1987 (9) TMI 63 - AT - Income Tax

Tribunal grants partial appeal for stolen jeeps, allows challenge on interest levy.

The Tribunal allowed the appeal partially, directing the allowance of the claim for the loss of Rs. 2,87,516 related to stolen jeeps. It also provided ... - Issues Involved:1. Allowability of the loss claimed for stolen jeeps.2. Levy of interest under sections 139(8) and 217(1A).Detailed Analysis:1. Allowability of the Loss Claimed for Stolen Jeeps:The assessee challenged the CIT(A)'s decision to disallow a sum of Rs. 2,87,516 as a provision for stolen jeeps. The assessee argued that they followed the mercantile system of accounting and the loss should be considered in computing the total income for the assessment year 1982-83, as the theft occurred during this period.The IAC (Asst.) disallowed the claim based on two primary reasons:- The loss had not matured since the jeeps were recovered and in the custody of the assessee. There was a reasonable chance of recovering the goods. Mere dispossession does not constitute a loss unless recovery becomes impossible or very remote.- The matter was sub-judice, and it was not yet settled whether the jeeps were stolen or sold. The accused claimed that the jeeps were sold in a regular fashion. Thus, until the court decided on the issue, the claimed loss could not be allowed.The CIT(A) upheld the IAC's decision, stating that only present liabilities can be allowed, not future liabilities. Since the jeeps were recovered and in the possession of the assessee, and there were reasonable chances of winning the case, no loss had been suffered by the assessee at that time.In appeal, the assessee's counsel argued that the claim was allowable as it pertained to the year under appeal, supported by a Board Circular and case law. The counsel emphasized that the jeeps were not shown as purchases and were deteriorating in the company's custody. The counsel also undertook that any amount recovered in the future would be offered for taxation.The Tribunal considered the facts and the legal precedents, including the decisions of the Hon'ble Punjab & Haryana High Court and the Hon'ble Bombay High Court, which allowed losses even during the pendency of litigation. The Tribunal concluded that the claim of the assessee merited allowance based on the system of accounting and the surrounding facts. The Tribunal directed that the claim for Rs. 2,87,516 be allowed.2. Levy of Interest Under Sections 139(8) and 217(1A):The assessee challenged the levy of interest under sections 139(8) and 217(1A). The CIT(A) held that interest under both provisions was chargeable but allowed the company to move an application for waiver of interest under the rules.The Tribunal noted that the levy of interest was consequential to the disallowance of the loss amounting to Rs. 2,87,516. Given the decision to allow the loss claim, the Tribunal held that consequential relief should be allowed to the assessee regarding the interest charges.Conclusion:The appeal was partly allowed, with the Tribunal directing that the claim for the loss of Rs. 2,87,516 be allowed and consequential relief be provided concerning the interest levied under sections 139(8) and 217(1A).