TaxTMI 
TaxTMI 
2026 (9) TMI 432
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....excluding the covid period of 807 days as per the decision of the Supreme Court in suo motu W.P. (C) No. 3 of 2020 dated 10th January 2022. It is also submitted that the appellate order was not received by the assessee at its physical address or on its email-id mentioned in the return of income AY 2019-20 i.e. [email protected]. Further, it was also not received on email-id mentioned on the income tax portal i.e. [email protected]. The assessee had filed physical appeal before the CIT(A) wherein e-mail ID was not required to be mentioned in the said Form 35. The CIT(A) order dated 06th March 2020 was uploaded on the Income Tax Portal on 04th May 2020. However, due to the covid-19 pandemic and nationwide lockdown imposed on that account and the resultant disruption, the assessee could not take note of the order and was under the impression that the matter was still pending with him for passing the order. The delay in filing the present appeal was thus, attributable to genuine circumstances beyond the control of the assessee and was occasioned by bona fide and sufficient cause and unintentional. It is submitted that the expression 'sufficient cause' must receive a....
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....37(1), then the said expenses should be allowed as deduction under section 28 of the IT Act. Ground No. 2: Disallowance of bad debts amounting to INR 5.51,63,396 in respect of sales made to Baver Brazil (i.e. INR 3,38,48,776) and Bayer Philippines (i.e.. INR 2,13,14,620). 2.1 On facts of the case and in law, Learned CIT(A) has erred in upholding the disallowance made by the Ld. AO toward bad debts expenses of INR 5,51,63,396 claimed by the Appellant under section 36(1)(vii) of the IT Act in respect to sales made to its related parties, namely, Bayer Brazil and Bayer Philippines. 2.2 Without prejudice to the above, if the above expenses are not allowed as deduction under section 36(1)(vii), then the said expenses should be allowed as deduction under section 28 or section 37 of the IT Act, being loss incurred to the Appellant which is directly relatable to its business" 6. Briefly stated facts are that the return of income was filed declaring total income at Rs. 31,84,23,429/-. The assessee company is engaged in the business of production and sale of hybrid and patent seeds. Ground no.1 pertains to the denial of deduction in respect of sales tax expenses....
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....ance (P) Ltd (ITA No 3475/Mumbai/2006) and Mahesh J Patel Vs ACIT (109 ITD 35)in support of the claim that bonafide business loss of revenue nature is to be allowed as business loss even if, the provisions relating to deduction of Bad debt do not apply. The AR also contended that if the claim for sales tax written off does not fall within the scope of section 36(1)(vii) of the Act, it should be allowed deduction for the said write off under section 37(1) of the Act, since such expenditure was inextricably linked with the sales made by the assessee in earlier years and hence, expended wholly and exclusively for the purposes of the business. In support of his claim the AR placed reliance on the ruling of the Hon'ble Delhi High Court in the case of Mohan Meakin Ltd Vs CIT (59 DTR 401(Del). 8. The ld.CIT(A) observed that VAT/CST claimed is a component of sales return and hence, had never been a part of sales and as such its income. The claim of refund which was not received by the assessee from the Sales Tax Department did not qualify as bad debts allowable u/s 36(1)(iii) of the Act, hence, the addition made by the AO was confirmed. Regarding the alternative claim of deduction u....
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....siness. 10.1 We find that Hon'ble Delhi High Court in the case of Mohan Meakin Ltd. (2011) 11 taxmann.com 141, has held that non-recovery of trade advances amounted to business loss and were to be allowed as deduction under Section 28(i) read with section 37(1) of the Act Business loss/deduction Also the decision of Hon'ble Bombay High Court in the case of Harshad J. Choksi vs CIT reported in (2012) 25 taxmann.com 567 (Bom) also supports the claim of the assessee. The question raised before the Hon'ble High Court and the decision rendered thereon is reproduced below:- "Questions: * Whether if an amount is held to be not deductible as a bad debt in view of non-compliance of the condition precedent as provided under section 36(2), could the same be considered as an allowable business loss? * Whether, therefore, the amount of Rs. 44.98 lakhs could be considered as an allowable business loss? Held: * Section 28 imposes a charge on the profits or gains of business or profession. The expression 'Profits and gains of business or profession' is to be understood in its ordinary commercial meaning and the same does not mean total rec....
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....7(1) of the Act. The lower authorities were not justified in rejecting such a valid claim. Accordingly, we set aside the appellate order and direct the AO to allow the deduction claimed, thus allowing the ground of appeal. 11. Ground no. 2 pertains to the disallowance of Bad debts amounting to Rs. 5,51,63,396/- in respect of sales made to Baver Brazil (i.e. Rs. 3,38,48,776/-) and Bayer Philippines (i.e. Rs. 2,13,14,620/-).In the alternative, it was claimed without prejudice to the above, that the AO ought to have given relief in AY 2008-09, while holding that the expense (Bad debt) of Rs. 3,38,48,776/- pertained to AY 2008-09. 12. In respect of the claim of Bad debts disallowed of Rs. 5,70,99,211/-the AO observed that the assessee had claimed bad debts of Rs. 6,84,59,740/- during the previous year. Further, out of this Rs. 551,63,396/-, the part representing debts from Bayer Brazil was Rs. 3,38,48,776/- and Bayer Philippines was Rs. 213,14,620/-. In response to the query in this regard, certain details were filed. The AO stated that the assessee provided names of parties only without details of date of sale and year of accounting of income. In respect of the amount relating t....
