AI Drafter 
TaxTMI 
TaxTMI 
2017 (12) TMI 1416
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....rred to as 'the Act') vide his order dated 31.12.2010 for assessment years 2004-05 & 2005-06 respectively. Shri P.R. Kothari, Ld. Authorized Representative appeared on behalf of assessee and Shri Surabh Kumar, Ld. Departmental Representative appeared on behalf of Revenue. 2. Both the appeals are heard together and are being disposed of by way of consolidate order for the sake of brevity. First we take up ITA No.426/Kol/2015 for A.Y. 2004-05. 3. Assessee has raised the following grounds:- "1) Against recourse to reassessment proceeding u/s. 147: a) For that on the facts and circumstances of the case and in law, ld. Commissioner of Income tax (Appeals)[CIT] erred in upholding the order of ld. Assessing Officer (A....
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....year in proper perspective." 4. First we take up assessee's ground No.2 wherein the issue was raised that Ld. CIT(A) erred in confirming the order of the Assessing Officer by sustaining the disallowance of Rs.19 lacs on account of interest income on the loan given to ISG Traders Ltd. 5. Briefly, the facts are that assessee is a Non Banking Financial Company (NBFC) carrying on the business of financing and trading in shares and securities. The assessee was registered with the Reserve Bank of India. During the course of its business, assessee has advance a loan of Rs.95 lakh to M/s ISG Traders Ltd. on 16.05.2002 on interest. 5.1 M/s ISG Traders Ltd has claimed interest expense of Rs.19 lacs payable to assessee after deducting TDS. Th....
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....nced based on Promissory Note. Interest can be considered as overdue only when there is an agreement between the parties wherein a stipulation is there with regard to the date of payment of interest. In the absence of any such stipulation we can never say that interest has fallen due on a particular date or was overdue. Similarly a loan can be considered as overdue only when it remains unpaid despite lapse of six months from the date of demand of the loan. Assessee here has been unable to produce any document to show that it had made any demand for return of the loan by the concerned creditors. There is no claim by the assessee that the loans given were term loan. This being the situation the loans given by the assessee to he said two compa....
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....at the assessee cannot take of refuge under the Prudential Norms issued by the Reserve Bank of India and say that principles of accrual of income, then mercantile basis of accountancy is followed wound not apply to it. No doubt, section 4 5Q of the R.B.I act is overriding in nature and has to be given primacy. However unless and until an assessee shows that a loan or advance had become a non-performing asset, there can be no question of applying the norms set out for such non-performing asset We are, therefore, of the opinion that Ld. CIT(Appeals) fell in error in deleting the addition made by the assessing Officer. We, therefore, set aside the order of Ld. CIT(Appeal) and the addition made by the Assessing Officer is restored. 11.....
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....o assessee for Rs.19 lacs. However, the assessee did not include the same in its income on the ground that the amount of loan given to M/s ISG Traders Ltd., was Non-performing asset (NPA). As per the Non-Banking Financial Companies Prudential Norms (Reserve Bank of India) no income of interest on NPA can be identified in the books of account. Indeed, the issue for the AY 2006-07 has been decided against the assessee by the Co-ordinate Bench of this Tribunal in assessee's own case (supra) but we find that the fact of that case are distinguishable from the facts on hand. The addition in the AY 2006-07 was sustained by this Coordinate Bench of this Tribunal on the ground that assessee failed to demonstrate whether the interest was overdue or n....
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....ad further was received and the position remained the same until the assessment year 2006-07. Reason was adverse financial circumstances and the financial crunch faced by 'S'. So much so, it was facing winding up petitions which were filed by many creditors. Those a result of the aforesaid precarious financial position of 'S'. What to talk of interest, even the principal amount itself had become doubtful to recover. In that scenario, it was legitimate move to infer that interest income thereupon had not 'accrued'. (2)The assessee being an NBFC was governed by the provisions of the RBI Act. In by the RBI in exercise of its statutory powers. As per these Norms, the ICDs had recovery was almost nil, interest could not be treated to ha....