TaxTMI 
TaxTMI 
2017 (4) TMI 602
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....n its respect was made beyond the permissible time limit of one hundred and eighty (180) days of the date of the relevant export sale/s The assessee makes its purchases inclusive of value added tax (VAT) incident thereon Credit for the same, however, is available on sale, either as input credit, where the sale is taxable, or by way of refund, where not, as in the instant case, being by way of export out of India, which is not liable to any domestic tax The assessee accordingly is entitled to refund of the same, which is accounted for separately at the time of purchase A purchase of Rs. 100 (say), inclusive of VAT at Rs. 10/-, he would clarify, is recorded in the books of account at Rs. 90/-(i.e., net of VAT), debiting the tax component of Rs. 10/- to an account titled 'VAT credit receivable', which is taken as a part of the assessee's current assets in the balance-sheet The relevant statute (Tamil Nadu Value Added Tax Act, 2006), however, provides a period of 180 days from the date of sale for making the claim for refund The same having been made beyond the said prescribed period, came to be rejected, which led to the write off, the genuineness of which is thus es....
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.... to which it claims to be entitled, i.e., but for the application being not made (with the appropriate authority) within the prescribed time, i.e., within 180 days of the export sale, selling the goods purchased (either as such or on conversion into finished/processed goods) It is important to draw this distinction as the emphasis of the ld AR all through the hearing was to the 'inequity' that apparently stems from the denial of the claim of loss qua the tax paid for which the assessee had not claimed deduction, inflating its' profit for the year of purchase to that extent The same is misplaced Irrespective of the method of accounting, as emphasized during the hearing as well, the income from business is to be computed by valuing the purchases, sales, as well as inventories (as at the beginning and the end of the relevant year), inclusive of all taxes incident thereon The assessee can thus only be considered as having claimed and been allowed deduction for the tax paid as a part of the purchase cost and, further, of having credited it's profit and loss account for the amount of refund qua the tax paid (at Rs. 10, as per the example by the ld AR), neutralizing the effect of th....
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....l Nadu VAT Act, 2006 reads as under: '18 Zero-rating- (1) The following shall be zero rate sale for the purpose of this Act, and shall be eligible for input tax credit or refund of the amount of the tax paid on the purchase of goods specified in the First Schedule including capital goods, by a registered dealer in the State, subject to such restrictions and conditions as may be prescribed:- (i) A sale as specified under sub-section (1) or (3) of section 5 of the Central Sales Tax Act, 1956 (Central Act 74 of 1956); (ii) Sale of goods to any registered dealer located in Special Economic Zone in the State, if such registered dealer has been authorized to establish such units by the authority specified by the Central Government in this behalf; and (iii) Sale of goods to International Organisations listed out in the Fifth Schedule (2) The dealer, who makes zero rate sale, shall be entitled to refund of input tax paid or payable by him on purchase of those goods, which are exported as such or consumed or used in manufacture of other goods that are exported as specified in sub-section (1), subject to such restrictions and conditions a....
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....e entitled to the refund in the first place, for it to claim any deduction in its respect upon write off in a subsequent year The income having accrued to the assessee in an earlier year on, as stated, making or effecting the export sale/s, we proceed to examine next the aspect of the year of the loss The loss being of a valid claim or a debt from the Government, income qua which stands recorded in the books of account in an earlier year (or otherwise taken into account in computing the income for such year), the question that arises in the matter is if the loss is on the account of a bad debt/s, i.e., a debt that has become irrecoverable, if only by lapse of time allowed for its recovery, or is it in the nature of a business loss This assumes relevance in determining, as afore-stated, the year of the claim for deduction qua the said sum, as also for examining if any conditions attached thereto are satisfied In my considered view, the impugned loss is only qua a debt arising in the course of trade, that has become irrecoverable, i.e., has become bad for recovery The debt being due from the State Government, which being a part of an independent state (Union of India), so that it ....
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....ant sale/s, i.e., on the expiry of the stipulated 180 day time period allowed for claiming the refund The same is, thus, due to the non-satisfaction of the statutory mandate and not qua a business decision Further, as explained, it is not any debt, but only that which is irrecoverable, in whole or in part, that is contemplated for being allowed, to that extent, on its write off That the assessee does not require to prove its irrecoverability to the satisfaction of the Revenue is another aspect of the matter The same, besides giving due deference to it's accounts, which purport to state the true and fair state of affairs, is also associated with practical hardships and business considerations, also requiring making value judgments, i.e., in relation to the decision for write off, viz the relation with the concerned trade customer on an ongoing basis; the cost - direct or indirect, of recovery, etc In fact, but for it becoming irrecoverable, there was no question of any loss to the assessee, being a debt due from the Government Rather, being due from the Government, but for the law, a claim for bad debt in its respect would ordinarily invite an objection, being almost a contradiction....