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TMI Blog2014 (2) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 73 is wrong – Decided against Revenue. Disallowance u/s 14A of the Act – Held that:- The decision in Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] followed – the matter remitted back and the AO is directed for fresh adjudication – Decided in favour of Revenue. Deletion made on account of reversal of income charged to P&L A/c – Held that:- The assessee has recognized the income in the earlier assessment years - it is not the case of recognizing current year income - the parties accounts would have been debited, increasing the balance in the debtor account to the extent of interest accrued but not received - Reversal of such income, which is already accounted as income in the earlier assessment year would be possible only by, part write off the debts - The accounting entries and treatment in the books have to be considered and it has to be seen whether there is part write off of debts in the books of accounts - Verification of facts is required – Matter remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Disallowances of calculation of book profit u/s 115JB of the Act – Held that:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation @ 20% at Para 2-3 of page 2 of his order. The AO records that similar additions have been made in the preceding year and the matter is under litigation. Hence he repeated the addition. The ld. CIT (A) at page 3 Para 5.2 onwards followed the decision of his predecessor CIT (A) XIII order dated 21.6.2007 for the A.Y. 2003-04 and order dated 19.9.2007 for the A.Y. 2004-05 in the assessee s own case and disallowed the claim of the assessee. Aggrieved the assessee filed this appeal. 6. The Tribunal in ITA No. 3779/Del/2007 ITA No. 3818/Del/2007 C bench, the A.Y. 2003-04 order dated 6.7.2012, reversed the order of the ld. CIT (A) by observing as follows: 31. We have heard the rival submissions of both the parties and have gone through the material available on record. We have observed from the material available and contentions of parties that there was no fresh leasing activity done by the assessee as is apparent from page 81-83 of paper book wherein no fresh purchases of motor cars/lorries etc,. was made during the year and hence it can be concluded that assessee was claiming depreciation on old vehicles only which were already let out on hire and on which the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record. Explanation to section 73 reads as follows:- Where any part of the business of a company other than a company whose gross total income consist mainly of income which is chargeable under the head interest on securities, Interest from house property, capital gains and income from other sources, or a company the principle business of which is a business of banking or the granting of loans and advances consist in the purchase and sale of shares of other companies, such company shall for the purpose of this section be deemed to be carrying on a speculative business to the extent to which the business consist of purchase and sale of such shares. From the above definition, it is clear that this section is applicable only where shares are purchased or sold by a NBFC. This section does not talk about Govt. securities and therefore, in our opinion, in case of Govt. securities, this explanation is not applicable. We have observed from computation of capital gain, placed at page 38of paper book that the loss occurred to assessee was on account of sale of Govt. securities only other than one belonging to GR Solvents which is not a Govt. security but is a share. From the dates of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appeal of the assessee is allowed and the appeal of the revenue is allowed in part. 17. ITA No. 37/Del/2012 is an assessee s appeal filed for the A.Y. 2006- 07 on the following ground: 1. The CIT (A) erred both on facts and in law in confirming the action of the Assessing Officer in disallowing depreciation to the extent of Rs.6,86,584/- pertaining to vehicles, motor-lorries and taxies which had been leased out by the company in its business of leasing. 2. The appellant reserves to itself, the right to add, alter, amend, substitute, withdraw and / or any Ground(s) of Appeal on or before the date of hearing. 18. The issue is the same as in the year 2005-06. The undisputed fact is that there is no addition to the leased assets during the year. For the reason stated while disposing off the very same issue raised in the year 2005-06, we allow this ground of the assessee. In the result the appeal of the assessee is allowed. 19. Now we take up ITA No. 5876/Del/2011 which is a revenue appeal of the A.Y. 2006-07. The grounds of appeal are as follows: 1. On the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no other option but to declare substantial part of its loan assets as doubtful nature resulting in a provision of Rs.189.40 crores. As the principal amount of the doubtful assets was provided for, the income accounted for against such assets during the relevant assessment year as also in the earlier assessment years which was outstanding for recovery had also to be reversed in accordance with the accounting norms for NBFCs and more particularly in view of the Accounting Standard 9 issued by the Institute of Chartered Accountants of India on revenue recognition. 21. The ld. Counsel relied on the ITAT Delhi s order dated 31.08.2005 in appellants own case in ITA No. 611/2005 for A.Y. 2001-02 and Hon ble Delhi High Court s decision dated 11.07.2011 in the case of CIT Vs. IFCI in ITA No. 660/2000 and submitted that the claim of reversal of the income is fully in accordance with law and hence allowable. The first appellate authority applying the decisions of the Tribunal in the case of Tedco Investment and Financial Services Pvt. Ltd. 82 TTJ 259 allowed the claim of the assessee. The revenue disputes the finding of the ld. CIT (A). 