessee PAN AAACJ1000A
Bench Mumbai
Appeal Number ITA 3917/MUM/2006
Duration Of Justice 3 year(s) 8 month(s) 5 day(s)
Appellant M/s. JINDAL DRUGS LTD., MUMBAI
Respondent ACIT Rg. - 3(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted E
Tribunal Order Date 25-02-2010
Date Of Final Hearing 01-02-2010
Next Hearing Date 01-02-2010
Assessment Year 2002-2003
Appeal Filed On 20-06-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E MUMBAI BEFORE SHRI. P.M. JAGTAP (A.M.) AND SMT. P. MADHAVI DEVI (J.M.) ITA NO.3917/MUM/2006 ASSESSMENT YEAR : 2002-2003 JINDAL DRUGS LTD. BAKHTAWAR 6 TH FLR. B & C 229 NARIMAN POINT MUMBAI 400 021. PAN : AAACJ1000A VS. ASST.COMMISSIONER OF INCOME-TAX RANGE 3(2) AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. (APPELLANT) (RESPONDENT) ITA NO.4117/MUM/2006 ASSESSMENT YEAR : 2002-2003 ASST.COMMISSIONER OF INCOME-TAX RANGE 3(2) AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. VS. JINDAL DRUGS LTD. BAKHTAWAR 6 TH FLR. B & C 229 NARIMAN POINT MUMBAI 400 021. PAN : AAACJ1000A (APPELLANT) (RESPONDENT) C.O. NO.327/MUM/2006 ARISING OUT OF ITA NO.4117/MUM/2006 ASSESSMENT YEAR : 2002-2003 JINDAL DRUGS LTD. BAKHTAWAR 6 TH FLR. B & C 229 NARIMAN POINT MUMBAI 400 021. PAN : AAACJ1000A VS. ASST.COMMISSIONER OF INCOME-TAX RANGE 3(2) AAYAKAR BHAVAN M.K. RD. MUMBAI 400 020. (CROSS OBJECTOR) (RESPONDENT) APPELLANT BY : SHRI R.R. VORA RESPONDENT BY : SHRI HEMANT J. LAL O R D E R PER P.M. JAGTAP THESE TWO APPEALS ONE BY THE ASSESSEE BEING ITA NO .3917/MUM/06 AND OTHER BY THE REVENUE BEING ITA NO.4117/MUM/06 A RE CROSS APPEALS ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 2 WHICH ARE DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A) III MUMBAI DATED 17.04.2006 AND THE SAME ARE BEING DISPOSED OF BY THIS ORDER ALONG WITH THE CROSS OBJECTION FILED BY THE ASSESSEE BEIN G C.O. NO.327/MUM/06. 2. FIRST WE SHALL TAKE THE APPEAL OF THE ASSESSEE GROUND NO.1 OF WHICH IS GENERAL IN NATURE SEEKING NO SPECIFIC DECISION FROM US. 3. AS REGARD GROUND NO.2 TO 7 OF THE ASSESSEES APP EAL THE LEARNED REPRESENTATIVE OF BOTH THE SIDES HAVE AGREED THAT T HE COMMON ISSUE INVOLVED THERE IN RELATING TO ASSESSEES CLAIM FOR DEDUCTION U/S.80HHC IN RESPECT OF DEPB RECEIPTS NOW STANDS SQUARELY COVERED BY THE DE CISION OF SPECIAL BENCH OF ITAT AT MUMBAI IN THE CASE OF TOPMAN EXPORT VS I TO REPORTED WHEREIN IT HAS BEEN HELD THAT SECTION 28(IIIB) WHICH REFERS TO CASH ASSISTANCE AGAINST EXPORT IS WIDE ENOUGH TO COVER THE FACE VALUE OF DE PB BENEFIT. IT HAS ALSO BEEN HELD THAT SECTION 28(IIID) ON THE OTHER HAND REFERS TO THE PROFIT ON TRANSFER OF DEPB WHICH CONTEMPLATES PROFIT ELEMENT AND NOT THE ENTIRE SALES PROCEEDS OF THE DEPB. IT IS THUS HELD THAT ONLY THE AMOUNT OF PROFIT ON TRANSFER OF DEPB IS LIABLE TO BE EXCLUDED FROM T HE PROFIT OF THE BUSINESS WHILE COMPUTING