TaxTMI 
TaxTMI 
2011 (8) TMI 1310
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....JB of the Act vide his order dated 5.12.2008. For the sake of brevity and clarity, we dispose of both these appeals and cross objections by this consolidated order as issues are common. 2. The first common issue in revenue's appeal in ITA No 1470/K/2009 for Assessment Year 2006-07 and assessee's appeal in ITA No.1275/K/2010 for Assessment Year 2007-08 is as regards to computation of income u/s. 115JB of the Act for both years. For this, assessee as well as revenue have raised following grounds: "Grounds in Assessee's appeal in ITA No 1275/K/2010: 1.0. Confirming the action of Assessing Officer in determining the Book Profit u/s. 115JB of the Act for the year under appeal at Rs. 1823380456 as against Rs. 'Nil' declared in the return on the alleged ground that there was no Brought Forward Business loss & Depreciation as per books of account available for reducing from the net profit as shown in the profit and loss account under clause (iii) of Explanation 1 to Sec. 115JB(1). 1.1. Holding that the adjustment of Rs. 381.55 cr. being the loss incurred by the appellant company in the earlier years, against the Share Premium account/Revaluation Reserve, pursu....
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....mpany for the year as per P&L A/c is Rs. 56,25,04,996/-. In the return vide Schedule-15, an equal amount has been deducted as adjustment vide explanation to Section 115JB and both the Book profit and the tax payable thereof have been shown at 'NIL'." The Assessing Officer gone through clause (iii) of Explanation 1 to section 115JB of the Act, as amended and effective from 1.4.2001, and noted that audited accounts of assessee reveals that balance brought forward is Rs. 34.90 cr. which is unabsorbed depreciation. According to AO, as per books of account, brought forward unabsorbed depreciation is Rs. 34.90 cr. and brought forward losses are NIL, therefore, as per clause (iii) of Explanation 1 to section 115JB of the Act no amount is required to be reduced for the purpose of computing book profit on this account. The Assessing Officer computed the book profit at Rs. 56,24,31,715/- by giving following finding: "It is apparent from the submission of the assessee that the assessee's claim is to reverse the adjustments of loss with the Revaluation Reserve and share premium A/c made in F Y 1999-2000, for the purpose of computation of Book Profit of the company for this A.Y. 200....
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....her in person or, where proxies are allowed [under the rules made under section 643], by proxy, at the meeting, agree to any compromise or arrangement, the compromise or arrangement shall, if sanctioned by the Court, be binding on all the creditors, all the creditors of the class, all the members, or all the members of the class, as the case may he, and also on the company, or, in the case of a company which is being wound up, on the liquidator and contributories of the company:" The High Court has approved a scheme of compromise arrived at with the creditors and equity shareholders. Article 9 of the scheme has the following sentence. "The debit balance in the Profit and Loss Account as on 30 9 2000 of JKCL shall stand adjusted against the Share Premium Account and/or Revaluation Reserve Account of JKCL" It is in terms of this agreement that the normal accounting of brought forward loss of Rs. 391 crore is given the extra-ordinary treatment of set off against the balance in the Share Premium A/c and Revaluation Reserve Account. 6.3. While giving effect to this debt re-structuring exercise, the auditors reported to the company as follows ....
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....chedule VI of Companies Act was different from the net profit in consequence of giving effect in F Y 99-2000 to the order of the High Court under Sec. 391(2) of the Companies Act. Debit balance of Rs. 381.55 crores in the Profit & Loss Account for financial year 1999-2000 would not be adjustable against Share Premium and Revaluation Reserve according to the generally accepted accounting practices. It had to be done on account of the overriding effect of the High Court orders. Nevertheless the debit balance according to the principles of the theory of real income, continues to exist as real loss. Its adjustment by the order of the Court is a notional adjustment in the speciality of the situation. The appellant's claims about the reality of the loss adjusted notionally against Revaluation Reserve A/c and Share Premium A/c is not a claim to reverse the adjustment but to acknowledge the continued existence of brought forward loss in accounts in line with generally accepted accounting practices. The argument of the Assessing Officer is that the audited profit and loss account does not refer to brought forward loss. Audited Accounts cannot he tampered with for the purpo....
