AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 929
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....ase are that, the assessee filed return declaring loss of Rs. 54,60,29,396/- and subsequently filed revised return. The case was selected for scrutiny and assessment order came to be passed u/s 143(3) read with Section 144C of the Act by assessing the loss of Rs. 30,93,58,600/- as against returned loss at Rs. 54,60,29,396/-. Aggrieved by the assessment order dated 30/04/2015, the assessee preferred an appeal before the CIT(A). The ld. CIT(A) vide order dated 29/10/2018 deleted the addition of Rs. 15,98,86,715/- made on account of claim of loss on sale of finance receivables. Aggrieved by the order of the CIT(A), the Revenue preferred the present appeal on the grounds mentioned above. 4. The Ld. Departmental Representative submitted that the ld. CIT(A) committed an error in deleting the addition of Rs. 15,98,86,715/- made on account of claim of loss of sale of finance receivables. The Ld. Departmental Representative relying on the order of the A.O. submitted that the order of the CIT(A) requires interference at the hands of the Tribunal. 5. Per contra, the Assessee's Representative submitted that the ld. CIT(A) while allowing the Appeal of the assessee, relied on the order....
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....t the finance receivables were assigned without 'recourse' i.e. to say in the event of default by the borrower in repaying instalments to STFCL, it cannot claim such loss from the assesssee. 6.4 The Assessee also brought my attention to clause 4.2 of the assignment agreements according to which the agreement was duly completed in terms of on the basis of following: * The estimated sales consideration was duly received by the Assessee from STFCL as per clause 4.2.1 of the agreement. In this regard, copy of certificates from bank of the Assessee evidencing the receipt of estimated sales consideration from STFCL was also submitted by the Assessee. * All the underlying documents and underlying security were transferred in view of clause 4.2.3 of the agreement. * A letter was executed between the parties as per Schedule D in view of clause 4.2.4 of the agreement. Copy of the said executed letter was also submitted by the Assessee. 6.5 Further, attention was drawn to clause 7.8 of the agreement wherein it was stated that the indemnification of 20% of buyer's loss was on account of any breach of representation and warranty or breach....
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....rney. 6.7 With respect to allowability of loss, the AO has noted that section 28 is a charging section and not for allowing lossess to the assessee. In this regard, the Assessee submitted that expenditure necessitated out of commercial expediency has to be allowed and the said transaction is incidental to its business and is allowable under section 28 of the Act. 6.8 I have considered the facts of the case and submission filed by the Assessee in this regard. Considering the same, I am of the view that the finance receivables/debtors were created in ordinary course of business and there was an outflow of money from assessee's funds. In the present case, assessee had assigned certain finance receivables from whom assessee was facing difficulties in getting installments due and Assessee sold those finance receivables to a third party for a consideration. Thus, selling of finance receivables was purely a commercial decision taken by assesee in line with the prevailing business practice in order to minimize its business loss. This was a case of outright: sale without recourse obligations. The assessee was NBFC and, therefore, the financing was done in ordinary cour....
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....uch circumstances those who are in a position to realize non-performing assets take over loans from entrepreneurs. It is well settled commercial practice to invest in stressed assets which is presently gaining momentum on account of upsurge in NPAS in business and financial institutions. High profile fund managers are finding lot of business prospectus in acquiring non-performing portfolio at considerable discounts. Thus, fund managers are, therefore, investing in the stressed assets space. The government has also eased norms in this regard. Thus, selling of delinquent loan portfolio was purely a commercial prudent decision taken by assessee in line with the prevailing business practice in order to minimize its business loss. This was a case of outright sale without recourse obligations. The assessee was NBFC and, therefore, the financing was done in ordinary course of business and the loans under current assets acquired more or less the same character as of stock-in-trade and, accordingly, constituted trade debts/ receivables. It is not disputed that amount received on sale of delinquent assets had been adjusted against the outstanding balances and only net amount had been claimed....