M/s. Greenland Finance and Leasing P. Ltd., Delhi V. ITO, New Delhi

ITA 6166/DEL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1246 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 12-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH

Judgement Text

ITA NO. 6166/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 6166/DEL/2012 A.Y. : 2006-07 M/S GREENLAND FINANCE & LEASING P. LTD., 306, SHARP BHAVAN, COMMERCIAL COMPLEX, AZADPUR, DELHI 110 033 (PAN: AAACG3755F) VS. INCOME TAX OFFICER, WARD -12(2), NEW DELHI (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. G.N. GUPTA, ADVOCATE DEPARTMENT BY : SH. S ATPAL SINGH, S R. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-X, NEW DELH I DATED 05.10.2012 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUND RAISED IS THAT LD. COMMISSIONER OF I NCOME TAX (A) ERRED IN UPHOLDING THE ADDITION OF ` 1,04,204/- ON ACCOUNT OF INTEREST ON NON PERFORMING ASSETS NOT RECOGNIZED BY THE APPEL LANT. 3. ON THIS ISSUE ASSESSING OFFICER OBSERVED THAT A SSESSEE COMPANY HAS NOT RECOGNIZED INTEREST ON NON-PERFORMING ASSET S AS INCOME AMOUNTING TO ` 1,04,204/-. ASSESSEE IN THIS REGARD HAS SUBMITTED THAT IN VIEW OF THE RBI GUIDELINES, ACCOUNTING STANDARD S AND GUIDANCE NOTES OF ICAI ETC. FOLLOWING THE PRINCIPLES OF INCO ME RECOGNITION, THE ASSESSEE HAD FOLLOWED THESE DIRECTIONS AND ACCORDIN GLY NOT ITA NO. 6166/DEL/2012 2 RECOGNIZED THE INTEREST ON NPA FOR THE YEAR. ASSESS ING OFFICER DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE. HE PROCE EDED TO MAKE THE ADDITION OF ` 1,04,204/-. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPE AL BEFORE US. 6. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE BATCH OF CASES IN I.T.A. NO. 552 OF 2005 IN THE CASE OF C.I.T. VS. M/S VASISTH CHAY VYAPAR LTD. VIDE ORDER DATED 29.11.2010. IN THIS CASE THE BRIEF FACTS OF THE CA SE WERE AS UNDER:- TO STATE IN BRIEF, THE ASSESSEE HEREIN HAD ADVANC ED CERTAIN INTER CORPORATE DEPOSITS (ICD) TO M/S SHAW WA LLACE COMPANY. THE INTEREST THEREUPON COULD NOT BE RECEIV ED BY THE ASSESSEE FOR MORE THAN SIX MONTHS. THE ASSESSEE IS A NON-BANKING FINANCIAL COMPANY (NBFC) AND, THEREFORE, IS BOUND BY THE DIRECTIONS GIVEN BY THE RESERVE BANK O F INDIA. THESE DIRECTIONS, INTER ALIA, MANDATE A NBFC TO DECL ARE SUCH ADVANCES AS NON PERFORMING ASSETS (NPA) WHEN THE ACCRUED INTEREST THEREIN IS NOT PAID BY THE DEBTOR CONTINUOUSLY FOR SIX MONTHS. IN THESE CIRCUMSTANCES, TREATING THE SAID ICD AS NPA, THE ASSESSEE DID NOT S HOW INTEREST INCOME, WHICH ACCORDING TO THE ASSESSEE WAS NOT REALIZABLE. THE ASSESSING OFFICER, HOWEVER, ADDED THE INTEREST AS INCOME OF THE ASSESSEE HOLDING THAT IT H AD ACCRUED TO THE ASSESSEE EVEN IF IT WAS NOT ACTUAL LY REALIZED AS THE ASSESSEE WAS FOLLOWING MERCANTILE S YSTEM OF ITA NO. 6166/DEL/2012 3 ACCOUNTING. THE CIT (A) AFFIRMED THE ORDER OF THE ASSESSING OFFICER. HOWEVER, THE ITAT HAS DELETED THE AFORESA ID INTEREST INCOME. 