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....so has to b considered on merits. While the Assessing Officer cannot say that certain entries in the audited accounts are not in accordance with Parts II & II of' Schedule VI of Companies Act, the auditors themselves can certainly say so and have said so. And when they say so, the Assessing Officer must deal with those observations. 7.1. The book profit u/s 115JB is computed in the following manner in A.Y. 2005-06. BOOK PROFIT U/S 115JB 1. Net profit as per P&L A/c (Rs. 256l9886 + Rs. 4263000) 260461886 2. Add: (a) Unascertained Liabilities (Net) Provision for Doubtful debts 31300193 Impairment of assets 6272114 Diminution in value of Investments (35713560) 3. Less: (a) Dividend Income 10870255 (b) Deferred Tax 4263000 (c) Lower of' loss B/F (Rs.2721534810) or Unabsorbed Depreciation (Rs.3314300127) per books of account as certified by statutory Auditors filed vide Annex 13 of letter dt. 7.12.2007 4. Book Profit (1+2-3) _________ (2736668065) (2474347432) 5. Loss C/F (Rs.2721534810 -Rs.256198886) [Assessees claim that C/F works out t....
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....settle the earlier finding where the earlier finding is not arbitrary or perverse, and is arrived at after making due enquiries, where, subsequent to the earlier finding no fresh facts are placed for consideration, where the earlier decision has considered all the relevant material. Departure from an earlier decision must be justified on the ground of fresh material for consideration, or obvious errors in the earlier decision. In my view the Book Profit determined for section 115JB in A.Y 2005- 06 is based on the certificate from the statutory auditors, is not arbitrary or perverse and has considered all relevant material. For A.Y. 2006-07 a different view about the adjustment of brought forward loss in terms of Explanation 1(iii) of section 115JB was not justified. 7.2. The assessing officer was aware that this decision about adjustment of brought forward loss was different from that of his predecessor in identical case and identical circumstances. According to him there is an error in the order of earlier AY. It accepted the claim of the assessee to reverse adjustment of loss with Revaluation, Reserve and Share Premium A/c in F.Y 99-2000 for the purpose 115JB in this yea....
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.... argument is the need to acknowledge that real loss incurred by the appellant company in A.Y 2000-01 was artificially removed from the profit & loss A/c and balance sheet by accounting entries. These entries were declared to be extraordinary aid out of harmony with the accepted accounting practices or with the relevant provisions of the Companies Act by the auditors in that year's report itself. The auditors do not issue a certificate to accommodate the appellant company in tax dispute. The certificate about brought forward loss given by auditors in A.Y. 2005-06 is in line with their views in the annual report for F.Y. 99-2000. 7.6. In my view the assessment order for AY. 2005-06 is the correct position in computing the book profit u/s 115JB. The departure from this in A.Y. 2006-07 is not supported by the ratio of the Supreme Court judgment in the case of Apollo Tyres. Ground No. 3 is allowed." Aggrieved, now revenue is in appeal before us. 5. This departmental appeal for Assessment Year 2006-07 and assessee's appeal for Assessment Year 2007-08 involves common question to be adjudicated with reference to the provisions of section 115JB of the Act. In assessment year ....
