Allbank Finance Ltd., Kolkata V. DCIT, Circle -6, Kolkata, Kolkata

MA 131/KOL/2012

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 2365 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 30 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 05-09-2014
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 06-08-2012
• Court: TRIBUNAL
• Keywords: Bad and doubtful debts

Judgement Text

, A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI SHAMIM YAHYA, AM] '' # '' # '' # '' # $ $ $ $ /M. A. NO. 131/KOL/2012 IN $ $ $ $ /IN I.T.A NO. 85/KOL/2007 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2003-04 ALL BANK FINANCE LIMITED VS. DEPUTY COMMISSIONE R OF INCOME-TAX, CIRCLE-6, KOLKATA. ( /APPLICANT ) ()*+,/ RESPONDENT ) DATE OF HEARING: 05.09.2014 DATE OF PRONOUNCEMENT: 05.09.2014 - . /FOR THE APPLICANT: SHRI BARUN KR. GHOSH, FCA )*+, - . /FOR THE RESPONDENT: SHRI DAVID Z. CHAWNGTHU, ACIT / ORDER PER MAHAVIR SINGH, JM/ , : BY THIS MISCELLANEOUS APPLICATION, ASSESSEE HAS REQ UESTED FOR RECALLING OF THE ORDER OF TRIBUNAL QUA GROUND NO.2. THE ASSESSEE CONTENDED I N THE PETITION AS UNDER: THE FACTUAL MATRIX IN OUR APPEAL OF THE GROUND NO. 2 IS THAT YOUR PETITIONER DID NOT BOOK THE LEASE RENTALS RECEIVABLE FROM CERTAIN PARTIES A S THE ACCOUNTS OF SUCH PARTY HAD BECOME NON PERFORMING ASSET (NPA). THE GUIDELINES ISSUED B Y THE RESERVE BANK OF INDIA STIPULATE THAT ONCE THE PARTY HAS BECOME A DEFAULTER FOR AT L EAST 12 MONTHS THAT PARTY SHOULD BE DECLARED AS NPA AND NO INCOME (I.E. LEASE RENTAL) D UE FROM SUCH PARTIES CAN BE RECOGNIZED IN THE BOOKS OF ACCOUNTS. YOUR PETITIONE R, BEING A NON BANKING FINANCE COMPANY (NBFC) IS BOUND BY THE GUIDELINES OF RESERV E BANK OF LNDIA. 2. YOUR PETITIONER BRINGS TO YOUR KIND ATTENTION TH AT THE DECISION OF THE SPECIAL BENCH OF ITAT, DELHI IN THE CASE OF NEW INDIA INDUSTRIES LIM ITED VS. ACIT (2007) 18 SOT 51 (DEL.SB), WHCH HAS BEEN RELIED ON BV YOUR HONOUR, IS DISTINGUISHABLE, BOTH ON FACTS AND LAWS. THE ISSUE BEFORE THE SAID SPECIAL BENCH, ITAT , DELHI WAS WHETHER PROVISION MADE BY NBFC IN RESPECT OF NPAS IN ITS PROFIT & LOSS ACC OUNT (I.E. PROVISION FOR BAD AND DOUBTFUL DEBTS) AS PER THE PRUDENTIAL NORMS OF RESE RVE BANK OF LNDIA IN EXERCISE OF POWERS CONFERRED UPON IT UNDER SECTION 45JA OF RBI ACT, 19 34 BE CLASSIFIED AS BAD DEBT AND BE ALLOWED AS DEDUCTION UNDER SECTION 36(1)(VII) OFTHE ACT. 3. THE HONBLE BENCH MAY KINDLY APPRECIATE THAT IN THE CASE OF YOUR PETITIONER THE ISSUE WAS ENTIRELY DIFFERENT. YOUR PETITIONER DID NOT REC OGNIZE THE LEASE RENTAL DUE FROM PARTIES WHOSE ACCOUNTS HAD BEEN CLASSIFIED AS NPA IN TERMS OF THE PRUDENTIAL GUIDELINES ISSUED BY THE RESERVE BANK OF INDIA. LEASE RENTAL OR INTEREST INCOME DUE FROM ANY PARTY WHOSE ACCOUNT IS CONSIDERED DOUBTFUL CANNOT BE. RECOGNIZE D AS INCOME IN VIEW OF SUBSTANTIAL UNCERTAINTY IN COLLECTION OF SUCH DUES IN ACCORDANC E WITH THE ACCOUNTNG STANDARD 9 (REVENUE RECOGNITION) ISSUED BY THE INSTITUTE OF CH ARTERED ACCOUNTANTS OF INDIA. ALTHOUGH YOUR PETITIONER, BEING A COMPANY HAS TO FOLLOW ACCR UAL SYSTEM OF ACCOUNTING AS PER 2 MA NO. 131/K/2012 ALL BANK FINANCE LTD. A. Y 2003-04 SECTION 209 OF THE COMPANIES ACT, 1956, NON-RECOGNI TION OF LEASE RENTAL /NTEREST INCOME DUE FROM PARTIES CLASSIFIED AS NPAS, DO NOT VITIATE SUCH ACCRUAL SYSTEM OF ACCOUNTS. THE ACCRUAL IN SUCH CASE IS A HYPOTHETICAL ACCRUAL AND THE RELEVANT INCOME IS NOT A REAL INCOME. THE DECISION OF ITAT, SPECIAL BENCH, DELHI RELIED UPON BY THE HONBLE BENCH IS, THEREFORE, NOT APPLICABLE IN THE FACTS AND CIRCUMST ANCES OF YOUR PETITIONER. 