2021 (9) TMI 813 - AT - Income Tax

Disallowance on account of bad -debts written-off - Addition considering the provisions of Section 36(1)(vii) and Section 36(2) - assessed had failed to prove that the amount was actually trading liability and the corresponding amount was actually offered as income in earlier years - CIT-A deleted the addition - HELD THAT - CIT(A) allowed the claim of the assessee following the decision of the Supreme Court in TRF Ltd Vs. CIT 2010 (2) TMI 211 - SUPREME COURT holding that when the assessee has written off the above sum, debts are already taken into income in earlier years, it is allowable. Nothing new was argued by the DR and the ld AR also reiterated the arguments before the ld CIT(A). We find that when the assessee has written off a debt in its books of account, which was taken into computation of income in earlier years, it satisfied all the characteristic of allowable bad debt u/s 36(2) of the Act. In view of this we do not find any infirmity in the order of the ld CIT(A) in allowing the claim of bad debt written off. Disallowance of expenditure incurred on land acquisition - Revenue or capital expenditure - HELD THAT - The acquisition of land and payment of electricity charges were on account of above project and it did not create any asset in the hands of the assessee but assessee was merely a contract for construction of border outpost on behalf of Ministry of Home Affairs - CIT(A) has correctly held that in the hands of the contractor, assessee the above expenditure was merely project expenditure and has note created any capital assets , hence, not a capital expenditure. Disallowance on account of provision written back - HELD THAT - Before the ld CIT(A) the above claim was contested and the computation of income for last three years was shown wherein, the above provision was disallowed. CIT(A) also examined the details of the provision written back. The complete details as well as the justification which clearly shows that the provision made by the assessee in earlier years was never claimed/ allowed to the assessee. CIT(A) also verified the same with respect to the computation of the total income of the assessee for earlier years. Before us the ld DR could not show that these provisions have already been allowed to the assessee in earlier years and therefore, they are required to be taxed in this year u/s 41(1) of the Act. In view of this we do not find any infirmity in the order of the ld CIT(A) in deleting the addition on account of provision of written back. Disallowance made in books profit u/s 115JB - admitting additional evidence adduced by the assessee during appellate proceedings even after specific denial of the Assessing Officer in his remand report - HELD THAT - CIT(A) has categorically held that the learned Assessing Officer has merely opposed the admission of the additional evidences. The admission of the additional evidences is the prerogative of the learned CIT(A) according to Rule 46 of the Income Tax Rules, 1962. In paragraph No. 16.3 of the order he has categorically admitted the additional evidences and find that the issue is squarely covered by the decision of his predecessor in earlier assessment years, which has been upheld by the coordinate bench in the case of the assessee itself. Therefore, we do not find any infirmity in the order of the learned CIT(A). Even otherwise, on the merit issue is squarely covered in favour of the assessee. Accordingly, ground No 5 of the appeal of the AO is dismissed.

Summary

Issues:
1. Disallowance of bad debts written off
2. Addition under Section 36(1)(vii) of the Act
3. Disallowance of expenditure incurred on land acquisition
4. Disallowance on account of provision written back
5. Disallowances made in books profit under Section 115JB of the Act

Analysis:
1. The first and second grounds of appeal concern the allowability of bad debt written off amounting to ?4,44,994. The coordinate bench in a previous case held that when a debt is written off in the books of account and was taken into income in earlier years, it satisfies the conditions of allowable bad debt under Section 36(2) of the Act. The tribunal confirmed the order of the CIT(A) deleting the disallowance of ?4,44,994.

2. The third ground of appeal relates to the disallowance of expenditure of ?76,50,97,493 incurred on land acquisition. The tribunal upheld the CIT(A)'s decision that the expenditure was revenue in nature as the contractor was executing the project on behalf of the Ministry of Home Affairs, and the corresponding income was already offered for taxation. The tribunal dismissed this ground of appeal.

3. The fourth ground of appeal involves the disallowance of ?8,48,30,839 on account of provision written back. The tribunal held that when the original provision was created but not claimed as a deduction in earlier years, the provision written back in the current year cannot be taxed again. The tribunal confirmed the CIT(A)'s decision to delete the addition of ?8,48,30,839.

4. The fifth ground of appeal concerns the admission of additional evidence during the assessment proceedings. The tribunal noted that the assessing officer opposed the admission of additional evidence, but the CIT(A) admitted it as per Rule 46 of the Income Tax Rules, 1962. The tribunal found no infirmity in the CIT(A)'s decision and dismissed this ground of appeal.

5. In conclusion, the tribunal dismissed the appeal of the assessing officer for the Assessment Year 2012-13, upholding the decisions of the CIT(A) on all grounds.