2019 (9) TMI 353

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....essment years 2001-02. 2.The above Tax Case Appeal has been filed raising the following substantial questions of law:- "1. Whether the facts and in the circumstances of the case, the Tribunal was right in law in holding that the internal rate return (IRR) method is the appropriate method of income recognition in hire purchase transaction as against the Even Spread Method (ESM) regularly followed by the appellant? 2. Whether on the facts and circumstances of the case, the Tribunal was right in law in holding that the amount of the provision made in the earlier years in respect of Non Performing Assets which was reversed during the current assessment year is taxable even though the provisions were not allowed as deductions in the respect....

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....ars e.g. If the Hire Purchase Agreement is for 10 years, the SOD is 55 (1+2+3+4+5+6+7+8+9+10=55). Therefore, total financial charges for the first year would be 10/55, for the second year 9/55, for third year 8/55 and so forth which would clearly give higher financial charges for interest taxable in the first year. This SOD method even though adopted by the Assessee in its Book of Accounts on the basis of Guidelines issued by the Institute of Chartered Accountants of India was not adopted in the Returns of Income filed by it which consistently adopted EMI method for taxability of interest income all these years. Since, for the previous assessment years, this Court has already approved such bifurcation of income and has held that interest in....

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....al, were never canvassed as before the CIT(A) or before the Tribunal. 6. The question to be answered is whether the amount of the provision made in the earlier years in respect of non-performing assets, which was reversed during the current assessment years is taxable, even though the provisions were not allowed as deductions in the respective assessments years. On perusal of the grounds raised by the assessee before the CIT(A) and Tribunal, we find that the factual position has not been analysed. Though noted by the CIT(A) in paragraph 4.7.1 in order dated 13.01.2005, before the Tribunal, the assessee did not specifically canvassed the issue as canvassed before us to contend that the CIT(A) erred in not giving a direction to the Assessing....

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.... because, only if the provision charged to profit and loss account was allowed in the earlier years. In the instant case, the Assessing Officer has added it on the ground, if credit figure is allowed, it would amount to double deduction. 9. The assessee's case is that the Tribunal ought to have appreciated that these represent net reversal of provision, credited to profit and loss account, and this reversal can be assessed as income only if the provision made in the earlier years was allowed as deduction in the respective assessment year. 10. Such verification exercise was never done in the assessee's case for the year under consideration. If it is so, whether it would be substantial question of law for consideration, on this aspe....