4. WE HUMBLY DRAW YOUR KIND ATTENTION TO THE DECISI ON OF THE HONB1E CALCUTTA HIGH COURT IN THE CASE OF CIT VS. INVESTMENTS LIMITED II E IT WAS HELD THAT INTERESTOFNON PERFORMING ASSET WAS NOT INCLUDIBLE IN THE TOTAL IN COME OF THE ASSESSEE ON ACCRUAL BASIS, EVEN THOUG THE ASSESSEE WAS FOLLOWING MERCANTILE SY STEM OF ACCOUNTING. THE SPECIAL LEAVE PETITION FILED BY THE REVENUE AGAINST THE SAID DECI SION OF THE CALCUTTA HIGH COURT HAS BEEN DISMISSED BY THE HONBLE SUPREME COURT VIDE ITS ORD ERD DATED 12 TH JANUARY, 2009 IN CC NO.29 OF 2009 [310 ITR 4 ST]. 5. IT IS WELL SETTLED THAT WHERE A DECISION OF THE JURISDICTIONAL HIGH COURT IS NOT FOLLOWED BY THE AUTHORITIES BELOW, THE ORDER PASSED BY THE L OCAL AUTHORITIES BECOMES ERRONEOUS AND THEREFORE BECOMES AMENABLE FOR RECTIFICATION. SUCH PRINCIPLE HAS BEEN ENUNCIATED BY THE HONBLE APEX COURT IN THE CASE OF ACIT VS. SAURASHT RA KUTCH STOCK EXCHANGE LIMITED (305 ITR 227) WHEREIN THEIR LORDSHIP HELD THAT NON CONSIDERATION OF A JUDGMENT OF THE JURISDICTIONAL HIGH COURT IS A MISTAKE APPARENT FRO M RECORD, WHICH CAN BE RECTIFIED UNDER SECTION 254. THAT IS PRECISELY WHAT HAS HAPPENED IN THE CASE OF YOUR PETITIONER. 2. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO GONE THROUGH THE TRIBUNALS ORDER DATE D 29.06.2012 WHEREIN THE ISSUE OF LEASE RENTALS DUE FROM NON-PERFORMING ASSETS (NPAS) HAS A LREADY BEEN CONSIDERED BY THE TRIBUNAL VIDE PARA 8 OF ITS ORDER, WHEREIN ON THE ISSUE OF REAL INCOME THEORY WAS DECIDED AGAINST THE ASSESSEE. NOW, ASSESSEE WANTS TO CONTEND ONLY THAT THIS INCOME PERTAINS TO NPAS AND HENCE, NOT CONSIDERED TO BE TAKEN INTO THE INCOME OF THE A SSESSEE. WE FIND THAT THE TRIBUNAL HAS TAKEN A VIEW AND IN CASE WE CHANGE THIS, THIS WILL TANTAM OUNT TO REVIEW OF THE ORDER. IN SUCH CIRCUMSTANCES, WE CAN RECTIFY NON-DEBATABLE ISSUE P ARTICULARLY WHEN THERE IS NO MISTAKE APPARENT FROM RECORD UNDER THIS PROVISION. IN CASE , WE DEAL WITH THE ISSUE THAT WILL TANTAMOUNT TO REVIEW OF THE ORDER FOR WHICH TRIBUNAL HAS NO PO WER. HENCE, WE DISMISS THE MISC. APPLICATION OF THE ASSESSEE. 3. IN THE RESULT, MISCELLANEOUS APPLICATION OF THE ASSESSEE IS DISMISSED. 4. ORDER IS PRONOUNCED IN THE OPEN COURT . SD/- SD/- , ! , (SHAMIM YAHYA) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( /! /! /! /!) )) ) DATED : 5 TH SEPTEMBER, 2014 01 #23 4 JD.(SR.P.S.) 3 MA NO. 131/K/2012 ALL BANK FINANCE LTD. A. Y 2003-04 - )' 5 '&6- COPY OF THE ORDER FORWARDED TO: 1 . /APPLICANT ALL BANK FINANCE LIMITED,15, INDIA EX CHANGE PLACE, 4 TH FLOOR, KOLKATA-700 001. 2 )*+, / RESPONDENT DCIT, CIRCLE-6, KOLKATA. 3 . # ( )/ THE CIT(A) , KOLKATA 4. # CIT, KOLKATA 5 . => )# / DR, KOLKATA BENCHES, KOLKATA *' )/ TRUE COPY, #?/ BY ORDER, 3 /ASSTT. REGISTRAR .