30/05/2019 Riverus

https://incometax.riverus.in/caseview/Repute_Logistics_Private_Ltd_Chennai_vs_ITO%2C_Corporate_Ward-5(4)_Chennai/YXBwZWFsSWQ9NzE2Mzc1JmZ… 1/3

Chennai ITAT

MembersN. R. S. Ganesan

Inturi Rama Rao

Lawyers (Assessee)T. Vasudevan

Timeline

ITAT CHENNAI

31 Aug 2017

Case �led

16 Nov 2017

Hearing

25 Jan 2018

Listed for

hearing

21 May 2019

Judgement

Repute Logistics Private Ltd Chennai vs ITO,Corporate Ward-5(4) Chennai

21.05.2019 ITA 2120 / CHNY / 2017

Text Highlight ǥ

Issues & Grounds of

appeal

Arguments Holding &

Outcome

Limited, Alwarpet, This is an appeal �led by the Assessee

directed against the order of the Commissioner of Income Tax

(Appeals)-3, Chennai

(‘CIT(A)’ for short) dated 31.05.2017 for the Assessment Year

(AY)

2. The Assessee raised the following grounds of appeal:

1. The order of the Commissioner of Income Tax (Appeals)-3,

Chennai, dated 31.05.2017 in IT No. 23/16-17/A-3 for the

Assessment Year 2013-14 is contrary to law, facts, and in the

circumstances of the case.

2. Disallowance of Write o� of input credits of VAT

Rs.7,02,977/- and Service Tax Rs.5,52,670/- under the

nomenclature Bad Debts - Total Rs.

12,55,647/-.

2.1The CIT (Appeals) failed to appreciate the Appellant's

submission explaining the reasons for which it has been

necessitated for the appellant to write o� the VAT and Service

Tax Input credit to the extent of Rs.

2.2The CIT (AppeaIs) is not justi�ed in stating that the input

credits write o� are, "only bene�t that is available to the

appellant could not be availed by it".

2.3The CIT(A)ought to have appreciated that the purchases

mad and debited to the Pro�t and Loss account are after netting

o� of the input credits (Invoice Value less VAT / Service Tax

availed as input credit), hence the purchases are lower to the

extent of the input credits claimed, which has never

Loss account and being carried in the Balance Sheet as an Asset.

2.4The CIT (AppeaIs) failed to appreciate that the write o� of

input tax credits are the taxes on the purchases made and borne

by the appellant, hence claimed as expenditure now, which was

not part of the purchases cost earlier

Law Referred

Income Tax Act, 1961

Section 143(3)

Case Map

This case refers to:

Ncs Distilleries Pvt. Ltd. Hyderabad

Vs Ito Ward-16(2) Hyderabad

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30/05/2019 Riverus

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2.5The CIT (Appeals) wrongly understood the facts and not

justi�ed in stating that "the appellant was allowed deduction

and only the bene�t b way of input credit available could not be

availed by the appellant due to time limit of time or by

operation of law". The CIT (Appeals) failed to appreciate the

fact that these input credits have never been claimed as

expenditure by the appellant.

3. The appellant craves leave to �le additional

ground/arguments at the time of hearing.

3. The brief facts of the case are as under:

The appellant namely M/s.Repute Logistics Private Limited is a

company incorporated under the provisions of the Companies

Act, 1956. It is engaged in the business of providing logistics

services. The return of income for the AY 2013-14 was �led on

30.09.2013 disclosing total income of Rs.61,90,380/-. Against

the said return of income, the assessment was completed on

02.03.2016 by the Income Tax O�cer, Corporate Ward 5(4),

Chennai passed u/s. 143(3) of the

Income Tax Act, 1961 (for short ‘the Act’) declaring total

income of Rs.75,95,399/- after making disallowance to the

tune of E14,05,513/- under the following heads.

i) Bad debts disallowed : Rs.12,55,647/- ii) Van accident

expenses : Rs. 68,945/- iii) Disallowance u/s.43B : Rs.

80,421/-

4. Being aggrieved by the above additions, an appeal was

preferred before ld. CIT(A), who vide impugned order had

allowed the van accident expenses of E68,945/- and interest on

service tax E 80,421/-. However, con�rmed the addition on

account of VAT input written o� of E12,55,647/-.

5. Being aggrieved, the appellant is in appeal before us. It is

submitted that VAT component of the purchase is debited to

VAT input account and the said VAT input credit had lapsed.

Therefore this was claimed as bad debts as it is written o� in

the books of accounts which should be allowed as deduction as

in the year of purchases, all the purchases are reduced to the

extent of input credits. Alternatively, it was submitted that this

should be allowed as business loss u/s.37 of the Income Tax

Act, 1961 (in short ‘’the Act]. Ld. Authorised Representative

relied on the decision of Hyderabad Bench of the Tribunal in

the case of M/s. NCS Distilleries P. Ltd vs. ITO in ITA

No.699/Hyd/2012, dated 19.09.2014.

6. On the other hand, the ld. Sr. Departmental Representative

placed reliance on the orders of lower authorities

7. We heard the rival submissions and perused the material on

record. The issue arising in the present appeal is in respect of

deduction claimed on account of VAT Input credit and Service

tax input credit written o� in books of accounts claimed as bad

debts as the claim had lapsed. Admittedly, this input credit was

not debited as a part of purchase cost, it was lying in advance

account of the asset side of the balance sheet. Submission of

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the assessee is that the amount cannot be availed on account of

lapse of the credit and the same should be allowed as bad debts.

We are afraid that this submission of the appellant cannot be

accepted for the reason that in order to allow bad debts as

deduction, necessary condition is that it should have formed

part of the income in the earlier years, which does not stand

satis�ed in the present case. As regards to the alternative

submission that the same should be allowed as business loss,

the onus lies upon the assessee to prove that the claim had

lapsed during the previous year relevant to assessment year.

Unless and otherwise crystallization liability is established the

same cannot be allowed as business loss.

8. In the result, the appeal �led by the assessee is dismissed.

Order pronounced on 21st day of May, 2019, at Chennai.

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