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TMI Blog2017 (4) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. See Adea International Pvt. Ltd. Vs. ACIT [2011 (2) TMI 724 - ITAT, Bangalore] held that is a settled law that when the assessee arrives at a decision that certain debts have become bad and accordingly writes off the same in the books of accounts, section 36(1)(vii)of the Act provides for a deduction. Further, section 41(1) of the Act provides that if such bad debts written off is recovered during the subsequent assessment years, it shall be treated as income of that year. From the facts and circumstances of the case, we are of the considered view that the assessee is justified to claim deduction u/s. 36(1)(vii) of the Act with respect to the unrealized bills from export turnover - Decided in favour of assessee Disallowance of writing off loans and advances - This amount was written off by the BIFR - Held that:- BIFR, a scheme was sanctioned for rehabilitation of the scheme. As per scheme, assets and liabilities would be limited to what was shown in the sanctioned scheme. In view of this scheme, the balance sheet for financial year 1999- 2000 was recasted. Only those items were shown in recasted balance sheet, which were taken by the new management. Only those assets and lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals filed by the assessee and the revenue emanates from the order of ld. CIT(A), Alwar dated 01/08/2013 pertaining to the assessment year 2000-01. 2. Both the appeals are being heard together, for the sake of convenience and brevity, a common order is being passed. 3. Firstly, we take revenue s appeal being ITA No. 799/JP/2013. The sole ground of appeal taken by the revenue is reproduced as under:- (i) That the Commissioner of Income Tax (Appeals), Alwar has erred in law as well as on the facts and circumstances of the case in deleting the addition of ₹ 55,10,113/- made by the A.O. by disallowing the claim of depreciation on Plant and machinery and other assets due to closure of factory. 3.1 The only issue involved in this appeal is against deleting the addition of ₹ 55,10,113/- made by the Assessing Officer by disallowing the claim of depreciation on plant and machinery and other assets due to closure of factory. 4. The assessee has claimed depreciation of ₹ 55,10,113/- and the Assessing Officer show caused the assessee and asked as to why the depreciation claimed by it may not be disallowed as the company was closed from 03/6/1998 to 19/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made of ₹ 55,10,113/- on account of depreciation. 4.3 I have considered the AOs order and submissions made by the AR and the case laws cited by the AR and find force in the arguments given by the appellant. AO has made disallowance on the ground that the factory was closed during the year and also in the preceding year and the machinery was not fit for use. It is stated by the AR that factory had to be closed from 03.06.1998 to 19.06.2010 on account of liquidity problems and the matter was pending before BIFR for revival of the business. Further, the AR has relied upon the judgment of Hon ble Delhi High Court in the case of CIT Vs. Laxmi Sugar Mills Ltd. (2012) Taxman.Com 41(Delhi). Depreciation is an allowance which has to be given, even if, the factory has been closed for some reason, as it depreciates both by usage and with the passage of time. In view of these facts, I find that the AO was not justified in not allowing the depreciation on the plant and machinery. Accordingly, I delete the addition of ₹ 55, 10,113 made by the AO under this head. 6. We have heard both the sides on this issue and perused the material available on the record. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unjust, illegal, arbitrary and against the facts and circumstances of the case. These amounts have been written off considering the rehabilitation scheme sanctioned by Honorable BIFR dated 08/05/2000. (iii) Action of CIT (A) in confirming the action of the A.O. of disallowance of write off of fixed assets of ₹ 13,67,295/- is unjust, illegal, arbitrary and against the facts and circumstances of the case. These assets were found missing during the course of taking over of the operation of the company by the new management and company has written off these assets. (iv) Action of CIT (A) in confirming the action of the A.O. of disallowance of interest amount of ₹ 35,00,000/- is unjust, illegal, arbitrary and against the facts and circumstances of the case. This interest forms part of total interest of ₹ 65,00,000/- which has been provided, as per the direction given by the honorable BIFR in scheme sanctioned on dated 08/05/2000, on the various credit facility availed by the company from the bankers. 