TaxTMI 
TaxTMI 
2023 (1) TMI 488
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....g disposed by a separate order. The order impugned in the said appeal arises out of the conclusion arrived by the Tribunal in the impugned order of the Tribunal in this appeal. The present appeal is confined to issues answered against the appellant in I.T.A.No.78/Mds/2007 filed by the appellant. 4. At the time of admission, the following Substantial Questions of Law were framed:- i. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the appellant is not entitled to deduction of the provision made in respect of Non-Performing Assets which are considered irrecoverable? ii. Whether the appellate Tribunal was justified in not appreciating that the provision made in respect of Non Performing Assets if not allowable as a bad debt is allowable as a business loss? iii. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the appellant is not entitled to deduction of diminution in value of investments? iv. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the loss computed by the appellant on acco....
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.....A.No.131/05-06 for the Assessment Year 2002-2003. 12. In this appeal, the appellant has not stated whether the orders passed by the Income Tax Appellate Tribunal and Commissioner of Income Tax (Appeals) in the above two cases have been appealed against or not. Therefore, on this ground alone, the substantial question of law raised by the appellant has to be answered against the appellant. 13. A sum of Rs.53,98,000/- was claimed towards diminution in the value of investment in the shares of two unlisted companies. The appellant had deducted a sum of Rs.53,98,000/- in the profit and loss account and claimed deduction. These shares did not have a market value as they were not traded in the stock market. 14. The Hon'ble Supreme Court in Madhya Pradesh Co- Operative Bank Ltd. Vs. Additional Commissioner of Income Tax, (1996) 218 ITR 438, held that the Government securities cannot be easily encashed and can be utilized only when certain contingencies arise and therefore Government securities cannot be considered to be 'Circulating Capital' or 'Stock-in-Trade'. Thus, investment in shares of the unlisted companies cannot be considered as 'Circulating Capital' or 'Stock-in- Trade'....
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.... .................. (viia)in respect of any provision for bad and doubtful debts made by- (a) a scheduled bank not being a bank incorporated by or under the laws of a country outside India or a non-scheduled bank or a co-operative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank, an amount not exceeding eight and one-half per cent of the total income (computed before making any deduction under this clause and Chapter VIA) and an amount not exceeding ten per cent of the aggregate average advances made by the rural branches of such bank computed in the prescribed manner : Provided that a scheduled bank or a non-scheduled bank referred to in this sub-clause shall, at its option, be allowed in any of the relevant assessment years, deduction in respect of any provision made by it for any assets classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, for an amount not exceeding five per cent of the amount of such assets shown in the books of account of the bank on the last day of the previous year: Provi....
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....mputed before making any deduction under this clause and Chapter VI-A). Explanation.-For the purposes of this clause,- (i) "non-scheduled bank" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank; (ia) "rural branch" means a branch of a scheduled bank or a non-scheduled bank situated in a place which has a population of not more than ten thousand according to the last preceding census of which the relevant figures have been published before the first day of the previous year; (ii) "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); ....
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.... or sub-clause (iv) of clause (a), the business of providing long-term finance for- (A) industrial or agricultural development; (B) development of infrastructure facility in India; or (C) development of housing in India; (ii) in respect of the specified entity referred to in sub-clause (v) of clause (a), the business of providing long-term finance for the construction or purchase of houses in India for residential purposes; and (iii) in respect of the specified entity referred to in sub-clause (vi) of clause (a), the business of providing long-term finance for development of infrastructure facility in India; (c) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949) applies and includes any bank or banking institution referred to in section 51 of that Act; (d) "co-operative bank", "primary agricultural credit society" and "primary co-operative agricultural and rural development bank" shall have the meanings respectively assigned to them in the Explanation to sub-section (4) of section 80P; (e) "housing finance company" means a public company formed or registered in India with t....
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....D STOCK OF VEHICLES: 24. As far as the diminution in value of repossessed stock of vehicles is concerned, we have answered the Substantial Questions of Laws in T.C.A.No.1025 of 2009 against the appellant vide separate order passed today. Operative portion of the said order reads as under:- 8. We have considered the arguments advanced by the learned counsel for the appellant and the respondent. 9. Wherever defaults were committed by lessees, the appellant re-possessed the vehicles. The appellant treated the amount due from the defaulting lessees as "receivable" in its books of account. 10. A further sum was reduced from the aforesaid amount as diminution in the value based on the prevailing market value of the seized vehicle. The appellant appears to have compared the book value of the repossessed vehicle with the prevailing market value. If the estimated market value was less than the book value at the time of the repossession of the leased asset (vehicle), the appellant reduced the value and transferred it to its profit and loss account. 11. If the vehicles were sold before the closes of the financial year, entries made towards diminution in ....
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....covered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; iii. any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year), but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; iv. where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year) and the Assessing Officer is satisfied that such debt or part became a bad debt in any earlier previous year not falling beyond a period of four previous years immediately preceding the previous year in which such debt or part is written off, the provisions of sub-section (6) of section 155 shall appl....
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....d be treated as foreclosure of the contract of lease or hire purchase finance; ii. The accounting adjustment should be done in these cases by taking the assets at its book value; iii. In Case of Hire Purchase Assets, in arriving at the book value, the asset value should be depreciated by 20% per annum of the cost on the straight-line method; iv. The releasable value has to be arrived at after deducting the expenditure likely to be incurred on the sale of the assets; The provision in regard to deficit between book value and the realisable value should be made in the current year itself. In case the asset is still treated as part of Lease /hire purchase portfolio The asset should continue to be treated as non-performing and provision should be made according to the provisioning norms on the line of those applicable to the scheduled contracts. A) The repossessed assets should be shown as distinct from "assets on lease" or "stock on hire" under the "Fixed Assets" of "Current Asset" as the case may be. B) Valuation of assets may be done as per accounting standards of ICA!. 18. The above clarification does not clearly spell out the relevant....