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....as considered and found to have no merit. Under the provisions of the Income Tax Act 1961, the A.O is only required to quantify the Loss as per provision of section 72 of the Act. For the Purpose of Section 115JB the Loss has already been quantified in the books of accounts of the Company and no further quantification is permissible. In the order under section 143(3) while calculating the Book Profit u/s 115JB of the Act, the A.O has not taken loss as per books as on 31.03.2005 as certified by the auditors. In the audit report for the year ending 31.03.2005 the Auditor has duly reported that as per books of accounts the company does not have accumulated loss. It has been clearly mentioned that what ever loss was there has been already adjusted in Pursuant to the Scheme sanctioned by the Hon"ble High Courts of Orissa and Gujarat. It has been further specified by auditors that, "these adjustment has been carried out as per the Orders of the said High Courts, implementation whereof is binding on Company" . However it appears that the A.O in the assessment order form AY 2005-06 has taken the loss as per books on 30.09.2000 calculated by Lodha & Co Chartered Accountants on request of th....
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....h following narration " Lower of loss B/F (Rs. 2721534810) or Unabsorbed Depreciation (Rs. 3314300127) as per books of accounts as certified by statutory Auditors filed vide Anxee 13 of letter dt. 7.12.2007." No where in the above mentioned letter, it has been certified by the auditor that Loss B/f as per books of accounts for the purpose of section 115JB is Rs. 2721534810/ . Moreover for the year ending 31.03.2005 the Auditor has duly reported that as per books of accounts the company does not have accumulated loss. Hence the loss taken by the A.O while calculating the Book profit in A.Y 2005-06 is not the loss as per books of the Company, hence it will not help the assessee to take a ground for further allowance of the loss in the year under consideration. 8.3 Considering above facts and the provisions of the Act it is held that the amount of loss brought forward as per books of the company is Nil and the A.O has rightly calculated the Book Profit under section 115JB. Accordingly the ground no 5 taken by the appellant is dismissed." 6. We have heard rival contentions and gone through facts and circumstances of the case. The facts giving rise to above controversy for t....
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....5JB of the Act for assessment year 2005-06 u/s. 143(3) of the Act, made computation, which is as under :- "BOOK PROFIT U/S 115JB 1. Net Profit as per P&L A/c (Rs.256198886 + Rs. 4263000) 260461886 2. Add: a) Unascertained Liabilities (Net) * Provision for Doubtful debts 31300193 *Impairment of assets 6272114 * Diminution in value of Investments (35713560) 1858747 3. Less: a) Dividend Income 10870255 b) Deferred Tax 4263000 c) Lower of loss B/F (Rs.2721534810) or Unabsorbed Depreciation (Rs.3314300127) per books of account as certified by statutory Auditors filed vide Annex 13 of letter dated 7.12.2007 2721534810 ___________ (2736668065) 4. Book Profit (1+2-3) (2474347432) 5. Loss C/F(Rs.2721534810 - Rs. 256198886) [Assessees claim that C/F works out to Rs. 260601576 made on Page 3 of letter dt.7.12.2007 being not in accordance with I. Tax provisions is rejected]" 2465335924 7. The AO while framing assessment u/s. 143(3) of the Act for AY 2005-06 agreed with submissions of assessee that adjustment made on September, 30, 2000 of debit bal....
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....O to resort to any provision of the Companies Act, 1956 and to the audited accounts and held that assessee had only unabsorbed depreciation of Rs. 34.09 crore and there was no brought forward loss and as such no adjustment in terms of clause (iii) of the Explanation to section 115JB (2)of the Act could be made. The assessee's accounts were audited and certified by auditors and same were adopted by Annual General Meeting of assessee-company approving final accounts. AO held that no recalculation in terms of sub-section (2) of section 115JB of the Act could be made in view of the decision of the Hon'ble Supreme Court in CIT v Apollo Tyres Ltd (2002) 255 ITR 273 (SC). He further held that computation of book profit under section 115JB of the Act for assessment year 2005-06 and loss/depreciation shown as carried forward therein was not binding upon him. He stated that principle of res judicata will not be applicable to income tax proceedings and observed that remedial measure was being taken for assessment year 2005-06. Similar are observations made by AO in assessment year 2007-08. As observed above, the CIT(A) in AY 2006-07 allowed the claim of the assessee and in AY 2007-08 confirme....
