2012 (11) TMI 135 - AT - Income Tax

Deletion of Disallowance due to devaluation of Indian currency - foreign exchange fluctuation Held that - The liability, is on revenue account being stated to be against raw material purchase and not on capital account. Claim to the assessee be allowed on payment basis in favour of assessee. Interest u/s. 244A Held that - No refund by way of a banking instrument having been received, it is the date of the passing of the order of adjustment / set off of the refund amount against outstanding demand that the refund and, thus, the interest can be said to have been allowed to the assessee. a separate and distinct proceedings, and to that extent, much in the same manner as where a debt in relation to an income assessed is written off or a credit in respect of a liability allowed as an expenditure is written back - matter is restored back to the file of the AO for fresh adjudication appeal partly allowed. Deletion of disallowance of security expenses Held that - Expenditure incurred on the provision of security at the residence of the Managing Director, could not be considered as his personal obligation, and having been incurred for and in the interest of the assessee, is, therefore, allowable u/s. 37(1) of the Act and same could at best be considered as a perquisite allowed by the assessee - in favour of revenue. Travelling Expenses Held that - Bill is for a group package, comprising lunch, rent, dinner, breakfast etc., and which would not by itself evidence or clarify the purpose for which the said expenditure was incurred, nor would the dates of arrival/departure of the group - matter be restored back to the file of the AO to allow an opportunity to the assessee to press this issue before him, furnishing all the relevant details and materials. Bad and doubtful debts written off substantiation of its claim by the assessee - Held that - There can be no double claim, i.e., both in the year of provision as well as in the reversal thereof when the debtor s account stands obliterated from its account by the assessee - restore the matter back to the file of the ld. CIT(A) for clarifying the details which were available on the file of the AO. Deletion of sum for the relevant year - on the basis of the findings by the tribunal in the case of the assessee for the assessment year 2001-02 Held that - Same did not pertain to the relevant year but to the subsequent year, i.e. relevant to the assessment year 2002-03 - CIT(A) directed the AO to consider the assessee s claim for the current year, and allow it subject to verification - no infirmity in the impugned order - In the result, the Revenue s appeal is partly allowed and partly allowed for statistical purposes.

Issues:
1. Deletion of disallowance due to foreign exchange fluctuation
2. Deletion of addition as interest u/s. 244A
3. Deletion of disallowance for security expenses
4. Deletion of addition for traveling expenses
5. Deletion of disallowance for bad and doubtful debts written off
6. Deletion of addition based on findings in a previous year

Analysis:
1. The first issue revolves around the deletion of disallowance concerning foreign exchange fluctuation. The Revenue appealed against the deletion of liability claimed by the assessee due to devaluation of Indian currency. Despite the AO disallowing the claim, citing past practice, the ITAT Jaipur accepted the assessee's claim as a revenue account liability, not a capital one. The tribunal referred to past decisions and allowed the appeal based on the mercantile system of accounting followed by the assessee.

2. The second issue pertains to the deletion of an addition as interest u/s. 244A. The AO's addition was based on the timing of refund receipt, but the CIT(A) deleted it as the refund was not actually granted. The ITAT found the primary facts unclear and ordered a fresh adjudication by the AO to clarify the status of the refund and interest granted.

3. The third issue involves the deletion of disallowance for security expenses at the Managing Director's residence. The AO disallowed it as personal expenditure, but the CIT(A) allowed it, considering it an expense in the interest of the assessee and not a personal obligation. The ITAT confirmed the deletion, aligning with the CIT(A)'s decision.

4. The fourth issue concerns the deletion of an addition for traveling expenses. The AO disallowed the claim due to lack of evidence, but the CIT(A) allowed it based on bill details confirming the expenses' business nature. The ITAT found the primary facts unclear and ordered a fresh adjudication by the AO to substantiate the purpose of the expenses.

5. The fifth issue addresses the deletion of disallowance for bad and doubtful debts written off. The ITAT reiterated the law that a debt written off as irrecoverable should be allowed as a deduction in the year of write-off. The matter was sent back to the CIT(A) for clarification on the details of debts written off and to ensure no double claim was made.

6. The sixth issue involves the deletion of an addition based on findings in a previous year. The ITAT confirmed the deletion, as the expenditure in question was found to pertain to a subsequent year, not the relevant assessment year. The ITAT upheld the CIT(A)'s decision based on the tribunal's findings in the assessee's case for the previous year.

In conclusion, the ITAT partially allowed the Revenue's appeal while also allowing it for statistical purposes, addressing each issue with detailed analysis and legal interpretations.

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