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.... Brazilian Ministry of Agriculture tested the goods at the port, they were found to be infected by Xanthomonas Oryzae. Similarly, the rice exported to Philippines did not meet the internal quality standards of the Philippines Government, since the average germination of seeds exported was below 85%. Accordingly, the Brazilian and Philippines Government returned the goods to India. During the year under the appeal, the assessee had written off bad debts aggregating to Rs. 5,51,63,396/- (pertaining to sales made in AY 2008-09) in respect of Bayer Brazil (Rs 3,38,48,776/-) and Bayer Philippines (Rs. 2,13,14,620/-) respectively and claimed deduction of the said amounts. It was submitted before him that the said sales were treated as income and offered to tax in the year of sale and that there was no dispute with respect to the original sales being offered to tax. It is further contended that all the necessary documentary evidences to evidence the sale of goods and sale return, ledger explaining the sales made and amounts written off for Bayer Brazil and Bayer Philippine were furnished before the AO during the course of assessment proceedings. The AR further contended that based on the ....
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....2009-10. Goods Returned was an event of the AY 2008-09 and was duly taken into consideration in the books of accounts in that year. As to the appellant's contention that it had added the same to the computation of income in A Y 2008-09 and so it should be allowed to debit the same from computation of income for A Y 2009-10 was not acceptable. 14. Before us, the ld.AR has reiterated the same contentions as made before the lower authorities. It is further submitted that in this case, due to sales return on account of rejections of the goods, there was no debt claim per se for the assessee. There was no possibility of recovering the said amount and it was an actual loss for it in the form of sales return which ought to be allowed u/s 36(1)(vii) of the Act as the assessee fulfills all the requite conditions laid therein. It is further stated that from 01.04.1989, there is no requirement in the act to establish that the debt has actually become bad. Reliance is also placed in this regard on the decision of hon'ble Supreme Court in the case of TRF Ltd vs CIT 323 ITR 397 which has been followed consistently by courts of law. The ld.DR relied on the orders of lower authorities. 1....
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....ection 36(1)(vii) of the IT Act in respect to sales made to its related party, namely, Bayer Brazil. 1.2. Without prejudice to the above, if the above expenses are not allowed as deduction under section 36(1)(vii), then the said expenses should be allowed as deduction under section 28 or section 37 of the IT Act, being loss incurred to the Appellant which is directly relatable to its business. Ground No. 2: Disallowance of expense of an amount of INR 82,508 incurred in earning exempt income as per provisions of section 14A of IT Act r.w.rule 8D(2)(iii) of the Income-tax Rules, 1962 2.1. On facts of the case and in law, Learned CIT(A) has erred in upholding the disallowance made by the Ld. AO of an amount of INR 82,508 as expenses incurred towards earning exempt income computed as per section 14A of the IT Act r.w. Rule 8D(2)(iii) of the Income-tax Rules, 1962 ('IT Rules"). 2.2. On facts of the case and in law, the learned CIT(A) has erred in not appreciating the fact that no further expenses other than that suo motu disallowed are relatable to exempt income and accordingly, no further disallowance is warranted in the instant case under sectio....
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....efore us, the ld.AR has reiterated the same contentions as made before the lower authorities. It is claimed that the impugned sum was already offered for taxation as per the computation of income filled with the return. The amount had to be written off as the sales were returned by the concerned parties. It is submitted that the ratio laid down in the case of TRF Ltd(supra) is directly applicable to the facts of the case. Our decision rendered in appeal for the AY 2009-10 in para 15 above applies mutatis mutandis. Therefore, relying on the decision of the Apex Court in the case of TRF Ltd(supra) we set aside the appellate order and direct the AO to delete the impugned addition, thus allowing the grounds of appeal. 21. Ground no.2 pertains to the disallowance u/s 14A of the Act. The AO on perusal of the balance sheet and the other details furnished, noticed that the assessee had made huge investments of Rs. 3,30,03,432/-in the shares of IDFC Mutual Fund Daily Dividend Plan, income from which shall not form part of total income. The dividend income earned which is shown exempt was Rs. 91,60,000/-.In response to the query regarding proposed application of section 14A r.w.Rule 8D, i....
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....uo-motto disallowed proportionate interest pertaining to general borrowings. The AR further contended that mere commonality of funds by itself cannot be any ground for disregarding the claim made by the appellant and that when there are interest free and interest bearing funds available with the assessee, then one has to proceed on the basis that investments were made out of non-interest bearing funds in accordance with the law laid down by the Hon'ble Bombay High Court in the case of CIT Vs Reliance Utilities & Power Ltd. The AR further contended that out of total interest cost of Rs 22,22,184/- debited to P&L A/c, only interest of Rs 72,872/- pertained to general borrowing and the balance interest of Rs 21,49,312/-was towards specific purposes and not towards any general borrowing. Accordingly, it was submitted that wherever the expenses incurred had not relationship with the income not includible in the total income, there could not be any occasion to invoke the provision for making the disallowance u/s 14A of the Act. It was further submitted that assessee had sufficient own funds as on March 2010 in the form of share capital, General Reserve, Profit & loss account to deplo....