THE DEDUCTION U/S.80HHC AND THAT TO O IN THE CASE OF THE ASSESSEE HAVING EXPORT TURNOVER OF MORE THAN 10 CRO RES. WE THEREFORE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE DIRECTION TO RECOMPUTE THE DEDUCTION ADMISSIBLE TO THE ASSESSEE U/S.80HHC KEEPING IN VIEW THE DECISION OF SPECIAL BENCH OF ITAT IN THE C ASE OF TAXMAN EXPORT (SUPRA). GROUND NO.2 TO 7 OF THE ASSESSEES APPEA L ARE ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 4. GROUND NO.8 9 AND 10 OF THE ASSESSEES APPEAL I NVOLVE A COMMON ISSUE RELATING TO THE DISALLOWANCE MADE BY THE ASSE SSING OFFICER AND CONFIRMED BY THE CIT(A) ON ACCOUNT OF ASSESSEES CL AIM FOR SUNDRY BALANCES WRITTEN OFF AMOUNTING TO RS.38 43 564/-. ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 3 5. AGAINST THE GOODS SOLD BY THE ASSESSEE TO M/S. R AVI SIDDHARTH COLOUR CHEM FULL PAYMENT WAS RECEIVED BY THE ASSESSEE. SUBSEQUENTLY THE SAID PARTY RAISED AN ISSUE ABOUT THE POOR QUALITY OF THE GOODS SUPPLIED BY THE ASSESSEE. IN ORDER TO SETTLE THE DISPUTE THE AS SESSEE FINALLY AGREED TO PAY A SUM OF RS.38 43 564/- AND THE AMOUNT SO PAID WAS CL AIMED BY IT AS BAD DEBT WRITTEN OFF. THE ASSESSING OFFICER AS WELL AS LEARNED CIT(A) DISALLOWED THE SAID DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOU NT OF BAD DEBT ON THE GROUND THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO ESTABLISH THAT THE CONCERNED DEBT HAS ACTUALLY BECOME BAD. 6. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AT THE TIME OF HEAR ING BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE HAS AGREED THAT IT IS NOT STRICTLY A CASE OF BAD DEBT WRITTEN OFF AS ENVISAGED IN SECTION 36(1)(VII). HE HOWEVER HAS CONTENTED THAT THE AMOUNT OF RS.38 43 564/- HAVING BEEN PAID BY THE ASSESSEE IN THE NORMAL COURSE OF HIS BUSINESS IN ORDER TO SETTLE TH E DISPUTE WITH THE CUSTOMER THE SAME IS ALLOWABLE U/S.28 AS A LOSS IN CIDENTAL TO THE BUSINESS. IN THIS REGARD THE CONTENTION RAISED BY THE LEARNE D D.R. IS THAT IF THIS ALTERATIVE CONTENTION RAISED BY THE LEARNED COUNSEL FOR THE ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL IS TO BE ENTERTAINED THE MATTER MAY BE SENT BACK TO THE ASSESSING OFFICER FOR GIVING HIM AN OPP ORTUNITY TO EXAMINE THE SAME ON MERIT. WE FIND MERIT IN THIS CONTENTION OF THE LEARNED D.R. ACCORDINGLY THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER AND DECIDE THE ALTERNATIVE CL AIM OF THE ASSESSEE AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD T O ESTABLISH THAT THE LOSS WAS INCURRED BY IT FOR THE PURPOSE OF BUSINESS AND THE SAME WAS INCURRED IN THE YEAR UNDER CONSIDERATION. GROUND NO.8 TO 10 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS PARTLY ALLOWED FOR STATI STICAL PURPOSE. 