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GE Capital Transportation Financial Services Ltd Versus Deputy Commissioner of Income Tax, Circle 12 (1) , New Delhi and Vica-Versa

Treatment to loss on account of repossessed vehicles as revenue loss - Held that:- The claim of the assessee for the said receipts should be treated as revenue receipts is proper as re-possessed vehicles/ assets are treated as stock-in-trade throughout the earlier years and the same was accepted by the Department in the earlier years. Thus Ld. CIT(A) has taken a correct view and directed the AO to treat the said loss as revenue loss. In light of this, the A.O. is directed to treat the said loss .....

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ame stand was not taken by the Assessing 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 .....

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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 are filed by the Assessee (ITA No. 2190/Del/06) and Revenue (ITA No. 2069/Del/06) against the order dated 31.03.2006 passed by CIT(A) XV, New Delhi. The ground of appeal in Revenue s appeal urged before us is as follows:- 1. On the facts and in the circumstances of the case and in law the Ld. .....

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ss loss. 3. Ground No. 1 of the assessee s appeal is general in nature, hence not discussed. Ground No. 2(a), 2(b) and 2(c) are withdrawn by the assessee. Ground No. 3(a), 3(b), 3(c) and 3(e) are incorporated in Ground No. 3(d) to the extent of ₹ 1,04,37,525/-, as the assessee has withdrawn the amount of ₹ 18,95,714/- which is classified as investment and does not fall into category of stock in trade. Ground No. 4(a) and 4(b) are also withdrawn by the assessee. 4. The assessee compan .....

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of losses on re-possessed stock which were given on hire purchase, but was repossessed by the assessee because the borrowers defaulted on the installments. The Assessing Officer took the view that in light of the decision of Allahabad High Court in case of Motor and General Sales Pvt. Ltd. Vs. CIT (1997) 226 ITR 137 and for the reasons given in the assessment order of Assessment Year 95-96, the loss on repossessed hire-purchase assets is not allowable as deduction because it is basically of the .....

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sion 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 dire .....

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thod of computation of estimated value has been furnished. This implies the loss figure of ₹ 1,70,83,682/- is not actual loss of the assessee but also includes notional loss claimed by the assessee who have occurred to it. Notional loss cannot be allowed as expense in the profit and loss account of the assessee as the same is not an ascertained expenditure. 8. The AR submitted that the loss does not amount to capital loss as in the previous years the similar ground was decided in favour of .....

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he business of hire purchase. The loss incurred on disposal of repossessed hire purchase assets represents the installments, which could not be recovered from parties to whom the goods were sold on hire purchase basis less the sale proceeds recovered. Therefore, the amount written off and claimed by the company in any case was allowable as revenue expenses under the Income Tax Act. For the said submissions. The AR furnished the assessment orders of the assessee company for the Assessment Years 1 .....

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appellant is a NBFC and is in the business of money lending giving finance for purchase of vehicle under hire purchase scheme. The owner of the vehicle is the purchaser 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 a .....

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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.) and Kedar Nath Jute Manufacturing Co. 82 ITR SC. 9. After perusal of the records and the submissions of the both the Counsels, it is noticed that .....

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. Hence, the ground No. 1 of the Department s appeal is dismissed. 11. In respect of second issue that is Ground 3 (d) of the assessee s appeal, the facts in brief are that the assessee company is also engaged in bills discounting activity, dealing in all kinds of securities including shares, the debentures, commercial papers, Government Securities. Vide Clause III (B) (3) of the Memorandum of Association of the company the object of the company is to undertake the activity relating to dealing o .....

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- as investment loss and raised as loss on securities and other investment shown as stock-intrade in the books of the assessee. The assessee has relied upon the decision of Hon ble Supreme Court in the case of Investment Ltd. Vs. CIT 77 ITR 533, it has been observed in the profit and loss account of the assessee for this year and the last so many years that no purchase of shares has been done. The Assessing Officer further held that loss which has arisen is on account of shares and that on the g .....

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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 .....

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provisions of Banking Regulation Act for the purpose of maintain Statutory Liquidity Ratio are stock in trade of the business of the banks and the notional loss suffered on account of the revaluation of said securities at the end of the year is an allowable deduction while computing the total income of the bank. In this case, the Bank held Government securities in accordance with the requirements of Section 24(2) of the Banking Companies Act and the same were reflected in the balance sheet as in .....

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Kerala High Court held that these investments are made in accordance with the requirements of Banking Companies Act. These provisions in the Act were intended to legalise the sound banking practice, namely, that the bank may keep a reserve of cash and liquid assets to meet its demand liability. As per these provisions an amount equal to 20% of its time and demand liabilities must be invested in these securities. No doubt the stock -in-trade can easily be converted into cash to meet any probable .....

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pon the case of ACIT VS. Shri Ram Transport Finance Company (2011) 9 ITR (Tri.) 543 (Chennai), wherein the same issue has been raised and the Hon ble Tribunal hold that the RBI notifies the percentage of the outstanding deposit which has to be invested in approved securities from time to time. The percentage 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 .....

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