TaxTMI 
TaxTMI 
2016 (6) TMI 258
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....ice u/s. 148 of the I.T.Act was issued on 27.3.2012. The assessee submitted vide its letter dated 4.4.2012 that the original return filed may be treated as return filed in response to notice u/s. 148 of the I.T. Act. Notices u/s. 142(1) were issued to the assessee. In response to notices, Ld. Authorised Representative attended the assessment proceedings and filed the written submissions. Keeping in view the details filed and after discussions, the AO assessed the total income at Rs. 34,47,210/- vide his Order dated 19/9/2012 passed u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961. 4. Against the aforesaid assessment order of the AO, assessee appealed before the CIT(A), who vide his impugned order dated 05.9.2013 has allowed the appeal of the Assessee. 5. Aggrieved with the order of the Ld. CIT(A) dated 05.9.2013, Revenue is in appeal before the Tribunal. 6. Ld. DR relied upon the order of the Assessing Officer and reiterated the contentions raised in the grounds of appeal and requested that Appeal filed by the Revenue may be allowed by setting aside the order of the Ld. CIT(A), because the assessee had debited Rs. 1,12,28,236/- to the Profit & Loss Account on account of 'Loss ....
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....he interest. The appellant filed the list of vehicles which were repossessed and sold thereafter resulting in loss of Rs. 1,12,38,236/-. 5.2 I have considered the submissions of the appellant and the assessment order passed by the AO. The main issue in contention is regarding the claim of loss on sale of repossessed assets of Rs. 1,12,38,236/-. The counsel of the appellant explained that the amount of loss has been debited to the profit and loss account during the year. The company was not in a position to recover the installments. The assets financed by the company were repossessed and sold thereafter. During the appellate proceedings the Counsel of the assessee explained that the appellant is entitled deduction of full amount either u/s 36(1)(vii) or as a business loss in computing the profits and gains of business u/s 28 of the Income Tax Act. The Hon'ble Bombay High Court in the case of Harshad J Choksi vs CIT, Bombay ITA No. 43 of 1997 dated August 14, 2012 held as under:- "By this reference under Section 256(1) of the Income Tax Act, 1961 ('the Act'), the Income Tax Appellate Tribunal ('the Tribunal') has referred the following question o....
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....ble expenditure/deduction under any other provisions including the benefit of deduction s a business loss. 6. Mr. Sanjeev Shah, Learned Counsel appearing for the applicant submits as under: a) The issue arising in the present reference stands concluded by the order of this court in the matter of Commissioner of Income Tax v. Shreyas S. Morakhia dated 28th February, 2012 in Income Tax Appeal No. 89 of 2011 (2012-TIOL-172-HCMUM- IT). It has been held therein that even if a part of the bad debts has been taken into account while computing the income of the assessee, and offered for tax in a earlier year, the same would be sufficient satisfaction of Section 36(2) of the Act. b) In any view of the matter, even if the amount of Rs. 44.98 lacs is not allowable as a bad debt, the same should be considered as a allowable business loss in computing the profits and gains of business and profession under Section 28 of the Act. c) The Act does not provide that the deduction available from the total receipts to compute profit & gain of business are only those deductions which are listed in Section 30 to 43 of the Act. This is because according to him the list ....
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....e same. This for the reason that the issue framed for our opinion is whether, when the loss is not allowed as a bad debts can it be considered for the purposes of allowing the same as a business loss. In this case, we are not called upon to decide whether or not the loss claimed satisfied the test of the business loss but our opinion is on the more restricted issue namely whether such a loss could be considered as a allowable business loss. Therefore, we are not dealing with both the above issues. 9. Our opinion is sought on the issue, whether if an amount is held to be not deductible as a bad debt, in view of non compliance of the condition precedent as provided under Section 36(2) of the Act, could the same be considered as a allowable business loss. The Tribunal in its order dated 19.12.1994 has not considered the issue, whether or not a loss claimed by the assessee is allowable as a business loss on the basis of the evidence produced by the assessee. The Tribunal proceeded on a premise that once a claim is made for deduction as bad debts, then the deduction can be granted only if the provision of Section 36 of the Act are satisfied and it is not open to an assessee to ....
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....scourt and it was held that even where the debt is not held to be allowable as bad debts yet the same would, be allowable as a deduction as a revenue loss in computing profits of the business under Section 10(1) of the Indian Income Tax Act, 1922. 13. In view of the above, the question as referred to us is answered in the affirmative i.e. in favour of the assesssee and against the respondent..." The Hon'ble High Court of Delhi in the case of CIT vs. Citicorp Maruti Finance Ltd. in ITA No. 1712/2010 and ITA No. 1714/2010 dated 09.11.2010 held as under:- 1. Following questions of law are proposed in this appeal:- "(i) Whether ITAT was correct in law in allowing loss of Rs. 1,56,04,644/- to the assessee on sale of repossessed assets u/s 36(1) (vii) r/w Section 36 (2) of the Act? (ii) Whether assessee had satisfied the conditions as prescribed in Section 36(2) of the Act so as to allow deduction of loss of Rs. 1.56 crore u/s 36 (1) (vii) of the Act.? (iii) Whether loss on sale of repossessed assets is a capital loss or it is a bad debt allowable u/s 36(1) (vii) R/W Section 36 (2) of the Act? (iv) Whether ITAT was correc....
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....te of 60% is allowable. 4. Wherein it had been held by the Court that deduction could not be allowed to the assessee, when the assessee had taken the possession of vehicles on the default committed by the borrowers and it had merely revalued such assets. The Assessing Officer took a view that it has been held by the High Court that as the assessee remains the owner and as such there arises no question of revaluation of assets and as such an assessee is not entitled to claim the loss on mere revaluation of assets u/s 36(1) (vii) read with section 36(2) of the Act. The CIT (A), however, took the view that the facts of the instant case are distinguishable and the aforesaid judgment of Allahabad High Court has no application. According to him, the assessee is entitled to the deduction of the amount of "bad debts written off' by it, in the year, when it became irrecoverable, since the repossessed assets were sold and was not a case of mere revaluation of the assets leased and were taken merely possession thereof. In holding so, he relied upon the following decisions., 1. CIT Vs. Morgan Securities Credit Ltd. 292 ITR 339 (Del). 2. Auto Meter Ltd. 210 CTR 33....
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.... of the assessee should be decided as per provision of law ( See case of Bur Paints India Ltd. 254 ITR 503 (CI.) and Kedar Nath Jute Manufacturing Co. 82 ITR SC." 7. The CIT (A) thereafter applied the provisions of Section 36 (1) (vii) and 36 (2) of the Act on the aforesaid facts. The case was fully covered by these provisions. Relevant portion of section 36 (2) of the Act provides as under:- "in making any deduction for a bad debt or part thereof, the following provisions shall apply- i)"No such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year n which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or moneylending which is carried on by the assessee....". 8. From the aforesaid it becomes clear that the CIT (A) was right in his conclusion. We are also of the view that the CIT (A) as well as ITAT rightly held that the judgment of Allahabad High Court in Motor & General Sales Pvt. Ltd (supra) was not applicable to the facts of this case. ....