7. GROUND NO.11 OF THE ASSESSEES APPEAL AND GROUND NO.3 OF THE REVENUES APPEAL RELATE TO A COMMON ISSUE OF DISALL OWANCE MADE BY THE ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 4 ASSESSING OFFICER ON ACCOUNT OF REPAIRS AND MAINTEN ANCE EXPENSES TREATING THEM AS OF CAPITAL IN NATURE. 8. DURING THE YEAR UNDER CONSIDERATION THE ASSESSE E HAD CLAIMED THE DEDUCTION OF RS.17 14 074/- ON ACCOUNT OF REPAIRS A ND MAINTENANCE EXPENSES INCURRED IN RESPECT OF FLAT OCCUPIED BY IT S DIRECTOR. THE ASSESSING OFFICER DISALLOWED THE SAID DEDUCTION HOLDING THAT THE EXPENSES INCURRED ON REPAIRS AND MAINTENANCE WERE OF CAPITAL IN NATURE. ON APPEAL THE LEARNED CIT(A) REMANDED THE MATTER TO THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY THE NATURE OF THE EXPENSES WHETHER INCURRED ON RENO VATION OR ON REPAIRS AND TO ALLOW THE DEDUCTION TO THE EXTENT THE EXPENSES A RE FOUND TO BE INCURRED ON REPAIRS. AGGRIEVED BY THE SAME THE ASSESSEE A ND REVENUE BOTH HAVE RAISED THIS ISSUE IN THEIR RESPECTIVE APPEALS FILED BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE ENTIRE EXPENSES CLAIMED BY THE ASSESSEE O N ACCOUNT OF REPAIRS AND MAINTENANCE HAVE ALREADY BEEN ALLOWED BY ASSESSING OFFICER AFTER VERIFICATION AS PER THE DIRECTION GIVEN BY THE LEAR NED CIT(A). HE HAS CONTENDED THAT GROUND NO.11 RAISED BY THE ASSESSEE IN ITS APPEAL THUS HAS BECOME INFRUCTOUS AND SAME MAY BE DISMISSED AS NOT PRESSED. AS REGARD GROUND NO.3 OF THE REVENUES APPEAL ON THE SAME ISS UE IT IS OBSERVED THAT THE REVENUE HAS CHALLENGED THE DIRECTION GIVEN BY T HE LEARNED CIT(A) TO THE ASSESSING OFFICER TO BIFURCATE THE EXPENSES INTO EX PENSES ON RENOVATION AND EXPENSES ON REPAIRS AND TO ALLOW THE EXPENSES INCUR RED ON REPAIRS. AS POINTED OUT BY THE LEARNED COUNSEL FOR THE ASSESSEE THIS DIRECTION HOWEVER WAS GIVEN BY THE LEARNED CIT(A) RELYING ON THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF BALLIMAL NAVAL KISHORE VS. CIT (224 ITR 414) AND THE SAME BEING FULLY JUSTIFIED IN THE FACTS AND CIRCUM STANCES OF THE CASE WE ARE OF THE VIEW THAT THERE WAS NOTHING WRONG IN THE SAI D DIRECTION GIVEN BY THE LEARNED CIT(A). WE THEREFORE FIND NO MERIT IN T HE GROUND RAISED BY THE ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 5 REVENUE CHALLENGING THE SAID DIRECTION. ACCORDI NGLY GROUND NO.11 OF THE ASSESSEES APPEAL AND GROUND NO.3 OF THE REVENUES APPEAL ARE DISMISSED. 10. GROUND NO.12 AND 13 OF THE ASSESSEES APPEAL IN VOLVE A COMMON ISSUE RELATING TO THE DISALLOWANCE OF THE ASSESSEES CLAI M FOR DEDUCTION ON ACCOUNT OF EXPENDITURE INCURRED ON ABANDONED PROJECT IN WOR KING OUT LONG TERM CAPITAL GAINS ON SALE OF LAND. 11. IN RESPECT OF LAND ACQUIRED ON LEASE FROM MIDC FOR ITS VITAMIN C PROJECT THE ASSESSEE COMPANY CLAIMED TO HAVE INCUR RED SUBSTANTIAL EXPENDITURE ON ITS DEVELOPMENT IN THE EARLIER YEARS . THE SAID EXPENDITURE WAS CLAIMED TO BE INCURRED ON FILLING LEVELLING F ENCING ETC. TO MAKE THE LAND