Bd Mundra & Sons M/S , Kota vs Assessee

Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM

C.O. No.67/JP/2011 (Arising out of vk;dj vihy la-@ITA No. 607/JP/2011) fu/kZkj.k o"kZ@Assessment Year : 2007-08

M/s. B.D. Mundra & Sons cuke The ACIT Prop. Mundra Tractors Vs. Circle- 1 C-150, IPIA, Kota Kota

LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAAHB 7862 D vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : written submission jktLo dh vksj ls@ Revenue by: Smt. Neena Jeph, JCIT -DR

lquokbZ dh rkjh[k@ Date of Hearing : 24/03/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 30/04/2015

vkns'k@ ORDER PER R.P. TOLANI, JM

The assessee has filed a C.O. wherein the ld. AR of the assessee

contends that Ground No. 1 of the C.O. remains to be adjudicated by

ITAT while passing its order dated 28-01-2014. The Ground No. 1 of the

C.O. is as under:-

''That under the facts and circumstances of the case, ld. CIT(A) erred in directing the AO to confirm the disallowance of bad debts Rs. 38,211/-if it relates to margin money payment to tractor purchasers.'' 2 CO No.67/JP/2011 M/s. B.D. Mundra & Sons vs. ACIT, Circle- 1, Kota .

2.1 Vide order dated 19-09-2014 in Miscellaneous Application No.

13/JP/2014, the order of ITAT in ITA No. 607/JP/2011 dated 21-08-2014

was recalled with limited extent to decide Ground No. 1 of the C.O. of the

assessee which inadvertently remained un-adjudicated.

2.2 During the course of hearing, it is found that assessee by

application dated 19-03-2015 has requested to decide the ground on the

basis of the written submission already filed. Accordingly ld. DR is

heard.

2.3 In the written submission, assessee has relied on ITAT order dated

28-01-2014 for the assessment year 206-07 in ITA No. 608/JP/2011

claiming that the facts and circumstances of the case in respect of bad

debts are similar to preceding year; where this Bench of ITAT at para 2.4

had decided this issue in favour of the assessee by following

observations.

''2.4 We have heard the rival submissions and have carefully perused entire records. At the time of hearing, the ld. AR mentioned that in his ground of appeal, the amount of disallowance confirmed under the head bad debts has been wrongly mentioned as Rs. 11,47,972/- which actually is Rs. 11,74,972/-. We have corrected this figure being a typographical mistake in the ground itself for which ld. DR has no objection. After hearing both the sides, we have found that the reasons given by the ld. CIT(A) in deleting the bad debts to the tune of Rs. 56,86,172/- are correct since both the parties have reiterated their earlier arguments which were taken before the ld. CIT(A).

3 CO No.67/JP/2011 M/s. B.D. Mundra & Sons vs. ACIT, Circle- 1, Kota .

We have found that the AO has moved in a wrong direction. In fact, the business of the assessee is to sell vehicles after cajoling and coaxing the farmers by motivating them to make purchases of tractors so that they can make cultivation in their fields and can grow more and more crops and also to do other allied agricultural work with the help thereof. In this regard, the modus operandi of the assessee in advancing the margin money is a reality of life and it cannot be ignored because many a times, the farmers do not have even margin money to that extent for taking loan etc. Therefore, this advance has to be treated as a transaction transacted during the course of assessee's business. The manners in which the accounts are maintained or bills are drawn may not be having that much relevance. The AO has taken into account the requirement of Section 36(2) of the Act that the assessee has to prove that debt has become really bad. It is well settled law on this subject by now that the assessee is required to write off such debts as bad debts without proving that debt has really become bad.

