TaxTMI 
TaxTMI 
2017 (5) TMI 726
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....e A.O. having chosen to make an addition of Rs. 1.79,53,595 ought to have allowed corresponding deduction for unrecovered debtors of Rs. 1,80,72,562. 3. In the facts and circumstances of the case and in law the CIT (A) erred in upholding the action of the A.O. in making an addition of advances from customers Rs. 1,02,99,091 and Rs. 43,89,471 being amount held on behalf of principal u/s 28(iv) of the Act. 4. In the facts and circumstances of the case and in law the CIT (A) erred in upholding the action of the A.O in making an addition of Rs. 1,66,212 being monies received from Kenyan Government u/s 28(iv) of the Act" 3. Brief facts of the case are that the assessee was engaged in the business of shipping agents, carries on the activities like overseas recruitment, management, pension, gratuity fund for foreign shipping companies for which staff was recruited from India beside doing travel agency and cargo handling etc. During the year, the assessee filed its return of income at NIL on 31.10.2007, which was processed under section 143(1) of the Act on 14.8.2008. The case of the assessee was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued and....
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....n in respect of outstanding sundry credit balances to the total income of the assessee u/s 41(1) of the Act on the ground that these creditors have remained unpaid for long time and these were not written back despite the facts that the assessee was not knowing even the names of the said creditors to whom the payments to be made. 5. In the appellate proceedings, the ld. CIT(A) confirmed the addition on the ground that the assessee was not in a position to furnish the details of sundry creditors by rejecting the contentions of the assessee that records were not possible to be produced on account of the destruction of records in the fire and the termination of staff of Calcutta Branch after the outbreak of fire in the office. The ld. CIT(A) further observed that these creditors‟ advances were lying outstanding for so many years despite the fact that the assessee did not know the details of these creditors in view of the fact that a note by the auditor of the company stating that according to the information and in the opinion of the statutory auditor of the company these amounts should be written back. The ld. CIT(A) after considering the arguments of the assessee as has bee....
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....re also hampered because of the heavy downpour and flood in Mumbai on 26.7.2005. The company also tried to extract the details from auditors of the company that also proved futile and even details of the company was not able to furnish the details. The ld. AR further argued that non-filing of details qua sundry creditors did not in any manner prove that the liability/sundry creditors become non-existent or ceased to exist. So much so that the sundry debtors‟ details and addresses were also not found following which the company could not file any suit against the debtors or in some cases the following the suits against the debtors would be uneconomical, keeping in view precarious financial position of the company. The ld. AR also stated that year after year the company was filing its return of income submitting annual accounts before all the authorities including Company Law Board. While making the addition the authorities below have relied upon the two decisions which were clearly distinguishable as under : i) Solid Containers Ltd V/s DCIT (308 ITR 417) (Bom), wherein the Hon‟ble Bombay High Court has held that loan taken for trading activities ultimately, upon waive....
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....laim before the AO and ld.CIT(A) on same analogy that the amount of sundry debtors should be allowed to be adjusted against the amount of sundry creditors. However, the same was not allowed on the ground that the assessee‟s claim of outstanding debts could not be considered for want of compliance under section 36(1)(iv) of the Act. The ld.AR submitted that the part of the total creditors represented the money payable by the assessee to its member from the money receivable from the client for the services rendered by the assessee. The ld. AR further argued that the condition of section 36(1)(vii) were not required to be fulfilled because whole amount has not gone to credit of profit and loss account. It was the business loss and should be allowed u/s 37 of the Act and therefore the assessee should be allowed reduction and adjustment of the amounts of sundry debtors against the amount of sundry debtors. 8. On the other hand, the ld.DR vehemently opposed the arguments of the ld.AR by submitting that the credit balances were 10 to 15 days old for which the assessee was not having any details and addresses. The ld. DR argued that no efforts were made by the assessee-company to ....
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....stion whether the liability is actually barred by limitation, is not a matter which could be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt was barred and had become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. The principle that expiry of period of limitation prescribed under the Limiation Act cannot extinguish the debt but it will only prevent the creditor from enforcing the debt is well-settled. If that principle is applied, it is clear that mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by the section. In the appellant‟s, case amount of liability continues as i is. It is not ....
