TaxTMI 
TaxTMI 
2021 (2) TMI 20
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee directed against the order of Pr.CIT passed under section 263 of the Income Tax Act, 1961 (hereafter called 'the Act'), dated 28.03.2016. 2. ITA Nos.3347 and 3348/Bang/2018, 2859/Bang/2017 and 2289/Bang/2019. These four appeals are with regard to quantum additions for the Assessment Years 2010-11, 2012-13, 2009-10, 2011-12 respectively. 3. ITA No.2325/2019 is with regard to levy of penalty under section 271(1)(c) of the Act for Assessment Year 2011-12. 4. Since the issue involved in all these appeals are common in nature, these appeals are heard and disposed off together for the sake of convenience. 5. The facts are that the appellant had signed a contract dt 22.06.1989 with M/s Engineering Industry Commission (EIC)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l under consideration. 6. Even in the succeeding Assessment Year also no interest received by the assessee and the position remained the same until the Finance Year 2012-13, when the debt settlement was agreed and the assessee received 7% of the outstanding amount as the final settlement of debt and same has been offered to tax by the assessee. There was uncertainty with regard to recovery of interest concerned as a result of precarious position of EIC. Accordingly, the CIT(A) placed reliance on the judgment of Delhi High Court in the case of CIT(A) Vs. Vasisth Chay Vyapar Ltd., 330 ITR 440 (Delhi) and he allowed the appeal of the assessee. Again, the Revenue is in appeal in all these Assessment Years. The learned DR submitted that the j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llace. So much so, it was facing winding up petitions which were filed by many creditors. These circumstances, led to an uncertainty insofar as recovery of interest was concerned, as a result of the aforesaid precarious financial position of Shaw Wallace. What to talk of interest, even the principal amount itself had become doubtful to recover. In this scenario it was legitimate move to infer that interest income thereupon has not "accrued". We are in agreement with the submission of Mr. Vohra on this count, supported by various decisions of different High Courts including this court which has already been referred to above. (2) In the instant case, the assessee company being NBFC is governed by the provisions of RBI Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax Act operate in different areas. These Directions 1998 have nothing to do with computation of taxable income. These Directions cannot overrule the "permissible deductions" or "their exclusion" under the Income-tax Act. The inconsistency between these Directions and Companies Act is only in the matter of Income Recognition and presentation of Financial Statements. The Accounting Policies adopted by an NBFC cannot determine the taxable income. It is well settled that the Accounting Policies followed by a company can be changed unless the Assessing Officer comes to the conclusion that such change would result in understatement of profits. However, here is the case where the Assessing Officer has to follow the RBI Directions 1998 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ows: "The income-tax is a tax on "real income", i.e., the profits arrived at on commercial principles subject to the provisions of the Act. Therefore, if by the Explanation to section 36(1)(vii) a provision for doubtful debt is kept out of the ambit of bad debt which is written off, then one has to take into account the Explanation in computing the total income under the Income-tax Act failing which one cannot ascertain the real profits. The provision for non-performing assets debited in the profit and loss account under the Reserve Bank Directions of 1998 is only a notional expense and, therefore, there would be add back to that extent in the computation of total income under the Income-tax Act." 10. A plain reading the above p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f claiming as a Bad Debt because it is not accountable as there was uncertainty of collection. The same cannot be recognized as income accrued till it is realized by the assessee. It is not correct to say the judgment of Delhi High Court in the case of Vasisth Chai Vyapara is not applicable. In this judgment, it considered the AS 9 along with other provisions of the Act while deleting the addition. We find no merit in the argument of DR that that judgment is not applicable. Accordingly, we do not find any infirmity in the order of CIT(A) in allowing the appeal of the assessee on this issue. Accordingly, we uphold the orders of CIT(A) in ITA No.2859/Bang/2017, 3347, 3348/Bang/2018, 2289/Bang/2019. 11. ITA No.2325/Bang/2019 This appeal ....