Skf India Ltd, Mumbai vs Assessee

श्री डी. करुणाकर राव, ऱेखा सदस्य, एवुं श्री विजय पाऱ राि, न्याययक सदस्य के समक्ष

BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER

आमकय अऩीर सं. / ITA no.7723/Mum./2010 (ननधधायण वषा / Assessment Year : 2006-07)

आमकय अऩीर सं. / ITA no.1666/Mum./2012 (ननधधायण वषा / Assessment Year : 2007-08)

SKF India Limited, (Since May 19, 2003, name has been changed from SKF Bearings India Ltd.), Corporate Office: Mahatma ................. अऩीरधथी / Gandhi Memorial Building, Netaji Subhash Appellant Road, Charni Road, Mumbai 400 002 PAN - AAACS0684H

फनधभ v/s

Addl. Commissioner of Income Tax ................... प्रत्मथी / Range-4(3), Mumbai Respondent

ननधधारयती की ओय से / Assessee by : Shri Milin Thakore यधजस्व की ओय से / Revenue by : Shri N.V. Nadkarni

सन ु वधई की तधयीख / आदे श घोषणध की तधयीख / Date of Hearing - 18.05.2015 Date of Order - 22.05.2015

आदे श / ORDER

डी. करुणाकर राव, ऱेखा सदस्य के द्वारा / PER D. KARUNAKARA RAO, A.M.

The present appeals preferred by the assessee are directed

against the two separate impugned orders dated 23rd August 2010, for SKF India Limited

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the assessment year 2006-07 and order dated 14th February 2011, for

the assessment year 2007-08, passed by the Commissioner

(Appeals)-8, Mumbai. Since both the appeals involve common issues

for our adjudication, therefore, as a matter of convenience, these

appeals were clubbed together and are being disposed of by way of

this consolidated order.

2. We shall first proceed to dispose the assessee's appeal in ITA

no.7723/Mum./2010, for the assessment year 2006-07. Following

grounds have been raised by the assessee:-

"1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in upholding addition to total income on account of adjustment for proportionate element of CENVAT under section 145A to the extent of ` 94,89,422.

2. On the facts and in the circumstances of the case and in law the learned CIT(A) has legally erred in confirming disallowance of ` 4,34,062 being subscription / membership fees paid to the clubs including ` 41,722 towards cost of club services and failures.

3. On the facts and in the circumstances of the case and in law the learned CIT(A) legally erred in confirming disallowance of ` 61,00,460 in respect of debts written off as irrecoverable in the accounts of the assessee."

3. At the outset, the learned Counsel for the assessee submitted

that the issue arising out of the ground no.1, relates to invoking of the

provisions of section 145A of the Act in respect of adjustment to

CENVAT.

SKF India Limited

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4. The learned Counsel for the assessee submitted before us that he

did not wish to press this ground. The learned Departmental

Representative has not made any objection to the submissions of the

learned Counsel. Consequently, this ground is dismissed as "not

pressed".

5. Ground no.2, relates to disallowance of club expenditure

amounting to ` 4,34,062.

6. Before us, the learned Counsel for the assessee brought to our

notice the order of the Tribunal passed in assessee's own case for the

earlier assessment year 1990-91, 1991-92, 1999-2000 & 2005-06

and submitted that the said issue is now covered in favour of the

assessee and against the Revenue. For the sake of completeness, we

peruse the order of the Tribunal in one of the above assessment years

i.e., assessment year 2005-06 and find that Para-5 of the said order

deals with this ground and its adjudication is given in Para-5.2 which

is extracted as under:-

"5.2 Thus it is clear that the issue is covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court in the case of Otis Elevators Co. Ltd. reported in 195 ITR 682 (Bom.) which has been followed by the Tribunal in assessee's own case for the earlier assessment years. Accordingly, respectfully following the earlier order of the Tribunal, we decide this issue in favour of the assessee and against the revenue."

SKF India Limited

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7. Considering the above settled nature of the issue, we are of the

opinion that the assessee's ground no.2 is required to be allowed.

Accordingly, we set aside the impugned order on this issue and allow

ground no.2 raised by the assessee.

8. Ground no.3, relates to disallowance of bad and doubtful debt

written of amounting to ` 61,00,460.

9. Before us, the learned Counsel for the assessee narrated the

facts leading to the write off of the bad and doubtful debt and

submitted that such write of is now allowed by virtue of the judgment

of the Hon'ble Supreme Court in TRF Ltd. v/s CIT, [2010] 323 ITR 397

(SC), and many others. Further, he also mentioned that the bad and

doubtful debts were ultimately written off in the Profit & Loss account

as per the method of accounting consistently followed over the years.

The learned Counsel supported the above statement by following

written submissions.

"The appellant creates provision for bad and doubtful debts which is disallowed in computation of income. Refer computation of income for A Ys 2003-04, 2004-05, 2005-06 and 2006-07.

The appellant had written off bad debts by debiting the provision account created in earlier years and making credit to relevant debtor account. For method of account of bad debts and reconciliation for provision for bad debts refer letter to CIT(A) dated 4 August 2010.

The method followed by the appellant ultimately results in debiting bad debts written off to P&L Account. These bad debts SKF India Limited

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are claimed separately by the appellant in computation of income. Refer computation of income for A Ys 2003-04, 2004- 05, 2005-06 and 2006-07.

Provision created earlier is disallowed and therefore claim of bad debts does not result in double deduction.

In case the appellant had written off the bad debts by debiting it to profit and loss account, provision created for bad and doubtful debts created in earlier years will have to be reversed. The impact on profit and loss account and computation of total income in both cases is depicted in separate statement. It is evidence from the statement that the impact on profit and loss account and computation of income of any of the method followed (as per the appellant or that as per the CIT(A)) is same."

