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TMI Blog2016 (6) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... Sidhu, Judicial Member And Shri O. P. Kant, Accountant Member For the Department : Sh. T. Vasanthan, Sr. DR For the Assessee : Sh . R.M. Mehta, Adv. ORDER Per H. S. Sidhu : JM This appeal by the Revenue is directed against the Order of the Ld. Commissioner of Income Tax (Appeals)-XIII, New Delhi dated 05.9.2013 pertaining to assessment year 2007-08. 2. The following issues have been raised by the Revenue:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the disallowance of ₹ 1,12,38,236/- made on account of loss on sale of repossessed assets being capital in nature. 2. The appellant craves leave to add, to alter or amend any ground of appeal raised above at the time of hearing. 3. The brief facts of the case are that the assessee filed its return of income on 30.10.2007 showing the total loss of ₹ 8,61,40,026/-. Notice u/s. 148 of the I.T.Act was issued on 27.3.2012. The assessee submitted vide its letter dated 4.4.2012 that the original return filed may be treated as return filed in response to notice u/s. 148 of the I.T. Act. Notices u/s. 142(1) were issued to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned order and the same may be upheld. 8. We have heard both the parties and perused the records, especially the impugned order and the case laws cited therein and the case laws cited by the Ld. Counsel of the Assessee, as aforesaid. 8.1 We find that the Ld. CIT(A) has elaborately discussed the issue in dispute in his impugned order dated 05.9.2013 vide para no. 5 to 6 at page no. 2 to 12. The relevant portion of his finding is reproduced as under:- 5. The ground no. 3 has been raised in regard to loss of ₹ 1,12,38,236/- on sale of repossessed assets. 5.1 It is observed from the facts of the case that the appellant had claimed loss of ₹ 1,12,38,236/- in the books of accounts on account of loss suffered on sale of assets which were repossessed. The appellant is non banking finance company. The main activity of the company is to finance the vehicles and in return the company is charging the interest. The appellant filed the list of vehicles which were repossessed and sold thereafter resulting in loss of ₹ 1,12,38,236/-. 5.2 I have considered the submissions of the appellant and the assessment order passed by the AO. The main issue in contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as a trading loss. So far as, the balance amount of ₹ 33.17 lacs was concerned the Commissioner of Income Tax (Appeals) held that the same could not be considered as a trading loss. 5. On appeal before the Tribunal the assessee contended that even if the deduction is not allowable as bad debts under Section 36(1)(vii) of the Act, the aforesaid amount of ₹ 44.98 lacs should be allowed as a business loss in computing the profits and gains earned in carrying on a business. The Tribunal held that once an assessee has made a claim for loss on account of bad debts then unless the assessee fulfills the requirements of Section 36(2) of the Act, the benefits of the same cannot be extended to the assessee. Further, it held that when there is a specific provision in the Act regarding allowability of bad debts as a deduction and relief is sought thereunder, the assessee is not entitled to claim relief as an allowable expenditure/deduction under any other provisions including the benefit of deduction s a business loss. 6. Mr. Sanjeev Shah, Learned Counsel appearing for the applicant submits as under: a) The issue arising in the present reference stands concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the aforesaid submission, he invited our attention to explanation (2) to Section 28 of the Act. 8. We have considered the submission. So far as, the submission of Mr. Shah for the assessee that the decision of this court in the matter of Shreyas S. Morakhia(Supra) covers the issue is concerned, we are not expressing any opinion with regard to it as the same does not arise from the question referred to us. The Tribunal has considered that the amount of ₹ 44.98 lacs is not deductible as bad debts in view of Section 36(2) of the Act and sought our opinion only on the question whether in such a case the assessee could claim a deduction as a business loss to arrive at his profits and gains from business. So far as, the submission of Mr. Suresh Kumar for the Revenue that the issue with regard to the loss being a loss on account of speculation is concerned, we are not expressing any opinion on the same. This for the reason that the issue framed for our opinion is whether, when the loss is not allowed as a bad debts can it be considered for the purposes of allowing the same as a business loss. In this case, we are not called upon to decide whether or not the loss cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bar in claiming a loss as a business loss, if the same is incidental to carrying on of a business. The fact that condition of bad debts were not satisfied by the assessee would not prevent him from claiming deduction as a business loss incurred in the course of carrying on business as share broker. 