GE Money Financial Services Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1683/DEL/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6579 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 20-10-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 30-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IPS BINDRA
• Section: 234B; 37; 263; 28

Judgement Text

1 ITA NO. 1683/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JU DICIAL MEMBER I.T.A .NO.- 1683/DEL/2016 (ASSESSMENT YEAR 2002-03) GE MONEY FINANCIAL SERVICE PVT. LTD. 401, 402, 4 TH FLOOR, AGGARWAL MILLENNIUM TOWER, E-1,2,3, NETAJI SUBHASH PALACE, PITAMPURA NEW DELHI AAACC0624F (APPELLANT) VS DCIT CIRCLE-12(1), 4 TH FLOOR, C. R. BUILDING NEW DELHI (RESPONDENT) APPELLANT BY SH. SACHIT JOLLY, ADV RESPONDENT BY SH. I. P. S. BINDRA, CIT DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 24/1/2 016 PASSED BY THE CIT(A)-15, NEW DELHI. 2. GROUNDS OF APPEAL ARE AS UNDER:- DATE OF HEARING 20.10.2016 DATE OF PRONOUNCEMENT 05.12.2016 2 ITA NO. 1683/DEL/2016 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) [ CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER (ASSESSING OFFICER ) IN TREATING LOSS ON SALE OF L OAN PORTFOLIO AS A CAPITAL LOSS AND ERRONEOUSLY CONFIRMING THE ADDIT ION OF RS.2,09,05,000/- MADE BY THE A.O IN THIS REGARD WIT HOUT APPRECIATING THAT THE APPELLANT BEING A NON-BANKING FINANCIAL COMPANY (NBFC), LOSS ON SALE OF NON-PERFORMING LO ANS WAS A BUSINESS LOSS AND ALLOWABLE DEDUCTION U/S 28 READ W ITH SECTION 37 OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THAT THE CIT(A) FURTHER ERRED IN NOT APPRECIATIN G THAT THE APPELLANT BEING AN NBFC, THE ENTIRE NON-PERFORMING LOAN COULD HAVE BEEN WRITTEN OFF AND CLAIMED AS DEDUCTION U/S 36(1) (VII) R/W SECTION 36(2) OF THE ACT. 3. THAT THE CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY THE A.O BY TREATING LOSS ON SALE OF LOAN PORTFOLIO AS A CAPITAL LOSS WITHOUT APPRECIATING THAT THE JURISDICTIONAL COMMIS SIONER WHILE EXERCISING POWERS U/S 263 OF THE ACT (WHICH F ORMS THE BASIS OF THE PRESENT ASSESSMENT) HAD CATEGORICALLY HELD THAT LOSS ON SALE OF LOAN PORTFOLIO IS NOT A CAPITAL LOS S BUT A BUSINESS LOSS. 4. THAT THE CIT (A) ERRED IN CONFIRMING THE ACTION OF THE A.O IN LEVYING INTEREST U/S 234B AND SECTION 234D OF THE A CT. 3. THE LD. AR SUBMITTED THAT THE ISSUE IS COVERED I N FAVOUR OF THE ASSESSEE BY THE TRIBUNAL FOR ASSESSMENT YEAR 20 04-05 BY THE ORDER DATED 29/08/2016. THE RELEVANT PARAGRAPH OF THE SAID ORDER IS AS FOLLOWS:- 38. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND H AVE PERUSED THE RECORD 3 ITA NO. 1683/DEL/2016 OF THE CASE. THE ASSESSEE WAS ENGAGED IN THE BUSINE SS OF CONSUMER AND AUTO FINANCE. ACCORDINGLY, IN COURSE OF ITS BUSINESS IT FINANCED THE CONSUMER GOODS AND AUTOMOBILES. THUS, THE DEBTORS WERE CREATED IN ORDINARY COURSE OF BUSINESS AND THERE WAS OUT FLOW OF MONEY FROM ASSES SEES COFFERS. IT IS WELL ACCEPTED COMMERCIAL FACT THAT REALIZATION OF LOAN I S ONE OF THE MOST DIFFICULT TASK FACED BY ANY MONEY LENDER. THEREFORE, ENTREPRE NEURS CONSIDER VARIOUS AVENUES FOR REALIZATION OF THEIR DUES. UNDER SUCH C IRCUMSTANCES THOSE WHO ARE IN A POSITION TO REALIZE NON-PERFORMING ASSETS TAKE OVER LOANS FROM ENTREPRENEURS. IT IS WELL SETTLED COMMERCIAL PRACTI CE TO INVEST IN