7. THE HONBLE JURISDICTIONAL HIGH COURT HAS DECI DED THE ISSUE AS UNDER:- 17. IN THIS SCENARIO, WE HAVE TO EXAMINE THE STREN GTH IN THE SUBMISSION OF LEARNED COUNSEL FOR THE REVENUE THAT WHETHER IT CAN STILL BE HELD THAT INCOME IN THE FOR M OF INTEREST THOUGH NOT RECEIVED HAD STILL ACCRUED TO T HE ASSESSEE UNDER THE PROVISIONS OF INCOME TAX ACT AND WAS, THEREFORE, EXIGIBLE TO TAX. OUR ANSWER IS IN THE N EGATIVE AND WE GIVE THE FOLLOWING REASONS IN SUPPORT:- (1) FIRST OF ALL WE WOULD DISCUSS THE MATTER IN THE LIGHT OF THE PROVISIONS OF INCOME TAX ACT AND TO EXAMINE AS TO WHETHER IN THE GIVEN CIRCUMSTANCES, INTEREST INCOME HAS ACCRUED TO THE ASSESSEE. IT IS STATED AT THE COST OF REPETITI ON THAT ADMITTED POSITION IS THAT THE ASSESSEE HAD NOT RECEIVED ANY INTEREST ON THE SAID ICD PLACED WITH SHAW WALLCE SINCE THE ASSESSMENT YEAR 1996-97 AS IT HAD BECOME NPAS IN ACCORDANCE WITH THE PRUDENTIAL NORMS WHICH WAS ENTERED IN THE BOOKS OF ACCOUNTS AS WELL. THE ASSESSEE HAS FURTHER SUCCESSFULLY DEMONSTRATED THAT EVEN IN THE SUCCEEDING ASSESSMENT YEARS, NO INTEREST WAS RECEIVED AND THE POSITION REMAINED THE SAME UNTIL THE ASSESSMENT YEARS 2006-07. ITA NO. 6166/DEL/2012 4 REASON WAS ADVERSE FINANCIAL CIRCUMSTANCES AND THE FINANCIAL CRUNCH FACED BY SHAW WALLACE. SO MUCH SO, IT WAS FACING WINDING UP PETITIONS WHICH WERE FILED BY MANY CREDITORS. THESE CIRCUMSTANCES, LED TO AN UNCERTAINTY IN SO FAR AS RECOVERY OF INTEREST WAS CONCERNED, AS A RESULT OF THE AFORESAID PRECARIOUS FINANCIAL POSITION OF SHAW WALLACE. WHAT TO TALK OF INTEREST, EVEN THE PRINCIPAL AMOUNT ITSELF HAD BECOME DOUBTFUL TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTEREST INCOME THEREUPON HAS NOT ACCRUED. WE ARE IN AGREEMENT WITH THE SUBMISSION OF MR. VOHRA ON THIS COUNT, SUPPORTED BY VARIOUS DECISIONS OF DIFFERENT HIGH COURTS INCLUDING THIS COURT WHICH HAS ALREADY BEEN REFERRED TO ABOVE. (2) IN THE INSTANT CASE, THE ASSESSEE COMPANY BEING NBFC IS GOVERNED BY THE PROVISIONS OF RBI ACT. IN SUCH A CASE, INTEREST INCOME CANNOT BE SAID TO HAVE ACCRUED TO THE ASSESSEE HAVING REGARD TO THE PROVISIONS OF SECTION 45Q OF THE RBI AND PRUDENTIAL NORMS ISSUED BY THE RBI IN EXERCISE OF ITS STATUTORY POWERS. AS PER THESE NORMS, THE ICD HAD BECOME NPA AND ON SUCH NPA WHERE THE INTEREST WAS NOT RECEIVED AND POSSIBILITY OF RECOVERY WAS ALMOST NIL, IT COULD NO T BE TREATED TO HAVE BEEN ACCRUED IN FAVOUR OF THE ASSESSEE. ITA NO. 6166/DEL/2012 5 8. LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CONTR OVERT THE SUBMISSIONS OF THE ASSESSEE THAT THIS ISSUE IS SQUA RELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. M/S VASISTH C HAY VYAPAR LTD.(SUPRA). 9. RESPECTFULLY FOLLOWING THE HONBLE JURISDICTIONA L HIGH COURT DECISION AS ABOVE, WE SET ASIDE THE ORDERS OF THE A UTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15/2/2013. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 15/2/2013 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES ITA NO. 6166/DEL/2012 6