2015 (7) TMI 535

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....fter amendment which was rectified resulting in addition of Rs. 27,76,88,836/-? (2) Whether the appellate authorities were correct in holding that no expenditure can be allotted to the exempted income earned by the assessee when the Assessing Officer had worked out 5% and the appellate Commissioner had worked out at 2.5% despite assessee incurring expenditure for earning such income? (3) Whether the appellate authorities were correct in holding that Bad debts of Rs. 9934910/- was an allowance deduction u/s 36(1)(vii) of the Act despite the same having been deducted by the Assessee in the computation made under Section 36(1)(viia) of the Act? (4) Whether the appellate authorities were correct in holding that excessive claim under proviso to Section 36(1)(viia) of the Act is allowable despite the assessee claiming deduction under Section 36(1)(viia) of the Act which would amount to double deduction when the section contemplated either one of the dedn. contemplated in Section 36(1)(viia) or Proviso to Section 36(1)(viia) of the Act? (5) Whether the Tribunal was right in holding unrealized lease rentals on NPA's is allowable deduction despite the same not having not acc....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ion to such debts. Nowhere in the Section there is any mention about these lease rentals and therefore, he disallowed the claim with respect to unrealized lease rentals and added back the said amount to the total taxable income of the assessee. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). 5. The First Appellate Authority held that the assessee claimed for deduction in respect of unrealized lease rentals on the NPAs, which is found to be in accordance with the guidelines and the instructions issued by the Reserve Bank of India, which is empowered to deal with such matters in terms of Section 43-D of the Act. In fact, in the earlier years, the unrealized lease rentals were allowed. Therefore, following the said judgment, the claim of the assessee towards unrealized lease rentals was directed to be allowed. Aggrieved by the said order, the Revenue preferred an appeal to the Tribunal. 6. The Tribunal at para-9 of the impugned order extracted Section 43-D of the Act and held that the said Section clearly implies that to the extent that have been written off under Section 36(1)(vii) would be allowed subject to the condit....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....gories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State financial corporation or the State industrial investment corporation or the public company to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier." 10. A reading of the aforesaid provision makes it clear that, the income by way of interest in relation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the Reserve Bank of India in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institutions as mentioned in the said Section to its profit and loss account for that year or, as the case may be, in which it is actually received by that institution or bank or corporation or company, whichever is earlier. Therefore, it is clear that the said benefit is....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ls by the borrowers; (10) intentional non-adherence to project schedules leading to substantial cost escalations and requirement of additional term-finance; (11) the pressure on the liquidity leading to non-payment of wages to workers or statutory dues or rents of office and factory premises; (12) the current liabilities exceeding current assets; (13) any grave irregularities observed by the auditors of the borrowers which remain to be rectified; (14) basic weakness revealed by the financial statements of the unit, for example, continued cash loss beyond one year. (ii) The irregularities referred to in sub-clauses (i) in the accounts of the borrowers are, - (1) where the accounts are overdrawn beyond the drawing power or the sanctioned limit, for a temporary period; (2) instalments in respect of term-loans are overdue for less than 6 months or import bills under letters of credit or instalments under deferred payment carried are overdue for less than 3 months; (3) bills not exceeding 10% to 15% of the total out standings in the bills purchased or discounted account of the borrower are overdue for payment for a period of less than 3 months and refund in re....