STRESSED ASSETS WHICH IS PRESENTLY GAINING MOMENTUM ON ACCOUNT OF U PSURGE IN NPAS IN BUSINESS AND FINANCIAL INSTITUTIONS. HIGH PROFILE F UND MANAGERS ARE FINDING LOT OF BUSINESS PROSPECTUS IN ACQUIRING NON-PERFORMING PORTFOLIO AT CONSIDERABLE DISCOUNTS. THUS, FUND MANAGERS ARE, THEREFORE, INVE STING IN THE STRESSED ASSETS SPACE. THE GOVERNMENT HAS ALSO EASED NORMS IN THIS REGARD. THUS, SELLING OF DELINQUENT LOAN PORTFOLIO WAS PURELY A COMMERCIAL P RUDENT DECISION TAKEN BY ASSESSEE IN LINE WITH THE PREVAILING BUSINESS PRACT ICE IN ORDER TO MINIMIZE ITS BUSINESS LOSS. THIS WAS A CASE OF OUTRIGHT SALE WIT HOUT RECOURSE OBLIGATIONS. THE ASSESSEE WAS NBFC AND, THEREFORE, THE FINANCING 6. TO NEGOTIATE LOANS, TO DRAW, ACCEPT, ENDORSE, DI SCOUNT BUY, SELL AND DEAL IN BILL OF EXCHANGE, PROMISSORY NOTES, BONDS, DEBENTURES, COUPONS AND OTHER INSTRUMENTS AND SECURITIES. 38.1. THEREFORE, THIS ACTIVITY WAS IN LINE WITH THE MAIN OBJECTS OF ASSESSEE ALSO. 38.2. NOW COMING TO THE SUBMISSIONS OF ID. CIT(DR) THAT ASSESSEE HAD 4 ITA NO. 1683/DEL/2016 PRIMARILY SOLD RIGHT TO RECEIVE MONEY. THIS PLEA OF ID. CIT(DR) HAS TO BE CONSIDERED KEEPING IN VIEW THE ENTIRE CONSPECTUS OF THE ASSESSEES BUSINESS. THIS CANNOT BE CONSIDERED IN ISOLATION DE HORS OF T HE NATURE OF ASSESSEES BUSINESS. LD. COUNSEL HAS RIGHTLY POINTED OUT THAT HAD THERE BEEN DIRECT LOSS OR REPOSSESSION OF ASSETS THEN THE LOSS WOULD HAVE BEE N ALLOWED. THEREFORE, ON THE SAME FOOTING LOSS ARISING OUT OF SALE OF DELINQ UENT ASSETS PORTFOLIO ALSO IS TO BE ALLOWED. ADMITTEDLY, ASSESSEE HAD RIGHT TO RECEI VE MONEY FROM ITS DEBTORS ON ACCOUNT OF FINANCING OF ASSETS. THIS RIGHT HAD A CCRUED IN FAVOUR OF ASSESSEE IN ORDINARY COURSE OF BUSINESS AND NOT ON CAPITAL A CCOUNT. FURTHER, WE ARE IN AGREEMENT WITH LD. COUNSEL FOR THE ASSESSEE THAT TH E CONDITIONS LAID DOWN U/S 36(L)(VII) READ WITH SECTION 36(2)(I) ARE ALSO FULF ILLED BECAUSE OF FOLLOWING REASONS: - THE DEBT OR LOAN WAS IN RESPECT OF A BUSINESS WHIC H WAS CARRIED ON BY THE ASSESSEE IN THE RELEVANT ACCOUNTING YEAR; - THE DEBT REPRESENTED MONEY LENT IN THE ORDINARY CO URSE OF THE BUSINESS, WHICH WAS AKIN TO MONEY LENDING; - THE AMOUNT WAS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE FOR THAT ACCOUNTING YEAR IN WHICH THE CLAIM FOR DED UCTION WAS MADE FOR THE FIRST TIME. 38.3. IN VIEW OF ABOVE DISCUSSION THIS GROUN D IS ALLOWED. 4. THE LD. DR WAS UNABLE TO DISTINGUISH THE FACTS O F THE PRESENT ASSESSMENT YEAR AND THAT OF ASSESSMENT YEAR 2004-05 . 5 ITA NO. 1683/DEL/2016 5. WE HAVE HEARD BOTH THE SIDES AFTER PERUSING THE ORDER FOR ASSESSMENT YEAR 2004-05 PASSED BY THIS TRIBUNAL IN ASSESSEES OWN CASE BEING ITA NO. 4206/DEL/2011 (ASSESSMENT YE AR 2004- 05) DATED 29/8/2016 THE ISSUES ARE IDENTICAL TO THA T OF PRESENT ASSESSMENT YEAR. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05TH O F DECEMBER, 2016. SD/- SD/- (R.S. SYAL) (SUC HITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 05/12/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 6 ITA NO. 1683/DEL/2016 DATE 1. DRAFT DICTATED ON 20.10.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 21.10.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 0 5 .11.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 0 5 .11.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 1683/DEL/2016