High Court affirms taxability of Rs. 1.69 Crores as income for 2002-03 assessment year. Precedent cited.

The High Court upheld the taxability of the amount of Rs. 1.69 Crores credited to the profit and loss account as income in the assessment year 2002-03. The court rejected the appellant's argument that it was notional income, emphasizing that it was recognized as real income in the profit and loss account. The court relied on precedent to categorize the gain as a revenue receipt, dismissing the appellant's plea to spread the income over subsequent years. The court found no substantial question of law in the case and dismissed the appeals without costs.

---

---

Issues Involved:
1. Taxability of Rs. 1.69 Crores credited to the profit and loss account on account of securitization of lease rentals receivable in subsequent years.
2. Whether the amount is chargeable to tax merely because it is credited to the profit and loss account.
3. Taxability of the amount in the assessment year 2002-03 when the whole amount has been offered and assessed to tax in subsequent years.

Issue-wise Detailed Analysis:

1. Taxability of Rs. 1.69 Crores Credited to the Profit and Loss Account:
The appellant-assessee, a non-banking finance company, securitized rent receivables for the financial years 2002-03 and 2003-04, receiving Rs. 9.33 Crores in the financial year 2001-02. The balance amount of Rs. 1.69 Crores was recognized as profit on securitization of lease receivables in the profit and loss account. The Assessing Officer (A.O.) added this amount as income, treating it as a revenue receipt taxable in the assessment year 2002-03. The CIT(A) and ITAT upheld this view, rejecting the appellant's contention that it was a notional income and not real income. The authorities relied on the Supreme Court decision in CIT Vs T.V. Sunderam Iyengar & Sons Ltd., which categorized such gains as revenue receipts.

2. Whether the Amount is Chargeable to Tax Merely Because it is Credited to the Profit and Loss Account:
The appellant argued that the Rs. 1.69 Crores was notional income and should not be taxed. However, the A.O., CIT(A), and ITAT found that the appellant itself had credited this amount as income in its profit and loss account, indicating it was a real gain arising from business transactions. The authorities concluded that the gain was taxable as it was earned in the normal course of business and was a revenue receipt.

3. Taxability of the Amount in the Assessment Year 2002-03:
The appellant contended that the entire amount of Rs. 9.33 Crores was offered and assessed to tax in subsequent years, and hence, the Rs. 1.69 Crores should not be taxed in the assessment year 2002-03. The authorities, however, found that the gain of Rs. 1.69 Crores was recognized in the profit and loss account for the financial year 2001-02 and thus was taxable in the assessment year 2002-03. The appellant's argument of spreading the income over subsequent years based on the "Matching Concept" was rejected as it was not raised before the lower authorities and lacked a factual foundation.

Conclusion:
The High Court dismissed the appeals, stating that the findings of the A.O., CIT(A), and ITAT were based on factual aspects and did not raise any substantial question of law. The Court also noted that the "Matching Concept" argument was not applicable as it was not raised earlier and lacked a factual basis. The appeals were dismissed with no order as to costs.

---