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....ution vests these rights in every High Court, and so no Act of a legislature could take away that jurisdiction and confer it afresh by virtue of its own authority. That being the position, S. 25, General Clauses Act cannot apply. Further, High Court, as a court of record, being clothed with a special jurisdiction, has also all incidental and necessary powers to effectuate that jurisdiction. Consequently, it can order satisfaction of file imposed by it from out of an individual fund deposited by or on behalf of or for the benefit of the accused. In view of these arguments, Ld. Counsel Shri M. P. Agarwal stated that orders of AO in both assessment years be restored. 9. The learned senior counsel appearing on behalf of the assessee Shri J. P. Khaitan along with Shri R. Salarpuria, on the other hand, argued that the view taken by CIT(A) for assessment year 2006-07 was the correct view. He argued that scheme sanctioned by Hon'ble High Courts was primarily one of compromise between assessee and its lenders and bankers for adjustment or rescheduling of assessee's debts and rationalization of interest on working capital facilities provided by banks. He stated that as part of assessee's ....
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.... stated that making such computation, adjustment made in terms of sanctioned scheme was not conclusive or binding. If, as in the instant case, adjustment made in the books of account was not in accordance with the accounting standards/principles and/or the provisions of the Companies Act, 1956, though permitted by scheme, the same was required to be excluded from consideration for arriving at correct amount of book profit. And he argued that statutory auditors' opinion that adjustment was not in accordance with the generally accepted accounting practices could not be ignored, hence, CIT(A) in his order for assessment year 2007-08 failed to take note of auditors' opinion as regards to adjustment. Clause (iii) of the Explanation to section 115JB(2) of the Act required that any profit as shown in Profit and Loss Account prepared under 115JB (2) shall be reduced by the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Sub-section (2) of section 115JB of the Act required that Profit and Loss Account should be prepared in accordance with provisions of Parts II and III of Schedule VI to the Companies Act, 1956. The books of account adver....
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....the decision of CIT(A) for assessment year 2006-07. However, AO reiterated the view taken by him in assessment year 2006-07 was subject matter of appeal before Tribunal. Assessee preferred an appeal before CIT(A) who did not agree with his predecessor and took the view that sanctioned scheme had over-riding effect and was binding on all concerned and had to be totally implemented. Whether the scheme was in accordance with the provisions of company law was not relevant. Once effect was given to sanctioned scheme and adjustment had been made, book profit had to be computed with reference to the adjusted figures as appearing in the books of account and adjustment could not be ignored. He further held that the books of account of assessee for the previous year 2006-07 were duly audited and the audited balance sheet and profit and loss account of assessee as on March 31, 2007 were certified by auditors to be in agreement with books of account according to which assessee did not have any accumulated losses and its book profit was Rs. 182.34 crore. He therefore held that no further quantification was required to be made and since there was no brought forward loss as per books, no deductio....
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....s Account for the relevant previous year should be prepared in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956. In terms of clause (iii) of Explanation to the sub-section, net profit as shown in such Profit and Loss Account is required to be reduced by the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. The "books of account" adverted to in clause (iii) must be proper books of account which give true and fair view as required by section 209 of the Companies Act, 1956. The Profit and Loss Account and Balance Sheet have to be in agreement with the books of account. The Profit and Loss Account and Balance Sheet have to comply with the accounting standards. Profit and Loss Account prepared on the basis of books of account which are not proper books of account within the meaning of the Companies Act, 1956 or which is not in compliance with the accounting standards cannot be said to have been prepared in accordance with the provisions of the Companies Act. If such accounts have been commented upon by the statutory auditors and any entry therein is reported to be not in accordance with the a....
