TMI Blog2010 (3) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... f sale of shares disallowed - Held that:- Disallowance of long-term capital gain/loss is not based on any solid/valid grounds. A commercial transaction between two separate legal entities, even if they belong to the same group, cannot be ignored - See McDowell & Co. Ltd. v. CTO [1985 (4) TMI 64 - SUPREME Court] & Azadi Bachao Andolan (2003 -TMI - 6130 - SUPREME Court) - confirm the impugned deletion Bad debts - assessee has submitted that as per section 36(1)(vii) of the Act the entire sum has been written off and conforms with the Reserve Bank of India directions issued in this regard - Held that:- As decided in CIT v. HCL Comnet Systems & Services Ltd. [2008 (9) TMI 18 - SUPREME COURT] provision made towards irrecoverability of the deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce charges in respect of hire purchase and lease transactions which the assessee has admitted at Rs. 17,55,72,432 by following the same method of accounting as was followed in the earlier years. But the Assessing Officer has not accepted this method of accounting. In the books prepared as per the Companies Act, accrual basis has been adopted and the penal interest chargeable for delay in payment of instalments by the customers has been accounted for at Rs. 17,52,28,700. But under income-tax it has been accounted for on cash basis at Rs. 17,55,72,432, leaving the difference amount attributable to their doubtful recovery. The Assessing Officer has accepted the accrual basis of accounting. On the contrary, the learned Commissioner of Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of NBFCs were to be discontinued. Admittedly, these shares were not quoted on the stock exchange. Both the parties belong to the same group. The sale price could be fixed only through a negotiated settlement between the buyer and the seller. 5. After hearing both sides, we have to confirm the appellate finding in this regard because the disallowance of long-term capital gain/loss is not based on any solid/valid grounds. A commercial transaction between two separate legal entities, even if they belong to the same group, cannot be ignored. Similar view has been taken in the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148/22 Taxman 11 (SC) in which it has been held thus (headnote): "Held, affirming the High Court, that under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... milar view has been taken. Therefore, by drawing support from the above decision, we confirm the impugned deletion. 7. The next issue is of bad debts. The facts apropos this ground are that the assessee-company has claimed bad debt of Rs. 22,17,11,630 as per the profit and loss account. The assessee-company was required to give the complete details of this entire amount. The assessee has submitted that as per section 36(1)(vii) of the Act the entire sum has been written off based on its honest and bona fide judgment, and conforms with the Reserve Bank of India directions issued in this regard. Reliance on the decision of the Income-tax Appellate Tribunal order dated April 21, 2006 has been placed in similar facts. The learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, in the course of the present appellate proceedings, that it had been divested its title over this amount by the provisions of section 45-IC of the Reserve Bank of India Act is also not acceptable for the reasons discussed in detail earlier in this order while adjudicating on the claim of deduction with reference to the amounts transferred to this statutory reserve under computation of tax under the normal provisions of the Act. Accordingly, the appeal filed by the assessee on this ground is hereby dismissed." 10. We are also in agreement with the reasoning given by the learned Commissioner of Income-tax (Appeals), in this regard. We are quite convinced that there is no fallacy in the appellate order. Hence, we confirm the same. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax (Appeals) in deciding the issue has not become final and appeal has been preferred before the hon'ble Madras High Court. 3.1. The learned Commissioner of Income-tax (Appeals) erred in holding that the addition of 'provision for bad debts' to the book profits as an unascertained liability is not correct, relying upon the decision of the hon'ble apex court in the case of CIT v. HCL Comnet Systems and Services Ltd. [2008] 305 ITR 409 (SC). 3.2. Having regard to the amendment to section 115JB by introduction of clause (i) in Explanation 1 to section 115JB by the Finance (No. 2) Act, 2009 with retrospective effect from the assessment year 2001-02, the decision of the hon'ble Supreme Court is no more good law and the aforesaid amendmen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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