By the decision of Hon'ble Supreme Court in the case of TRF Ltd. vs. CIT, 230 CTR 14, when bad debt occurs, the bad debt is debited and the customer's account is credited and the customer's account is closed. It is not necessary after Ist April, 1989 for the assessee to establish that debt, in fact, has become bad or irrecoverable. It is enough if the bad debt is written off in the books of the assessee. Therefore, to that extent, the findings of the ld. CIT (A) are correct. However, we are unable to understand as to why the amount to the tune of Rs. 11,74,972/- has not been allowed. This amount also represents the margin money and this cannot be dealt with in any manner separately. Both parties have relied on decisions but we have stated above after going through the most relevant legal precedents settled on the issue. To further narrate the facts regarding Rs. 11,74,972/-, it was found by the ld. CIT(A) that out of total sum of Rs. 68,61,144/- claimed by the assessee as bad debts, a sum of Rs. 11,74,972/- is in relation to margin money payment pertaining to various years. This has been treated as cash loans/ advances made by the assessee to various parties.

This payment facilitated the sale of tractors but did not form part of sale proceeds of the assessee for 4 CO No.67/JP/2011 M/s. B.D. Mundra & Sons vs. ACIT, Circle- 1, Kota .

any year. Accordingly, the ld. CIT(A) has not taken it as bad debts. The ld. CIT(A) has distinguished this amount on the reasoning that the debt written off as bad debts in the books of the assessee's account should have been taken into account in computing the income of the previous year or in other earlier years and failing which the same cannot be allowed as such. Be that as it may, we are in agreement with the submissions of the ld. AR that modus operandi adopted by the assessee has not been disputed or doubted by the AO and, therefore, at best this advance, which has been taken as irrecoverable should be as a business loss, but in our considered opinion that margin money advances given on behalf of the farmers in the nature of cash loans and deposited in the bank account of the customers is a sort of business transaction and this has been taken as such while computing income of any earlier years. We do not hesitate in holding that this amount has to be allowed as bad debts and definitely it amounts to business loss as well. Accordingly, we delete the addition of Rs. 11,74,972/- and allow the Ground No. 1 of assessee's appeal and consequently we dismiss Ground No. 1 of Revenue's appeal.'' 2.4 The ld. DR is heard on this issue.

2.5 We have considered the rival contentions and perused the materials

available on record. It is not disputed that facts and circumstances in this

case are similar to the facts of the assessment year 2006-07 (supra). In

view thereof and respectfully following the order of this Bench of ITAT

for the assessment year 2006-07, we allow the assessee's ground as to

claim of bad debts of Rs. 38,211/-. Thus the ground no. 1 of the

assessee's CO is allowed.

2.6 Consequently in ITAT order dated 21-8-14 after para 11.2 between

para 11.2 and 12.1, the following para shall be inserted.

5 CO No.67/JP/2011 M/s. B.D. Mundra & Sons vs. ACIT, Circle- 1, Kota .

''12A . In view thereof and respectfully following the order of this Bench of ITAT for the assessment year 2006-07, we allow the assessee's ground as to claim of bad debts of Rs. 38,211/-. Thus the ground no. 1 of the assessee is allowed.

2.7 Consequently, para 17.2 shall also now be read as under:-

''Therefore, we allow Ground No. 1 of the C.O. of the assessee and dismiss the related grounds of the Revenue's appeal .'

3.0 In the result, the Ground No. 1 of the assessee's C.O. is allowed

with above modifications

Order pronounced in the open court on 30/04/2015.

Sd/- Sd/- ¼Vh-vkj-ehuk½ ¼vkj-ih-rksykuh½ (T.R. Meena) (R.P.Tolani) ys[kk lnL;@ Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 30th APRIL, 2015 *Mishra

vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- M/s. B.D. Mundra & Sons Prop. Mundra Tractors, Kota

2. izR;FkhZ@ The Respondent- The ACIT Circle- 1, Kota

3. vk;dj vk;qDr¼vihy ) @ CIT(A),

3. vk;dj vk;qDr@ CIT,

4. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

5. xkMZ QkbZy@ Guard File (C.O. No.67/JP/2011)

vkns'kkuqlkj@ By order,

lgk;d iathdkj@ Assistant. Registrar