10. Finally, the assessee relied on the decision of the Tribunal,

Mumbai Benches, rendered in Arrow Coated Products Ltd. v/s ACIT, 22

Taxman.com 31 (Mum.). He also furnished statement showing impact

on Profit & Loss account and computation of income on different

methods of write-off of bad and doubtful debts.

11. The learned Departmental Representative dutifully relied on the

orders of the Revenue authorities.

12. We have heard both the parties and perused the material

available on record. We have noticed that there is a need for

examining the statement of the assessee's write-off on the Profit &

Loss account for verification by the Assessing Officer. It is also noticed

that the decision of the Tribunal in Arrow Coated Products Ltd. (supra)

was delivered subsequent time and the same was not available before SKF India Limited

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the Revenue authorities at the relevant point of time. We, accordingly,

remand this issue to the file of the Assessing Officer for verification

and allowing the claim of the assessee after applying the decision of

the Tribunal, Mumbai Bench, in Arrow Coated Products Ltd. (supra).

Consequently, we set aside the impugned order passed by the learned

Commissioner (Appeals) and allow the ground raised by the assessee

for statistical purposes.

13. ऩरयणधभत् ननधधारयती की अऩीर सधंख्मकीम उद्देश्म के लरए आंलशक स्वीकृत की जधती

है ।

14. In the result, assessee's appeal for A.Y. 2006-07 is partly

allowed for statistical purpose.

We shall now take up assessee's appeal in ITA no.1666/Mum./

2012, for the assessment year 2007-08. Ground raised by the

assessee are as under:-

"1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming disallowance of ` 16,11,913 being subscription / membership fees paid to the clubs.

2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in confirming disallowance of ` 1,52,26,284 in respect of debts written off as irrecoverable in the accounts of the appellant.

3. On the facts and in the circumstances of the case and in law in confirming an addition of ` 12,99,690 in respect of alleged unreconciled transactions."

SKF India Limited

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15. After hearing both the parties, we find that ground no.1, relates

to disallowance of club expenses of ` 16,11,913, which is common to

ground no.2, of assessee's appeal in ITA no.7723/Mum./2010, which

is relevant for the assessment year 2006-07, which we have already

adjuditated and allowed the said ground in favour of the assessee.

Since this ground is common to the ground no.2, raised by the

assessee in the assessment year 2006-07, therefore, for the reasons

stated therein vide Para-6 and 7 above, we set aside the impugned

order passed by the learned Commissioner (Appeals) on this issue and

allow the ground raised by the assessee.

16. Ground no.2, relates to the issue of bad and doubtful debts

written-off amounting to ` 1,52,26,284.

17. After hearing both the parties, we find that this ground is

common to ground no.3, raised by the assessee in ITA no.7723/Mum./

2010, for the assessment year 2006-07, which we have already

adjudicated. Since this ground is common to the ground no.3, raised

by the assessee in the assessment year 2006-07, therefore, for the

reasons stated therein vide Para-12 above, we set aside the impugned

order passed by the learned CIT(A) and restore the issue back to the

file of the Assessing Officer for denovo adjudication. Consequently, this

ground is allowed for statistical purposes.

SKF India Limited

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18. Ground no.3, relates to disallowance on account of alleged

unreconciled ITS data amounting to ` 12,99,690.

19. In this regard, the learned Counsel for the assessee submitted

that AIR data amounting to ` 65,93,498, the assessee successfully

reconciled to the extent of ` 52,93,803 that constitute 80% of the

entire transaction. Regarding the balance of ` 12,99,690, the

Assessing Officer did not provide the necessary details to enable the

assessee to reconcile the same. It is a settled issue that merely non-

reconciliation of the AIR data and does not lead to sustainable addition

in the assessment. In our opinion, there is a need for remanding this

issue to the file of the Assessing Officer. Consequently, we set aside

the impugned order passed by the learned CIT(A) on this issue and

restore the issue back to his file with a direction to furnish requisite

specific information to the assessee calling for reconciliation. Normally,

the AIR data is generic as well as general in nature. The Assessing

Officer is required to first examine the specific of the transaction that

require reconciliation. Thus, ground no.3, is allowed for statistical

purposes.

SKF India Limited

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20. ऩरयणधभत् ननधधारयती की अऩीर सधंख्मकीम उद्देश्म के लरए आंलशक स्वीकृत की जधती है ।

21. In the result, assessee's appeal for the A.Y. 2007-08 is partly

allowed for statistical purposes.

Order pronounced in the open Court on 22.05.2015

Sd/- Sd/-

विजय पाऱ राि डी. करुणाकर राव न्याययक सदस्य ऱेखा सदस्य VIJAY PAL RAO D. KARUNAKARA RAO JUDICIAL MEMBER ACCOUNTANT MEMBER

मुंबई MUMBAI, ददनाुंक DATED: 22/05/2015

आदे श की प्रनतलरपऩ अग्रेपषत / Copy of the order forwarded to:

(1) ननधधारयती / The Assessee; (2) यधजस्व / The Revenue; (3) आमकय आमुक्त(अऩीर) / The CIT(A); (4) आमकय आमुक्त / The CIT, Mumbai City concerned; (5) पवबधगीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / The DR, ITAT, Mumbai; (6) गधर्ा पधईर / Guard file.

सत्मधपऩत प्रनत / True Copy आदे शधनुसधय / By Order प्रदीऩ जे. चौधयी / Pradeep J. Chowdhury वरयष्ठ ननजी सधचव / Sr. Private Secretary

उऩ / सहधमक ऩंजीकधय / (Dy./Asstt. Registrar) आमकय अऩीरीम अधधकयण, भंफ ु ई / ITAT, Mumbai