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....n, whichever is less as per books of account, statutory auditors of assessee in their report to shareholders in respect of the accounts for 1999-2000 expressly stated that adjustment of debit balance in Profit and Loss Account against Share Premium Account and Revaluation Reserve was not in line with generally accepted accounting practices and thereby qualified their report. Because of said adjustment, accumulated losses of Rs. 381.55 crore got reduced to nil though in normal course and in accordance with the generally accepted accounting practices, books of account should have continued to reflect said losses. Now, can AO computing book profit for assessment years 2006-07 and 2007-08 ignore statutory auditors' qualification in their report to shareholders on the ground that such qualification was contained in report for the year 1999-2000 and was not repeated in accounts for relevant previous years 2005-06 and 2006-07? In our view, since in terms of clause (iii), AO is required to look at amount of loss brought forward and unabsorbed depreciation as per books of account, he must take into account auditors' qualification even if expressed with reference to accounts of earlier year,....
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....ely comment on such accounting in their report, can AO still compute book profit for making income tax assessment not taking view that having regard to auditors' opinion, he will consider only loss as per books of account excluding capital item permitted to be treated as revenue expense? In our view, AO must take such a view. The primary duty of AO whilst computing book profit is to see that accounts have been maintained in accordance with the requirements of Companies Act and he would be failing in such duty if, inspite of the auditors' opinion, he does not appropriately adjust book figures to bring them in line with requirements of Companies Act. 13. We find that even Hon'ble Apex Court in the case of Indo Rama Synthetics (I) Ltd. Vs. CIT (2011) 330 ITR 363 (SC) held that the adjustment made in the P&L Account was primarily in the nature of contra-adjustment in the P&L Account and not a case of effective credit in the P&L Account. According to Hon'ble Court the amount withdrawn from any reserve must in effect impact the net profit as shown in P&L Account and unless an adjustment has the effect of increasing net profit as shown in P&L Account, that entry cannot be said to be a ....
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.... earlier assessment year 2000-01. It has been vehemently argued on behalf of the assessee that creation of such reserve did not impact the profits of that year. The facts enumerated hereinabove shows that though the profit was not impacted, depreciation as the head of account was impacted. By inter play of the balance-sheet items with the profit and loss account items the assessee, as stated above, has sought to project the loss of Rs. 7,38,09,000 as profit of Rs. 18,73,65,000. Conclusion For the above reasons, we see no reason to interfere, hence, the civil appeal filed by the assessee shall stand dismissed with no order as to costs." But facts, in present case before us, are reverse that assessee liquidated losses by adjusting debit balance against share premium and revaluation reserve pursuant to scheme of compromise sanctioned by Hon'ble High Courts of Orissa and Gujarat as on September 30, 2000 in the normal computation of profit of the assessee and now for computation of book profit u/s. 115JB of the Act it has claimed reduction of brought forward losses earlier liquidated by debiting against share premium and revaluation reserve. In view of this fact, we....
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...., including credits or receipts and debits or expenses in respect of non-recurring transactions or transactions of an exceptional nature. 3. The P&L a/c shall set out the various items relating to the income and expenditure of the company arranged under the most convenient heads; and in particular, shall disclose the following information in respect of the period covered by the account: (i).... (ii).... (xi) (a) The amount of income from investments, distinguishing between trade investments and other investments. (b) Other income by way of interest, specifying the nature of the income. (c) The amount of income-tax deducted if the gross income is stated under sub-paras (a) and (b) above. (xii) (a) Profits or losses on investments showing distinctly the extent of the profits or losses earned or incurred on account of membership of a partnership firm to the extent not adjusted from any previous provision or reserve. Note : Information in respect of this item should also be given in the balance sheet under the relevant provision or reserve account. (b) Profits or losses in respect of transactions of a kind, not usu....