USABLE. VITAMIN C PROJECT HOWEVER WAS FINALLY ABANDONED BY THE ASSESSEE DUE TO ADVERSE MARKET CONDITIONS AND THE EXPENDITUR E INCURRED ON DEVELOPMENT OF LAND WAS CARRIED FORWARD IN THE BOOK S OF ACCOUNT UNDER THE HEAD CAPITAL WORK IN PROGRESS. DURING THE YEAR UNDER CONSIDERATION MAJOR PORTION OF THE SAID LAND WAS SOLD BY THE ASSE SSEE COMPANY AND WHILE COMPUTING THE LONG TERM CAPITAL GAIN ARISING FROM T HE SAID SALE DEDUCTION WAS CLAIMED ON ACCOUNT OF EXPENDITURE INCURRED ON D EVELOPMENT OF LAND BEING COST OF IMPROVEMENT. THE ASSESSING OFFICER HOWEVER DISALLOWED THE SAID DEDUCTION CLAIMED BY THE ASSESSEE ON THE GROUN D THAT THE RELEVANT EXPENDITURE WAS INCURRED IN RELATION TO THE ENTIRE PROJECT AND NOT SOLELY IN RESPECT OF LAND. HE ALSO DISALLOWED THE SAID DEDU CTION ON THE GROUND THAT THERE WAS NO EVIDENCE PRODUCED BY THE ASSESSEE TO S UPPORT AND SUBSTANTIATE ITS CLAIM FOR THE EXPENDITURE INCURRED. THE LEAR NED CIT(A) CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER OBS ERVING THAT NO EVIDENCE WHATSOEVER WAS PRODUCED BY THE ASSESSEE BEFORE HIM IN SUPPORT OF ITS CLAIM FOR THE EXPENDITURE INCURRED. 12. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. EVEN DURING THE A PPELLATE PROCEEDING BEFORE US NO EVIDENCE WHATSOEVER HAS BEEN PRODUCED ON BEH ALF OF THE ASSESSEE TO ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 6 ESTABLISH WITH THE EXPENDITURE IN QUESTION WAS INCU RRED FOR THE DEVELOPMENT OF LAND SOLD BY IT DURING THE YEAR UNDER CONSIDERAT ION. THE LEARNED COUNSEL FOR THE ASSESSEE HAS MAINLY RELIED ON THE A UDITED ACCOUNTS OF THE ASSESSEE COMPANY WHEREIN THE SAID EXPENDITURE WAS D ULY REFLECTED WHICH IN OUR OPINION IS NOT SUFFICIENT TO ALLOW DEDUCTION T O THE ASSESSEE AS CLAIMED BY IT. WE THEREFORE FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF HE LEARNED CIT(A) CONFIRMING THE DISALLOWANCE OF EXPENDITURE IN QUESTION MADE BY THE ASSESSING OFFIC ER AND UPHOLDING THE SAME ON THIS ISSUE WE DISMISS GROUND NO.12 AND 13 OF THE ASSESSEES APPEAL. 13. IN GROUND NO.1 OF ITS APPEAL THE REVENUE HAS C HALLENGED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.1 59 64 440/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST. 14. THE EXPENDITURE OF RS.1 59 64 440/- INCURRED BY THE ASSESSEE ON ACCOUNT OF INTEREST AND BANK CHARGES WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE INTEREST BEARING BOR ROWED FUNDS AVAILED BY THE ASSESSEE FROM BANK WERE UTILISED FOR GIVING INT EREST FREE ADVANCES FOR NON BUSINESS PURPOSE TO M/S. ASHISH SHIP BREAKING L TD. B.V. METALS AND TIEN YUAN INDIA PVT. LTD. THE LEARNED CIT(A) HOW EVER DELETED THE SAID DISALLOWANCE ON THE GROUND THAT THERE WAS FAILURE O N THE PART OF THE ASSESSING OFFICER TO RECORD A FINDING THAT BORROWED FUNDS WERE ACTUALLY DIVERTED BY THE ASSESSEE FOR NON BUSINESS PURPOSE. HE ALSO FOUND THAT INTEREST BEARING FUNDS WERE AVAILED BY THE ASSESSEE FOR SPECIFIC PURPOSE AND THERE WAS LITTLE LIKELIHOOD OF THE SAME BEING DIVER TED FOR THE NON BUSINESS PURPOSE. HE ALSO NOTED THAT INTEREST FREE ADVANCE S WERE GIVEN BY THE ASSESSEE IN EARLIER YEARS BUT THERE WAS NO DISALLOW ANCE MADE OUT OF INTEREST BY THE ASSESSING OFFICER IN THE EARLIER YEARS. 15. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT A SIMILAR ISSUE INVOLVING ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 7 IDENTICAL FACTS HAS ALREADY BEEN CONSIDERED AND DEC IDED BY THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITS ORDER REPORTED IN 2010 -TIOL-25-ITAT-MUM WHEREIN THE APPELLATE ORDER OF THE LEARNED CIT(A) G IVING RELIEF TO THE ASSESSEE ON A SIMILAR ISSUE HAS BEEN UPHELD BY THE TRIBUNAL FOR THE FOLLOWING REASONS GIVEN IN PARA NO.19 AND 19.1: 19. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. WE HAVE ALSO GONE THR OUGH THE CASE LAWS ON WHICH OUT ATTENTIONS WERE DRAWN BY THE RESPECTIVE PARTIES. AFTER CONSIDERING THE SUBMISS IONS AND ALSO TAKING INTO CONSIDERATION THE VARIOUS CASE LAW S WE FIND THAT THERE IS NO INFIRMITY IN THE FINDINGS OF THE LD CIT[A]. THE CONTENTION OF THE ASSESSEE THAT INTER EST FREE ADVANCES WERE GIVEN TO THE SISTER CONCERN FOR BUSIN ESS PURPOSES NEITHER IS INCORRECT NOR FALSE. THE ASSES SEE ADVANCED MONEY ON ACCOUNT OF PURCHASE OF GOODS FROM SISTER CONCERNS. THE DETAILS OF PURCHASES AND THE PURPOSE FOR GIVING ADVANCE FREE LOANS WERE EXPLAINED BEFORE THE CIT[A] AND ALSO BEFORE THE AO. THE AO MERELY DISA LLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF PHALTON SU GAR WORKS LTD REPORTED IN 208 ITR 989 WHEREIN IT HAS BE EN HELD THAT ANY FUNDS GIVEN TO THE SISTER CONCERN ON INTEREST FREE THE INTEREST CAN BE DISALLOWED U/S. 36(1)(III ). THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF PHALTON SUGAR WORKS LTD HAS BEEN REVERSED BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS IN 288 ITR 1 (2006-TIOL-179-IT). THE HONBLE SUPREME CO URT HAS CATEGORICALLY HELD THAT IF FUNDS GIVEN TO THE S ISTER CONCERN OR ITS SUBSIDIARY FOR THE PURPOSE OF OWN BU SINESS OR THEIR BUSINESS THEN NO DISALLOWANCE CAN BE MADE U/S. 36(1)(III) AS IT HAS TO BE TAKEN INTO CONSIDERATION THAT THOSE FUNDS ARE TO BE TREATED AS USED FOR BUSINESS PURPOS ES. THE RATIO OF THE DECISION OF THE SUPREME COURT IS S QUARELY APPLICABLE ON THE FACTS OF THE PRESENT CASE. MOR EOVER THE ASSESSEE HAS ITS OWN FUNDS ON WHICH NO INTEREST HAS BEEN PAID AND THEY ARE MUCH MORE THAN THE AMOUNT GI VEN TO ITS SISTER CONCERN AS INTEREST FREE ADVANCES. T HE CIT[A] HAS CONSIDERED THIS ASPECT THEN ONLY CAME TO THE CONCLUSION THAT THE DISALLOWANCE MADE BY THE AO WAS NOT JUSTIFIED. 