22. The Tribunal while considering the issue in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as nothing to do with computation of taxable income under the Income-tax Act. Provision for nonperforming assets in terms of the Directions of the Reserve Bank of India does not constitute expense on the basis of which deduction can be claimed by the non-banking financial companies under section 36(1) (vii) of the Act. The basis of every business is that anticipated losses must be taken into account but expected income need not be taken note of. This is the basis of the Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998, as it is closer to the reality of cash liquidity that prevents nonbanking financial companies from collapse. In 1989 by the insertion of a new Explanation in section 36(1) (vii) of the Income-tax Act, 1961, a dichotomy was brought in and it has been clarified that any bad debt written off as irrecoverable in the accounts of the assessee will not include any provision for bad and doubtful debts made in the accounts of the assessee. If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like the sundry debtors account, it would constitute a write-off of an actual debt. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current year income and does not apply to reversal of income, of the earlier year, which is already recognised. 27. The Hon ble Delhi High Court in the case of CIT Vs. Vasisth Chay Vyapar Ltd. 330 ITR 440 has after considering the decision that the Hon ble Supreme Court in the case of Southern Technologies Ltd. and he held as follows: Held, dismissing the appeals, that the assessee-company being a non-banking financial company, was bound by the provisions of the Reserve Bank of India Act, 1934, and the 1998 Directions, under which it was mandatory on the part of the assessee not to recognize the interest on the inter-corporate deposit as income, having regard to recognized accounting principles. The accounting principles which the assessee was indubitably bound to follow are AS-9. The admitted position was that the assessee had not received any interest on the intercorporate deposit since the assessment year 1966-67 as it had become a non-performing asset in accordance with the Prudential Norms which was entered in the books of account as well. Even in the succeeding assessment years, no interest was received and the position remained the same until the assessment year 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... write off of debts in the books of accounts. 29. The Hon ble Delhi High Court in the case of CIT Vs. Industrial Finance Corporates of India, in ITA No. 660/2010 at page 18 to 21 had not approved the reasoning of the ITAT. At Para 24 it held as follows: 24. It may not be necessary to go into the validity of the reasons given by the Tribunal as in any case, the assessee was entitled to this deduction. If the income which is earlier recognized is not to be reversed in the subsequent assessment years, in any case it is permissible for the assessee to write off such an income in the concerned assessment years when it was found that the amount was not recoverable. Reference in this connection can be made to the judgments of the Supreme Court in the case of Vijaya Bank Vs. Commissioner of Income Tax and Another [323 ITR 166] and T.R.F. Ltd. Vs. Commissioner of Income Tax [323 ITR 397]. 30. Verification of facts is required. Then the propositions laid down by the Hon ble Delhi High Court and Supreme Court can be applied to the facts of the case. In view of the above discussions we deem it proper to set aside the issue to the file of the AO to fresh adjudication in accordance wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/bonds had been held as long term investments. In view of facts being identical on this issue to that of A.Y. 2005-06 for the reasons given in the appellate order for A.Y. 2005-06, it is held that the AO has erred in invoking Explanation to section 73 and in treating the long term Capital Loss as speculation loss. Accordingly the AO is directed to allow long term Capital Loss of Rs.16250375 as claimed in the return of income. The ground is thus allowed. 34. In the result this ground of revenue is dismissed. 35. In the result the appeal of the assessee is allowed and the appeal of the revenue is allowed in part. 36. ITA No. 682/Del/2012 is revenue appeal filed for the A.Y. 2007-08 on the following grounds: 1. On the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.13,35,000/- made on account of disallowance u/s 14A of the I.T. Act, 1961. 2. On the facts and circumstance of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.20,61,28,000/- made on account of reversal of income charged to Profit Loss Account. 3. On the facts and circumstance of the case and in law, the Ld. CIT (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation of income for A.Y. 2006-07 which is filed at page 18 of the paper book filed by the appellant. In the A.Y. 2007-08 the provision for doubtful advances has increased to Rs.37,92,82,284/- which means a further provision to the extent of Rs.160.58 lacs was made during the A.Y. 2007-08. In the assessment year 2008-09, out of the provision of Rs.37,92,82,284/- for doubtful advances, an amount of Rs.22,94,39,547/- was written back to the profit and loss account and same was credit in profit and loss account as this much of provision was no more required. While preparing the computation of income for A.Y. 2008-09, this amount of provision written back credited in the profit and loss account was reduced from the amount Net Profit shown in the computation of income for A.Y. 2008-09. The computation of income for A.Y. 2008-09 has been filed at page-1 of the paper book filed by the appellant. While making the assessment u/s 143(3), assessing officer also allowed this amount while preparing the computation under normal provisions. However, while preparing the book profit u/s 115JB the assessing officer did not reduce the amount of provision written back from the computation of income. I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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