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....n, no onus has been discharged by the revenue in providing that the impugned liabilities have been ceased in the year under consideration. In view of the totality of facts and the circumstances of the case and in view of the above discussion and observations, the orders of revenue authorities are set aside and the additions made under s.41(1) is deleted"., *In the case of Vardhman Overseas Ltd, (supra) the Hon‟ble Delhi High Court has held as under : "16. In our opinion, the judgment of the Supreme Court in Sugauli Sugar Works (P.) Ltd. (supra ) is a complete answer to the contention of the learned standing counsel. In the case before the Supreme Court for a period of almost 20 years the liability remained unpaid and this fact formed the basis of the contention of the revenue before the Supreme Court to the effect that having regard to the long lapse of time and in the absence of any steps taken by the creditors to recover the amount, it must be held that there was a cessation of the debts bringing the case within the scope of Section 41(1). In the case before us, the identical contention has been taken on behalf of the revenue, though the period for which the amount re....
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....Solid Containers Ltd (supra) and T V Sundaram Iyengar and Sons Ltd(supra) are clearly distinguishable on facts. In view of this discussion hereinabove and in the light of ratio laid down in the various decisions supra, we set aside the order of the ld.CIT(A) and direct the AO to delete the amount of Rs. 1,79,53,595/-. Ground No.1 is decided in favour of the assessee. 11. Since we have decided ground no.1 of this appeal in favour of the assessee, there is no need to decide ground No.2 hence dismissed. 12. Grounds of appeal no.3 and 4 are against the confirmation of addition of Rs. 1,02,99,091/- being advances received from the customers Rs. 43,89,471/- an amount held on behalf of principal and Rs. 1,66,212/- being monies received from Kenyan Government u/s 28(iv) of the Act. 13. The AO on perusal of the balance sheet of the assessee found that the advances from the customers, amounts held on behalf of principles and money held on behalf of Kenyan Government amounting to Rs. 1,02,99,901/-, Rs. 43,89,471/- and Rs. 1,66,212/- respectively , were outstanding for the last so many years and hence the AO issued notice to the assessee as to why these amounts should not be brought t....
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....assessee in the normal course of business. In defence of his arguments the ld.AR relied upon the following case law: i) CIT V/s Alchemic Pvt Ltd reported in 130 ITR 168 (Guj); ii) Iskraemeco Regent Ltd (196 Taxman 103) (Mad High Court); iii) Ravinder Singh and Amptjer V/s CIT (205 ITR 353) (Delhi High Court); iv) ITO V/s Ahuja Graphic Machinery (P) Ltd (109) ITD 71 (Mum)(TM). The ld. AR submitted that the provisions of section 28(iv) of the Act provides for the assessment of the value of any benefit or perquisite arising from the business or the exercise of a profession as income of the assessee and these provisions do not deal with actual receipt of money which has been held in the aforesaid judgements issued by the various High Courts and the Tribunal that sundry creditors balance do not fall within the purview of section 28(iv) of the Income Tax Act, 1961 and they involve actual money/financial transactions. 15. The ld. AR further submitted that the genuineness of the liability under various heads was enquired into by the revenue authorities in the scrutiny assessment for the assessment year 2003-04 by referring to the assessment orders filed at pages 66 to 70 ....
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....ndisputed facts are that the assessee received advances from the customers, amounts held from principals and amounts held on behalf of Kenyan Government amounting to Rs. 1,02,99,091,Rs 43,89,471/- and Rs. 1,66,212/- respectively. The authorities below have added the same as income u/s 28(iv) by relying on the decision in the case of Solid Containers Ltd (supra) and T V Sundaram Iyengar and Sons Ltd (supra), whereas as a matter of fact under section 28(iv) the taxation of benefit and perquisites are dealt with. For the sake of convenience, the provisions of section 28(iv) are reproduced below: "Profits and gains of business or profession. 28. The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",- (i); (ii) (iiia) (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; The perusal of the aforesaid provision reveals that the section applies for the value of any benefit or perquisite. We therefore find merits in the argument of the ld.AR that where money received or held from the creditors the provisions of section 28(iv) cannot be i....
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....he benefit or perquisite received in kind. Such a benefit or perquisite received in kind other than in cash would be an income as defined under Section 2(24) of the Income-tax Act. In other words, to any transaction which involves money, Section 28(iv) has got no application. Hence, we are of the view that Section 28(iv) has no application whatsoever, as admittedly even by the learned senior standing counsel for the revenue to the present case on hand. We do not agree with the stand taken by the learned senior standing counsel for the revenue that section 28(iv) of the Act is not the basis upon which the decision has been arrived at by the authorities below, in as much as the orders passed by them would clearly reveal the above said fact...... 29. Therefore, the transaction in the present case being a loan transaction having no application with respect to Section 28(iv) of the Income-tax Act, the same cannot be termed as an income within the purview of Section 2(24) of the said Act. In other words, inasmuch as Section 28(iv) is not applicable to the transactions on hand, it cannot be termed as income which can be made taxable as receipt. Hence, such a receipt which does not have....