TMI Blog2015 (10) TMI 391X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer while passing the Assessment Order and the said plea was not raised before the CIT(A) as well. The Hon’ble Supreme Court in case of Cocanada Radheswami Bank Ltd. (1965 (4) TMI 11 - SUPREME Court) clearly held that the income from the securities which formed part of the assessee’s trading assets was part of its income derived from the business and, therefore, the loss incurred in the business in the earlier year could be set off against that income in the succeeding year. As per guidelines issued by the RBI, every NBFC is required to maintain liquid assets including investment in shares, stocks, government securities etc. and thus the assessee has made these investments in the ordinary course of its business. Therefore, loss in the said investment relates to the business. - Decided in favour of assessee. - I.T.A .No.-2190/Del/2006, I.T.A .No.-2069/Del/2006 - - - Dated:- 23-9-2015 - SHRI N. K. SAINI, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE, JUDICIAL MEMBER For The Appellant Sh.T. Vasanthan, SR. DR For The Respondent : Sh.Sanjeev Subharwal, Sr. Adv, Sh. Tushar Sarwal, Adv, Sh. Rahul Satega, ADV. ORDER PER SUCHITRA KAMBLE, JM The present appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness of the company is not one simply of giving loans or money lending. In the business of vehicle finance/sale on hire purchase, the business of the company takes a much larger dimension because it covers not only financing but also repossession and resale-the latter being an integral part of the business of the company. The business of the company is not only restricted to financing and the related activity of re-possession but resale is a part of its regular business activity. The trading profits of the company are enmeshed in the entire transaction that may be spread over a few years. Since the profits are enmeshed in the overall transaction, the re-possession and re-sale is also an integral part of the transaction. Consequently, any loss or profit on re-possession or re-sale shall be to trading account. Accordingly, the CIT(A) held that the loss on re-sale of re-possessed vehicles is a revenue loss and directed the A.O. to treat the said loss as a revenue loss in respect of the repossessed vehicles that have been re-sold. 7. The DR submitted that the impugned loss cannot be treated as Revenue loss and the provisions of the Income Tax Act should be taken into account and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chaser and appellant is only lender of money. ii) I have gone through the modus-operandi of transaction and the model of entries passed in connection with the transaction starting with the finance and its logical end. From perusal of the entries it is abundantly clear that it is clearly cut case of write off of Bad Debts. Although the appellant company has used the nomenclature as Loss on Sales of Reprocessed Assets as provided under NBFC norms but the fact of the matter is that it is a write off of bad debts . When the customer makes default in payment of loan the vehicle is reprocessed and sold. The amount realized on sale is credited to the customer a/c and balance left in the account of customer is written off as Loss on Sale of Reprocessed Assets which is nothing a write off of Bad Debts. Nomenclature does not change the real character of the transaction and the treatment given to expenditure in particulars manner or the accounting entries does not change the real character of transaction and are not determinative and decisive for tax purposes. The claim of the assessee should be decided as per provision of law (See case of Burger Paints (India) Ltd. 254 ITR 503 (Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt process requires fresh application of the individual s mind to each year as he/she interprets the law. Therefore, it is always possible that two A.O. s would come to different conclusions on the same set of facts and accordingly the CIT(A) uphold the orders of the A.O. 13. At the time of the arguments, the AR submitted that investment loss of ₹ 18,95,714/- is not by the assessee as the same amount to two portfolios, therefore, he vested his argument only to the extent of loss on securities and other instruments shown as stock-in-trade in the books of the assessee amounting to ₹ 2,04,37,525/-. The AR further stated that the company is a non-banking finance company (NBFC) and is governed by the directions issued by the RBI and every NBFC is mandatorily required to follow those directions, in the term of the directions issued by the RBI, every NBFC is required to maintain liquid assets including investment in shares, stocks, government securities etc. These investments, therefore, are made in the ordinary course of the business of the assessee. The AR relied upon the following decisions:- CIT Vs. Nedungadi Bank Ltd. 364 ITR 54 In this case the Kerala High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntage notified is 15 per cent. Regulations regarding custody of securities etc. are incorporated in NBFC Public Deposits (RBI) Directions-1998. It is thus clear that investment in securities is a statutory direction which has to be necessarily complied with by the assessee, as it has public deposits. It is immaterial that they are shown under the classification investment . True nature of the investment be taken into consideration. The decision of the Hon ble Supreme Court in the case of CIT VS. Cocanada Radheswami Bank Ltd. [1965] 57 ITR 306 (SC) and the other decisions are also in support of the said view that the assessee is entitled to the claim of diminution in the value of securities which are held for the purpose of its business. 15. The Ld. DR submitted that para 6 of the AO s order clearly mentions that two portfolios has been kept by the assessee company and the business loss should be taken into account in respect of Section 73 of the Income Tax Act because it is speculative loss. 16. After perusal of the records and the arguments of both the sides it can be seen that the contentions of the DR in respect of Section 73 of the Act cannot be sustained as the same sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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