M/s DHFL Vysya House Financing Ltd., Bangalore V. ACIT, Bangalore

ITA 376/BANG/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1586 (ITAT-BANGALORE)
• Duration Of Justice: 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 15-03-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: P C CHADAGA ITP
• Keywords: Business income

Judgement Text

ITA 376/BANG/2010 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE DR. O. K. NARAYANAN, VICE PRESIDENT AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A NO.376/BANG/2010 (ASSESSMENT YEAR : 2005-06) M/S. DHFL VYSYA HOUSE FINANCING LTD., NO.3, 8TH 'A' MAIN ROAD, JVT TOWERS, HUDSON CIRCLE, BEHIND PUNJAB NATIONAL BANK, SAMPANGIRAMNAGAR, BANGALORE 560 027 .. APPELLANT V. ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -11(1), BANGALORE .. RESPONDENT APPELLANT BY : SHRI. P. C. CHADAGA, ITP RESPONDENT BY : SHRI. G. V. GOPALA RAO, COMMISSION ER OF INCOME-TAX-I O R D E R PER DR. O. K. NARAYANAN, VICE PRESIDENT : THIS IS AN APPEAL FILED BY THE ASSESSEE. THE RELE VANT ASSESSMENT YEAR IS 2005-06. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-I, AT BANGALORE, DATE D.01.01.2010 AND ARISES OUT OF ASSESSMENT COMPLETED U/S.143(3) O F THE IT ACT, 1961. 2. THE FIRST GROUND RAISED BY THE ASSESSEE IN THIS APPEAL IS THAT THE COMMISSIONER OF INCOME-TAX(A) HAS ERRED IN CONFIRMI NG THE ADDITION ITA 376/BANG/2010 PAGE - 2 OF ` 1,75,21,279/- MADE BY THE ASSESSING AUTHORITY, WHI CH AMOUNT IN FACT WAS NOT OFFERED BY THE ASSESSEE COMPANY AS INC OME AS IT WAS NECESSARY TO PROVIDE AGAINST LOSS ARISING FROM IDEN TIFIED LOAN ACCOUNTS. 3. THE ASSESSEE HAD CREATED A CONTINGENCY RESERVES OF ` 1,75,21,279/- REFLECTED ON THE LIABILITY SIDE OF IT S BALANCE SHEET. THIS AMOUNT IN FACT REPRESENTED AN AMOUNT RECEIVED FROM ITS ERSTWHILE HOLDING COMPANY ING VYSYA BANK UNDER A SETTLEMENT A GREEMENT. ACCORDING TO THE ASSESSEE, THE AMOUNT WAS PAID BY I NG VYSYA BANK TO MAKE GOOD THE LOSS ARISING ON ACCOUNT OF DEBTORS WHICH MAY BECOME BAD IN FUTURE. THE ASSESSING AUTHORITY TREA TED THIS AMOUNT, AS TAXABLE INCOME. THE COMMISSIONER OF INCOME-TAX(A) CONFIRMED THE ABOVE POSITION. 4. THE ONLY DEFENCE THAT IS ALWAYS ARGUED BY THE AS SESSEE COMPANY IS THAT AS AND WHEN SUCH DOUBTFUL AMOUNTS A RE COLLECTED, IT WOULD OFFER THE SAME FOR TAXATION AND THEREFORE THI S AMOUNT OF ` 1,75,21,279/- COULD NOT BE RECOGNIZED AS INCOME OF THE ASSESSEE. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE ALSO ARG UED AT LENGTH ON THE QUESTION WHETHER THIS AMOUNT RECEIVED BY THE ASSESS EE ON SETTLEMENT WOULD BE RECOGNIZED AS INCOME OF THE ASSESSEE IN VI EW OF THE FACT THAT ITA 376/BANG/2010 PAGE - 3 THE ASSESSEE WAS ANSWERABLE TO THE CORRESPONDING LI ABILITIES UNDERTAKEN BY IT. 6. ON AN EXAMINATION OF THE FACTS OF THE CASE IN DE TAIL, WE FIND THAT THE PROVISION MADE BY THE ASSESSEE IS ONLY CONTINGE NT IN NATURE. IT IS NOT AN ASCERTAINED LIABILITY. THE AMOUNT OF ` 1,75,21,279/- WAS RECEIVED BY THE ASSESSEE AS BUSINESS RECEIPTS EVEN THOUGH THE AMOUNT WAS RECEIVED BY WAY OF SETTLEMENT. IT WAS NOT A CA PITAL RECEIPT ANY WAY. THE AMOUNT HAS ALREADY BEEN RECEIVED. IT FOR MED PART OF ASSESSEE'S INCOME. THE ASSESSEE HAS WITHHELD THE I NCOME FROM TAXATION ONLY ON THE GROUND OF CERTAIN POSSIBLE FUT URE LOSS IN RESPECT OF CERTAIN IRREGULAR ACCOUNTS. SUCH A FUTURE CONTINGE NCY ALONE DOES NOT DERECOGNIZE THE CHARACTER OF INCOME OF ` 1,75,21,279/- RECEIVED BY THE ASSESSEE COMPANY. THERE IS NO PROVISION IN THE INC OME-TAX LAW TO RECOGNIZE SUCH CONTINGENT LIABILITIES. THEREFORE, WE FIND THAT THE ASSESSING AUTHORITY HAS RIGHTLY TREATED THE AMOUNT OF ` 1,75,21,279/- AS ASSESSEE'S INCOME. 7. THE SECOND GROUND RAISED BY THE ASSESSEE IS THAT THE ASSESSING AUTHORITY HAS ERRED IN MAKING AN ADDITION OF ` 8,67,036/- BY HOLDING THAT INCOME FROM OTHER SOURCES HAVE TO BE DISREGARD ED FOR THE PURPOSE OF WORKING OUT ADMISSIBLE DEDUCTION U/S.36(1)(VIII) AND THAT THE ITA 376/BANG/2010 PAGE - 4 COMMISSIONER OF INCOME-TAX(A) WENT WRONG IN CONFIRM ING THE SAID ADDITION ON THE GROUND THAT THE ASSESSEE HAD NOT PR ESSED THE SAME AT THE TIME OF HEARING. THE SAID AMOUNT OF ` 8,67,036/- REPRESENTED INCOME FROM DIVIDENDS OF MUTUAL FUNDS, INTEREST ON DEPOSITS ETC., OBVIOUSLY THESE ITEMS CANNOT BE TREATED AS INCOME A RISING OUT OF THE BUSINESS CARRIED ON BY THE ASSESSEE. THEREFORE, TH E ASSESSING AUTHORITY HAS RIGHTLY DISALLOWED IT AS CLAIM OF EXCESS DEDUCT ION. 8. IN RESULT, THIS APPEAL BY THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON TUESDAY, THE 08TH DAY OF FEBRUA RY, 2011, AT BANGALORE. SD/- SD/- (SMT. P. MADHAVI DEVI) (DR. O. K. NARAYANAN) JUDICIAL MEMBER VICE PRESIDENT