Revenue's appeal dismissed on loan portfolio sale loss deduction under ordinary business operations

Delhi HC dismissed revenue's appeal regarding loss on sale of loan portfolio. The assessee sold financial receivables worth Rs. 10,11,71,94,000 to Shriram for Rs. 9,08,29,87,000, claiming the difference as revenue loss. ITAT had allowed the claim, finding that the assessee's right to receive money from debtors arose in ordinary course of business and was not capital in nature. The Tribunal determined the liability crystallized in the assessment year 2010-11 based on the assignment agreement. HC upheld ITAT's decision, noting revenue failed to propose any question of law challenging the factual findings as perverse.

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Issues involved:
The issues involved in the judgment are related to the Assessment Year (AY) 2010-11. The primary issues revolve around the disallowance under section 14A of the Income Tax Act and the deletion of addition corresponding to the loss on the sale of loans.

Disallowance under section 14A:
The appellant/revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the disallowance under section 14A of the Income Tax Act. The Tribunal restricted the addition on disallowance to Rs. 78,037, differing from the AO's addition of Rs. 7,94,53,077. The Tribunal found that there was no nexus between borrowed funds and investments made in shares, leading to the deletion of the disallowance. The court held that the addition could not have been deleted as the exempt income earned was only Rs. 78,037. The court referred to various judgments to support its decision and concluded that the proposed question regarding this issue did not arise for consideration.

Deletion of addition corresponding to loss on sale of loans:
The second issue pertained to the deletion of the addition of Rs. 103,87,99,712 corresponding to the loss on the sale of loans. The court analyzed the agreement between the respondent/assessee and Shriram Transport Finance Company Limited (STFCL) regarding the sale of debts. The court noted that the sale of debts had not fully materialized in the relevant year, as it was in a transition phase. The court also highlighted the findings of the Dispute Resolution Panel and the Assessing Officer regarding the sale of receivables and the continuation of business activities by the assessee. The Tribunal concluded that the transaction had taken place during the relevant year, and the loss had crystallized, directing the Assessing Officer to delete the addition. The court found that the proposed question 'B' did not arise from the orders passed by the authorities and dismissed the appeal, as the appellant did not challenge the finding that the liability had crystallized in the relevant period.

Separate Judgement:
No separate judgment was delivered by the judges in this case.

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