12. In fact this court in the matter of Commissioner of Income Tax v. R.B. Rungta Co. (Supra) upheld the finding of the Tribunal that the loss could be allowed on general principles governing computation of profits under Section 10 of the Indian Income Tax Act, 1922 which is similar/identical to section 28 of the Act. The revenue in that case urged that the assessee having claimed deduction as a bad debt the benefit of the general principle of law that all expenditure incurred in carrying on the business must be deducted to arrive at a profit cannot be extended. This submission was negatived by thiscourt and it was held that even where the debt is not held to be allowable as bad debts yet the same would, be allowable as a deduction as a revenue loss in computing profits of the business under Section 10(1) of the Indian Income Tax Act, 1922. 13. In view of the above, the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of A. W. Figgies Co. Pvt. Ltd. 254 ITR 63 was directly applicable. The ITAT has affirmed the aforesaid view. (2) The assessee had also claimed depreciation at the rate of 60% of computers accessories and peripherals purchased by the assessee during this year. The Assessing Officer, however, allowed the depreciation at the rate of 25%. The CIT(A) reversed this part of the order of the Assessing Officer holding that on computer accessories 60% depreciation was allowable under the Act. This order is also upheld by the Tribunal. 3. In so far as second issue is concerned, it should not be disputed by the learned Counsel for the Revenue that this issue is now settled by the judgment of this Court in the case of Commissioner of Income-Tax Vs. BSES Yamuna Powers Ltd. (ITA 1267/2010 decided on 31.8.2010), holding that on computers and peripherals, depreciation at the rate of 60% is allowable. 4. Wherein it had been held by the Court that deduction could not be allowed to the assessee, when the assessee had taken the possession of vehicles on the default committed by the borrowers and it had merely revalued such assets. The Assessing Officer took a view that it has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y cut case of write off of Bad Debts. Although the appellant company has used the nomenclature as Loss on Sale of Reprocessed Assets as provided under NBFC norms but the fact of the matter is that it is a write off of bad debts . When the customer makes default in payment of loan the vehicle is reprocessed and sold. The amount realized on sale is credited to the customer a/c and balance left in the account of customer is written off as Loss on Sale of Reprocessed Assets which is nothing a write off f Bad Debts. Nomenclature does not change the real character of the transaction. The court have invariably held that nomenclature given to the transaction and the treatment given to expenditure in particulars manner or the accounting entries does not change the real character of transaction and are not determinative and decisive for tax purpose. The claim of the assessee should be decided as per provision of law ( See case of Bur Paints India Ltd. 254 ITR 503 (CI.) and Kedar Nath Jute Manufacturing Co. 82 ITR SC. 7. The CIT (A) thereafter applied the provisions of Section 36 (1) (vii) and 36 (2) of the Act on the aforesaid facts. The case was fully covered by these provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed assets is nothing but a write off of bad debts. The nomenclature cannot change the real character of the transaction. The appellant debited the loss to revenue account as it is incidental to business. Under no stretch of imagination, this loss can be considered as capital in nature as done by the Assessing Officer. On the basis of the aforesaid decisions, it can be concluded that loss on sale of repossessed assets can be considered for deduction as business loss. This is particularly so as there is no bar in claiming a loss as a business loss, if the same is incidental to carrying on of a business. Under the circumstances, it is held that the assessee was duly entitled to deduction of a sum of ₹ 1,12,38,236/- on account of business loss. 6. In the result, the appeal of the appellant is allowed. 8.2 After going through the aforesaid findings, we are of the considered opinion that the issue in dispute is squarely covered by the decisions of the Hon ble High Court of Delhi as well as Hon ble High Court of Bombay as detailed in Ld. CIT(A) s order. Therefore, respectfully following the said precedents of the Hon ble High Court of Delhi in the case of CIT vs. Citi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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