2015 (2) TMI 1416 - HC - Income Tax

Entitlement to deduction of the provision made in respect of Non Performing Assets which are considered irrecoverable - Whether the Tribunal was justified in not appreciating that the provision made in respect of Non Performing Assets if not allowable as a bad debt is allowable as a business loss? - HELD THAT - Either side fairly concede that the questions of law raised in these appeals covered by a decision of Southern Technologies Ltd. 2010 (1) TMI 5 - SUPREME COURT and answered similar questions of law against the assessee and in favour of the Revenue as held assessee is not entitled to deduction as a bad debt or as a business loss the provision made in respect of non-performing assets which were considered irrecoverable. Decided in favour of revenue.

Summary

In the case before the Madras High Court, the assessee appealed against the Income Tax Appellate Tribunal's decision regarding deductions for Non-Performing Assets (NPAs) deemed irrecoverable for the assessment years 1997-1998 and 1998-1999. The key legal questions were whether such provisions could be deducted as bad debts or business losses. Both parties acknowledged that these issues were addressed in a prior decision by the Division Bench of the Madras High Court in Sundaram Finance Limited v. The Assistant Commissioner of Income Tax, which followed the Supreme Court's ruling in Southern Technologies Ltd. v. Joint Commissioner of Income Tax. The Supreme Court held that deductions for NPAs as bad debts or business losses are not permissible. Consequently, the Madras High Court dismissed the appeals, ruling in favor of the Revenue and against the assessee, consistent with the established legal precedent.