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....repared in accordance with Part II and Part III of Sch. VI to the Companies Act, therefore, the decision of Hon'ble Supreme Court in the case of Apollo Tyres Ltd. (supra), in our opinion is not applicable to the facts of the present case. 22. Similarly in the case of Kinetic Motor Co. Ltd. (supra) the assessee had debited an amount of Rs. 6,32,65,430 on account of depreciation on the basis of WDV which is one of the permissible methods under the Companies Act although the assessee used to provide the depreciation on the straight-line method in its corporate accounts. The above resulted in a book loss of Rs. 1,64,49,937. These accounts were certified to be true and fair by the auditors. The AO took the view that there was no justification for the assessee to change the basis of providing depreciation and reworked the depreciation and arrived at a book profit of Rs. 2,22,10,525 as against the book loss of Rs. 1,64,49,937 which was confirmed by the Tribunal. On further appeal to the High Court, the Hon'ble High Court had held that under the Companies Act both straight-line method and written down method are recognised, therefore, once the amount of depreciation actually debit....
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.... the assessee was entitled to deduction in terms of clause (iii) of the Explanation to section 115JB(2) of the Act the adjustment of debit balance in the Profit and Loss Account with share Premium Account and Revaluation Reserve made on September 30, 2000, which is required to be excluded from consideration and accordingly, AO is required to determine amount of loss brought forward or unabsorbed depreciation for each of years without taking said adjustment into consideration and allow deduction in respect of lesser of two amounts. Hence, both questions framed by us are answered in favour of assessee on the given facts and circumstances of the case. In view of the above facts and circumstances, we allow this issue in favour of assessee and against revenue. 15. The next common issue in these appeals of revenue in ITA No.1470/K/2009 for Assessment Year 2006-07 and ITA No.1417/K/2010 for Assessment Year 2007-08 is as regards to the order of CIT(A) deleting the addition made u/s. 40A(9) of the Act on account of expenditure incurred for running school and other facilities. For this, revenue has raised the following ground no.1 in Assessment Years 2006-07 and 2007-08: "A.Y. 20....
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.... ITR 284. This ground of appeal is allowed consistent with the appellate order in the earlier assessment years." 18. Before us, Ld. Sr. counsel Shri M. P. Aggarwal appearing for revenue stated that Tribunal's order for Assessment Year 1999-2000 is challenged before Hon'ble High Court and the same is pending for disposal. Hence, he stated that even assessee could not submit details, the CIT(A) wrongly allowed claim of assessee. On the other hand, Ld. Sr. Counsel for the assessee Shri J. P. Khaitan stated that CIT(A) has allowed assessee's claim relying on Tribunal's order in assessee's own case for Assessment Year 1999-2000 in ITA No.1315/K/2006 dated 19.3.2008 by dismissing revenue's appeal relying on Hon'ble Kerala High Court decision in the case of P. Balakrishnan Vs. Travancore Cochin Chemicals Ltd. (2000) 243 ITR 284. We in principle are in agreement with arguments of assessee and issue is covered in favour of the assessee by Tribunal's decision in assessee's own case, but keeping in view the fact that assessee could not furnish details of expenditure before Assessing Officer and even now before us, are of the view that let this issue be examined by Assessing Officer on fact....
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....earing Inter-Corporate deposits: 1) Oswal Foods Limited On our filing legal case against the Company the Allahabad High Court passed an ex parte order in May 2001 for winding-up of the Company and official liquidator was ordered to be appointed. Oswal Food Ltd on knowing about the order passed by the Allahabad High Court made a recall application for stay of the ex parte order and the matter has yet to be taken up by the High Court. ii) HMG Financial Services Ltd. (now known as M/s Ensources Pvt. Ltd.) We had filed a petition for winding up of the Company. High Court passed a conditional order in March 2001 directing HMG Financial services to deposit Rs. 40 lacs within 4 weeks from 9th March 2001. The said Company did not deposit the above amount but preferred an appeal before the division bench of Bombay High Court. The division Bench granted stay for deposit of Rs. 40 lacs and the matter was remanded back to single Judge for further adjudication. The case is pending for adjudication. The assessee submitted that the facts of legal cases in respect of above referred two interest bearing Inter Corporate deposits clearly show that it was r....
