2021 (9) TMI 1101 - AT - Income Tax

Disallowance on account of bad debts written off u/s 36(2) - HELD THAT - Ground raised in the present appeal has already been decided by the coordinate bench of the Tribunal in favour of the assessee company for AYs 2011-12 2012-13 2021 (6) TMI 718 - ITAT DELHI AND 2021 (9) TMI 813 - ITAT DELHI respectively, which order has been followed by the AO/CIT(A). As Revenue though relied upon the order passed by the AO/ld. CIT (A) has failed to bring on record distinguishable facts and evidence, if any, or that the order passed by the Tribunal (supra) has been set aside or its operation has been stayed by the higher forum. Decided in favour of assessee. Nature of expenses - expenses incurred as a part of project cost by treating the same as capital expenditure for land acquisition of Border Out Post during the execution of Indo Bangladesh Border Fencing Work (IBBF) - HELD THAT - As relying on assessee's own case 2021 (9) TMI 813 - ITAT DELHI we delete the addition made by the AO and confirmed by the ld. CIT (A) on the ground that expenses incurred by the assessee company for acquisition of land for IBBF Project has not created any assets in the hands of assessee as the assessee company has merely executed a contract for construction of Border Out Post on behalf of Ministry of Home Affairs. Consequently, addition made by the AO and sustained by the ld. CIT (A) is ordered to be deleted. Addition on account of provisions written back under MAT provisions - Disallowances on account of provision of written back - AO made the addition holding that assessee has failed to give the information - HELD THAT - As relying on own case 2021 (6) TMI 718 - ITAT DELHI we are of the considered view that addition made by the AO and sustained by the ld. CIT (A) is not sustainable in the eyes of law because the provisions made by the assessee in earlier years were never claimed or allowed to the assessee, which fact however needs to be verified by the AO. Consequently, addition made by the AO and sustained by the ld. CIT (A) is ordered to be deleted subject to verification by the AO qua the computation of total income of the assessee for earlier years if these provisions have not been allowed to the assessee in earlier years.

Issues Involved:
1. Disallowance of ?4,61,876/- on account of bad debts written off under Section 36(2) of the Income Tax Act, 1961.
2. Disallowance of ?3,61,31,904/- on account of expenses incurred as part of project cost, treated as capital expenditure for land acquisition of 'Border Out Post' during execution of 'Indo Bangladesh Border Fencing Work (IBBF)'.
3. Addition of ?25,07,47,401/- on account of provisions written back.
4. Addition of ?25,07,47,401/- under the MAT provisions.
5. Non-admission of additional evidence filed by the assessee under Rule 46A of Income Tax Rules.

Issue-wise Detailed Analysis:

1. Disallowance of ?4,61,876/- on account of bad debts written off under Section 36(2) of the Income Tax Act, 1961:

The Assessing Officer (AO) disallowed the deduction claimed by the assessee for bad debts written off due to the absence of any evidence. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this disallowance. The Tribunal noted that in the assessee’s own case for the Assessment Year (AY) 2012-13, the coordinate Bench had allowed similar claims, stating 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 satisfies the characteristics of allowable bad debt under Section 36(2) of the Act. Consequently, the Tribunal allowed the assessee's claim for bad debts written off for the AY 2013-14 as well.

2. Disallowance of ?3,61,31,904/- on account of expenses incurred as part of project cost, treated as capital expenditure for land acquisition of 'Border Out Post' during execution of 'Indo Bangladesh Border Fencing Work (IBBF)':

The AO and CIT(A) disallowed the expenses claimed by the assessee by treating them as capital expenditure. The Tribunal referred to its earlier decision for AY 2012-13, where it was held that the expenditure incurred by the assessee on land acquisition and other project-related expenses did not create any asset in the hands of the assessee as it was merely executing a contract for the Ministry of Home Affairs. Therefore, these expenses were considered revenue in nature. Following this precedent, the Tribunal deleted the addition made by the AO and confirmed by the CIT(A).

3. Addition of ?25,07,47,401/- on account of provisions written back:

The AO and CIT(A) added the provisions written back to the assessee’s income. The Tribunal referred to its decision in the assessee's case for AY 2011-12, where it was established that the provisions made in earlier years were never claimed or allowed as deductions. Therefore, when these provisions were written back, they could not be taxed again. The Tribunal directed the AO to verify if these provisions were not allowed as deductions in earlier years and, if verified, to delete the addition.

4. Addition of ?25,07,47,401/- under the MAT provisions:

This issue was addressed along with the provisions written back. The Tribunal reiterated that the provisions written back should not be added under the MAT provisions if they were not allowed as deductions in earlier years. The AO was directed to verify this aspect and delete the addition if the provisions were not previously allowed.

5. Non-admission of additional evidence filed by the assessee under Rule 46A of Income Tax Rules:

This ground was not specifically addressed in the Tribunal’s order, as the main issues were resolved based on the Tribunal's earlier decisions in the assessee's own cases for previous years.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, directing the AO to delete the disallowances and additions subject to verification of facts regarding the provisions written back. The Tribunal’s decision was based on the consistency of facts and the application of legal principles established in the assessee’s own cases for earlier assessment years.

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