RAJDEEP CAPITAL & HOUSING FINANCE LTD, MUMBAI V. ITO WD 9(3)(4), MUMBAI

ITA 1178/MUM/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9287 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 09-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, ( JM) . . , , ./I.T.A. NO.1178/MUM/2011 ( / ASSESSMENT YEAR : 2007-08) M/S RAJDEEP CAPITAL AND HOUSING FINANCE LTD., 33 NEW SHOPPING CENTRE, NEW GOVT. COLONY, BANDRA (E), MUMBAI-400054 / VS. INCOME TAX OFFICER, WARD 9(3)(4), MUMBAI. ( / APPELLANT) .. ( / RESPONDENT) ./ ! ./PAN/GIR NO. :AAACR4836Q ' / APPELLANT BY SHRI BHUPENDRA SHAH # ' / RESPONDENT BY SHRI LOVE KUMAR $ % # &' / DATE OF HEARING : 3.3.2015 () # &' /DATE OF PRONOUNCEMENT : 11.3.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 18- 10-2010 PASSED BY LD CIT(A)-20, MUMBAI AND IT RELAT ES TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE IS AGGRIEVED BY THE DEC ISION OF LD CIT(A) IN CONFIRMING THE ADDITION OF THE DIFFERENCE BETWEEN T HE INTEREST ACCRUED AND THE INTEREST ACTUALLY OFFERED FOR TAXATION. 2. WE HEARD THE PARTIES AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF FINANCING. IT CLASSIFIED CERTAIN LOAN ASSETS AS NON PERFORMING ASSETS (NPA). ACCORDING LY, THE ASSESSEE DID ITA. NO.1178/MUM/2011 2 NOT OFFER THE INTEREST ACCRUED ON THE NPA AS INCOME , THOUGH THE ASSESSEE HAD QUANTIFIED AND REPORTED THE SAME. SINCE THE AS SESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE AO TOOK THE VI EW THAT THE INTEREST ACCRUED ON THE NPA IS ALSO ASSESSABLE AS INCOME AND ACCORDINGLY ASSESSED THE DIFFERENCE AMOUNT OF INTEREST OF RS.15,26,961/- . IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) NOTICED THAT THE ASSESSE E WAS NOT REGISTERED AS NON BANKING FINANCIAL COMPANY (NBFC) BY THE R ESERVE BANK OF INDIA (RBI) OR AS HOUSING FINANCE CO BY THE NATIONAL HOUS ING BANK. FURTHER, THE LD CIT(A) NOTICED THAT THE HONBLE SUPREME COUR T, IN THE CASE OF SOUTHERN TECHNOLOGIES LTD VS. JCIT (320 ITR 577) HA S HELD THAT THE DIRECTIONS ISSUED BY RBI OR THE ACCOUNTING SYSTEM F OLLOWED BY THE ASSESSEE WOULD NOT DETERMINE THE TAXABLE INCOME. T HE LD CIT(A) ALSO TOOK THE SUPPORT OF THE DECISIONS RENDERED IN THE C ASE OF CIT VS. SHIV PRAKASH JANAKRAJ AND CO. P LTD (222 ITR 583)(SC) AN D CIT VS. SARABAI HOLDINGS P LTD (307 ITR 89)(SC) TO OBSERVE THAT THE INCOME ACCRUED TO THE ASSESSEE CANNOT BE WIPED OUT BY UNILATERAL ACTION. ACCORDINGLY, THE LD CIT(A) UPHELD THE ADDITION MADE BY THE AO. 3. THE LD. A.R SUBMITTED THAT THE ASSESSEES BUSI NESS IS FINANCING AND SOME OF THE LOANS GIVEN BY IT HAS BECOME STICKY. H ENCE, AS PER THE PRUDENTIAL NORMS, IT DID NOT ACCOUNT FOR THE INTERE ST INCOME, SINCE THE RECOVERY OF PRINCIPAL ITSELF WAS IN DOUBT. THOUGH THE ASSESSEE WAS NOT REGISTERED WITH NATIONAL HOUSING BANK, YET IT HAS F OLLOWED THE PRUDENTIAL NORMS GUIDELINES ISSUED BY IT. THE LD A.R ALSO PLA CED RELIANCE ON THE DECISION OF CO-ORDINATE BENCH OF TRIBUNAL RENDERED IN THE CASE OF SMT. MADHU GUPTA VS. DCIT (2006)(8 SOT 691)(MUM) AND SUB MITTED THAT THE TRIBUNAL HAS HELD THAT THE INTEREST ON STICKY LOANS COULD NOT BE ASSESSED ON ACCRUAL BASIS. 4. ON THE CONTRARY, THE LD D.R PLACED STRONG RELIAN CE ON THE DECISION OF LD CIT(A). ITA. NO.1178/MUM/2011 3 5. ON A CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS , WE NOTICE THAT THE ASSESSEE HAS CLASSIFIED ITS LOAN ASSETS PORTFOLIO A S PERFORMING AND NON PERFORMING ASSETS AND IT HAS CHOSEN NOT TO OFFER T HE INTEREST ACCRUED ON NON-PERFORMING ASSETS. THE ADMITTED FACT THAT THE ASSESSEE IS NOT REGISTERED EITHER WITH RBI OR WITH NATIONAL HOUSING BANK AS A FINANCE COMPANY. WE UNDERSTAND THAT THE CLASSIFICATION OF ASSETS AS EITHER PERFORMING OR NON-PERFORMING ON THE BASIS OF DEFAUL T COMMITTED BY THE BORROWER IN PAYMENT OF TWO QUARTERLY INSTALLMENTS. THUS, IT IS SEEN THAT THE PRUDENTIAL NORMS PRESCRIBE ONLY A ROUGH CRITERI A WITH REGARD TO THE CLASSIFICATION OF ASSETS AND THE SAME CANNOT AUTOMA TICALLY BE ADOPTED TO CLASSIFY A LOAN ASSET AS STICKY LOAN ASSET. BEFO RE US, THE ASSESSEE HAS NOT FURNISHED ANY DETAIL AS TO HOW IT HAS CLASSIFIE D THE LOAN ASSETS AS NPA. THE PERIOD OF DEFAULT ETC. IN OUR VIEW, THE MERE C LASSIFICATION AS NPA WOULD NOT BE OF ANY HELP UNDER THE INCOME TAX ACT, UNLESS THE ASSESSEE WAS ABLE TO SATISFY THE AO THAT THE LOAN ASSET AS B ECOME A STICKY LOAN. IN THE INSTANT CASE, THE ASSESSEE HAS FAILED TO PROVE THE SAME. HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF LD CIT(A). 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY IN THE OPEN COURT ON 11TH M ARCH, 2015 IN THE PRESENCE OF BOTH THE PARTIES. () $ * + ,-11TH MARCH, 2015 ) # % 1 SD SD ( / SANJAY GARG ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER * $ % MUMBAI: 11 TH MARCH,2015. . . ./ SRL , SR. PS ITA. NO.1178/MUM/2011 4 !'#$% &%'# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ 4& ( ) / THE CIT(A)- CONCERNED 4. $ 4& / CIT CONCERNED 5. 56 &7 , ' 7 , * $ % / DR, ITAT, MUMBAI CONCERNED 6. 8% / GUARD FILE. 9 $ / BY ORDER, TRUE COPY : (ASSTT. REGISTRAR) ' 7 , * $ % /ITAT, MUMBAI