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....n Section 143(3) order for the Asstt. Year 2005-06 which inter alia includes WDV of the expenditure held to be capital in nature in various years prior to the Asstt. Year 2005- 06." ITA No.1275/K/2010 2.0. On the facts and in the circumstances of the case and in law, Ld. Commissioner of Income Tax (Appeals) Central-1, Kolkata erred in not appreciating that the depreciation of Rs. 8552528 @ 15% on the WDV of Rs. 57016850 as on 31.03.2006/01.04.2006 is available to the appellant company, being the expenditure on account of interest etc. incurred in earlier years for acquisition of capital assets, when such expenditure was held as capital expenditure in the earlier assessment years. 2.1 Not appreciating the fact that in earlier assessment years, depreciation on same was allowed by the Assessing Officer." 22. We have heard the rival contentions and gone through facts and circumstances of the case. We find that Ld. Counsel for the assessee stated that in the return of income for earlier years interest, for the purpose of acquisition of capital assets had been claimed as revenue expenditure which was held as capital expenditure in the assessment order passed....
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....he case. We find that the issue is covered in favour of revenue and against the assessee by the decision of Hon'ble Apex Court in the case of JCIT Vs. Rolta India Ltd. (2011) 330 ITR 470 (SC), wherein Hon'ble Court has held that it is clear from reading sections 115JA and 115JB of the Act that the question whether a company which is liable to pay tax under either provision does not assume importance because specific provision is made in the section saying that all other provisions of the Act shall apply to a MAT company (section 115JA(4) and section 115JB(5) ). It was further held that amendments have been made in the relevant Finance Acts providing for payment of advance tax under sections 115JA and 115JB of the Act and section 234B of the Act is clear that it applies to all companies and further pre-requisite condition for applicability of section 234B of the Act is that the assessee is liable to pay tax under section 208 and the expression "assessed tax" is defined to mean the tax on the total income determined under section 143(1) of the Act or under section 143(3) of the Act as reduced by the amount of tax deducted or collected at source. Thus, Hon'ble Apex Court held that the....
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....rest of Rs. 88,25,000/- when Hon'ble High Court has directed M/s. H. M. Company Financial Services Ltd., a debtor to make payment to the assessee. ii) That, the Ld. CIT(A)-C-1, Kol has not considered that even if BIFR proceedings are going on in respect of both the debtors, there is hope of recovery." 28. We have heard rival contentions and gone through facts and circumstances of the case. We find that this issue was decided by Tribunal in ITA No.1759/K/2007 vide order dated 9.10.2009 for Assessment Year 2001-02 and which was followed in subsequent four assessment years and held as under: "6. We have considered rival submissions and material available on record. Hon'ble Allahabad High Court in the case of CIT Vs. Abbas Wazir (P) Ltd. (274 ITR 448) held as under: "Held, that the Tribunal from the evidence and material on record had found that the financial position of the debtors had deteriorated to such an extent that even the chance of the principal amount being recovered was very dim. The Tribunal was justified in deleting the additions." Hon'ble Allahabad High Court in the case of Jwala Prasad Radha Krishna vs CIT [198 ITR 415) held as unde....
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....he principal amount itself was not paid to the assessee, what to say of the interest. The above facts clearly suggest that in the assessment year in question as well as in the subsequent assessment years, the principal amount itself was in doubt for recovery. Therefore, there was no question of accruing any interest in favour of the assessee. Learned counsel for the assessee on the basis of the findings of various authorities has been able to point out that even the assets of the various parties have wiped out. Therefore, there was no real accrual of interest to the assessee. The above facts clearly prove that the financial position of the debtors had deteriorated to such an extent that even the change of principal amount being recovered was very dim. Despite orders of various authorities, the principal amount as well as interest is not paid to the assessee. No material is brought on record to show if assessee has been able to recover any amount of interest from the above parties. The authorities below have heavily relied upon the Notes on annual account filed with the return of income in which the assessee apart from what is recorded by the A.O. has also mentioned that for recover....