19.1 THE CONTENTIONS OF THE LD D.R. THAT THE FUNDS AVAILABLE SHOULD BE TAKEN ON DAY-TO-DAY BASIS AND N OT ON THE BASIS OF LOSING BALANCE AT THE END OF THE YEAR; IN OUR VIEW IS NOT WELL FOUNDED ON THE FACTS OF THE PRESE NT CASE. IT HAS TO BE TAKEN INTO CONSIDERATION THAT WHAT IS THE ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 8 AMOUNT AVAILABLE WITH THE ASSESSEE ON THE FIRST DAY OF THE ACCOUNTING YEAR AND WHAT IS THE AMOUNT HAS BEEN GIV EN TO ITS SISTER CONCERN AND THEREAFTER WHAT IS THE CL OSING BALANCE AT THE END OF THE YEAR. THEREFORE IN OUR CONSIDERED VIEW THE CONTENTION OF THE LD COUNSEL O F THE ASSESSEE THAT TOTALITY OF THE UTILIZATION OF THE FU NDS. MOREOVER AS STATED ABOVE THE DEPARTMENT COULD NOT PROVE THESE FACTS AND CIRCUMSTANCES WE CONFIRM THE FINDINGS OF THE LEARNED CIT[A] ON THIS ISSUE. 16. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDE RATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE EARLIER YEARS WHICH HAVE ALREADY BEEN DECIDED BY THE TRIBUNAL WE RESPECTFUL LY FOLLOW THE ORDER OF THE TRIBUNAL PASSED IN THAT YEARS AND UPHOLD THE IMPUGN ED ORDER OF THE LEARNED CIT(A) DELETING THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER ON ACCOUNT OF INTEREST EXPENSES. GROUND NO.1 OF THE REVENUES APPEAL IS ACCORDINGLY DISMISSED. 17. IN GROUND NO.2 OF ITS APPEAL THE REVENUE HAS C HALLENGED THE ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.12 42 367/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ASSESSEES CLAI M FOR SUNDRY BALANCE WRITTEN OFF. 18. THE ASSESSEE COMPANY HAD ENTERED INTO A TRANSAC TION IN THE YEAR 1994 FOR IMPORT OF MS SCRAP FROM KUWAIT FOR SALE TO TISCO AFTER CLEARANCE OF MATERIAL FROM CUSTOMS. THE ASSESSEE COMPANY HAD ENTERED INTO THIS TRANSACTION FOR AND ON BEHALF OF DRM STEEL INDUSTRI ES PVT. LTD. AND HAD ALSO ADVANCE FUNDS FOR THE SAME. THE SAID TRANSACTION HOWEVER DID NOT MATERIALISE AND THE AMOUNT OF RS.33 23 000/- BECAME RECEIVABLE TO THE ASSESSEE FROM M/S. D.R.M. STEEL INDUSTRIES PVT. LTD . THE SAID LIABILITY WAS FINALLY ASSUMED BY DKM INVESTMENT TRADING PVT. LTD. AND A TOTAL SUM OF RS.20 18 633/- COULD BE RECOVERED FROM THE SAID PAR TY BY THE ASSESSEE COMPANY UP TO 31.03.2003. THERE AFTER NO PAYME NT WAS RECEIVED BY THE ASSESSEE COMPANY AND THE BALANCE AMOUNT OF RS.12 42 367/- WAS FINALLY WRITTEN OFF BY IT IN THE BOOKS OF ACCOUNTS AS BAD D EBT. THE CLAIM OF THE ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 9 ASSESSEE HOWEVER FOR DEDUCTION OF THE SAID AMOUNT H OWEVER WAS DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT IT COUL D NOT ESTABLISH THAT RELEVANT DEBT HAD ACTUALLY BECOME BAD IN THE YEAR U NDER CONSIDERATION. THE LEARNED CIT(A) HOWEVER DELETED THE SAID DISALLO WANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT IN THE FACTS A ND CIRCUMSTANCES OF THE CASE THE DECISION TAKEN BY THE ASSESSEE TO WRITE O FF THE AMOUNT IN QUESTION AS BAD DEBT WAS AN HONEST JUDGMENT. HE ALSO HELD THAT THE SAID AMOUNT EVEN OTHERWISE WAS ALLOWABLE AS BUSINESS LOSS U/S.2 8. 