8. The first ground of appeal is against sustaining the addition of ₹ 58,80,646/- on account of disallowance of writing off sundry creditors M/s Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the question as to whether the debt in question really became bad in the year in which such a claim was made and the amount was debited in the profit and loss account with a corresponding credit to either the individual account of the debtor or to account like bad debt reserve account indicating the amount due by the particular debtor, it would be a sufficient compliance with the provisions of the statutory requirement for writing off as irrecoverable the concerned debt in the books of the assessee for the purposes of the Act. It is not essential that the debtor s individual account be squared off by an appropriate credit entry. In the instant case the amount in question was debited in the profit and loss account with a corresponding credit to bad debt reserve account. Hence, this condition also stood fulfilled in the case of the assessee. In view of the aforesaid facts and discussions, the assessee was entitled to grant of deduction of a sum of ₹ 11,46,432 claimed as bad debt in the year under consideration. 9. It is a settled law that when the assessee arrives at a decision that certain debts have become bad and accordingly writes off the same in the books of accounts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,47,62,069/- was written off against loans and advances. The assessee was asked to produce details and its breakup and also to explain whether they are business loans/advances, how old are they, efforts made for recovery arid prove existence of party in form of full name, address etc. The assessee filled reply stating therein that Hon'ble Bench of BIFR scheme has sanctioned a rehabilitation scheme. As per this scheme the assets and liabilities would be limited to what was shown in the sanctioned scheme. In the scheme balance sheet for F.Y. 99-2000 has been re-casted by BIFR and only those items has been shown which are taken by the new management i.e. only those assets and liabilities have been shown which are recoverable and payable respectively by the new management and loans and advances which are not recoverable of ₹ 1,47,62,069/- has been written off at in the line of provision of the sanctioned scheme . I have gone through the reply filed by the assessee and found the same not convincing. The assessee was asked to produce details of loans/advances, their breakup and the nature of the advance and efforts made for the recovery etc. But the assessee has file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The following fixed assets were written off :- Furniture and fixtures ₹ 914065/- Light vehicle ₹ 453229/- Total ₹ 1367294/-'' The reply submitted by the assessee is baseless, The company has not filed any FIR of the fixed assets which were either stolen/lost. In absence of the FIR it cannot be ascertained whether these fixed assets were stolen or not. The assessee has also not claimed from the insurance company. All these facts clearly shows that no fixed assets were either stolen/lost. In view of above the claim of the assessee for write off of above fixed assets is disallowed. The assessee did not furnish any details of the extraordinary losses except a summary in reply dated 27.02.2003. The figures of the same are not tallying with amount shown in the P L account. Due to non-availability of details the claim of the assessee is not acceptable and ₹ 1,20,80,155/- is disallowed. Since, this sum includes the above discussed amounts written off regarding fixed assets, sundry debtors, loans and advances etc. therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest by adopting 15% rate of interest on an amount of ₹ 2 crores. Factually, the actual interest paid on the working capital loan from bank are completely different from what the Assessing Officer has assumed. The assessee company was having working capital of ₹ 5,25,59,463/- as an opening balance and there was closing balance of ₹ 5,17,52,067/-. Thus the actual bank limit remained around ₹ 5.25 crores during the year. The interest of ₹ 65.00 lacs has been on the amount of around 5.25 crores and not on ₹ 2.00 crores as assumed by the Assessing Officer. The assessee submitted the details of O.D. account for the relevant period from 01/4/1999 to 31/3/2000. The loan as on 31/3/2000 from the bank was ₹ 2.00 crores as cash credit, export bills and packing credit ₹ 79.52 lacs and working capital term loan ₹ 2.38 crores. The part of the working capital loans were converted during the year as working capital term loan as per the scheme of the BIFR. Thus the total loan outstanding of bank towards the working capital was ₹ 5,17,52,067, which is verifiable from the balance sheet as on 31/3/2000. Further the assessee company has char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the first time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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