19. AT THE TIME OF HEARING BEFORE US THE LEARNED D .R. HAS CONTENDED THAT THE AMOUNT IN QUESTION HAVING NOT BEEN DECLARED BY THE ASSESSEE COMPANY AS ITS INCOME IN THE EARLIER YEARS THE SAME WAS NO T ALLOWABLE AS DEDUCTION ON ACCOUNT OF BAD DEBT U/S.36(1)(VII) AND THIS POSI TION HAS NOT BEEN DISPUTED EVEN BY THE LEARNED COUNSEL FOR THE ASSESS EE. AS REGARDS THE DEDUCTION OF THE SAID AMOUNT HAVING BEEN ALLOWED BY THE LEARNED CIT(A) EVEN AS A BUSINESS LOSS U/S.28 THE LEARNED D.R. HA S CONTENDED THAT THE ONUS IN THIS REGARD WAS ON THE ASSESSEE TO ESTABLIS H THAT THE SAID LOSS WAS INCURRED FOR THE PURPOSE OF ITS BUSINESS AND THE SA ME WAS INCURRED IN THE YEAR UNDER CONSIDERATION. HE HAS CONTENDED THAT A S THIS ISSUE WAS RAISED BEFORE THE LEARNED CIT(A) FOR THE FIRST TIME THE A SSESSING OFFICER HAD NO OCCASION TO EXAMINE THIS ASPECT. HE HAS CONTENDED THAT THE MATTER MAY THEREFORE BE SENT BACK TO THE ASSESSEE FOR RECONSID ERATION. WE FIND MERIT IN THIS CONTENTION OF THE LEARNED D.R. AND SINCE TH E LEARNED COUNSEL FOR THE ASSESSEE ALSO HAS NOT RAISED ANY OBJECTION WE SET ASIDE THE IMPUGNED ORDER OF THE LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO CONSIDER AND DECIDE THE ALTERNATIVE CLAIM OF THE ASSESSEE FOR THE DEDUCTION OF THE AMOU NT IN QUESTION AS BUSINESS LOSS IN ACCORDANCE WITH LAW AFTER GIVING T HE ASSESSEE AN OPPORTUNITY OF BEING HEARD. GROUND NO.2 OF THE REV ENUES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURP OSE. ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 10 20. AS REGARD CROSS OBJECTION FILED BY THE ASSESSEE IT IS OBSERVED THAT THE GROUNDS RAISED THEREIN ARE ONLY SUPPORTIVE OF THE I MPUGNED ORDER OF THE LEARNED CIT(A) ON THE ISSUES RAISED IN THE REVENUE S APPEAL. KEEPING IN VIEW OUR DECISION RENDERED ON THE GROUNDS RAISED IN THE REVENUES APPEAL THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOM E INFRUCTUAS. ACCORDINGLY THE SAME IS DISMISSED. 21. IN THE RESULT BOTH THE APPEALS ARE TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS OBJECTION OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF FEBRUARY 2010. SD/- (P. MADHAVI DEVI) (JUDICIAL MEMBER) SD/- (P.M. JAGTAP) (ACCOUNTANT MEMBER) MUMBAI DATED 25 TH FEBRUARY 2010. JANHAVI COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-III MUMBA I. 4. COMMISSIONER OF INCOME TAX CITY-III MUMBAI. 5. DEPARTMENTAL REPRESENTATIVE BENCH E MUMBAI TRUE COPY BY ORDER ASSTT. REGISTRAR ITAT MUMBAI ITA NO.3917/MUM/2006 ITA NO.4117/MUM/2006 C.O. NO.327/MUM/2006 11 DATE INITIALS 1. DRAFT DICTATED ON 16-02-2010 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 17-02-2010 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM 5. APPROVED DRAFT COMES TO THE SR. PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER