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2016 (2) TMI 83 - ITAT CHENNAI

2016 (2) TMI 83 - ITAT CHENNAI - TMI - Addition on rebate on Hire purchase written off - Addition on additional Finance charges on account of change in method of accounting from Mercantile basis to Cash basis - CIT(A) deleted the addition - Held that:- The assessee company being in finance and leasing Business has claimed rebate on hire purchase written off in the books of accounts based upon the guidelines and accounting policies of ICAI. But no information was submitted to substantiate the cla .....

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he next ground is connected to Hire purchase were the assessee company has not recognized additional finance charges on NPA and changed method of accounting from mercantile system to cash system. The ld. Authorised Representative explained the hardship and constrains of the company for recoveries, were majority of hire purchase transactions have defaulted and charging of additional finance charges on NPA will not be prudent practice for the company. The ld. Authorised Representative filed paper .....

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eing heard to the assessee and decide the issue on merits - Decided in favour of revenue for statistical purposes. - I.T.A.No.1430/Mds/2012 - Dated:- 5-1-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Shri. V. Vivekanandan, IRS, CIT. For The Respondent : Shri. R. Vijayaraghavan, Advocate ORDER PER G. PAVAN KUMAR, JUDICIAL MEMBER: The appeal is filed by the Revenue against the order of Commissioner of Income-tax (Appeals)-XII, Chennai i .....

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is engaged in the business of Hire Purchase, leasing, factoring and real estate works. For the assessment year 2005-2006, the assessment u/s.143(3) of the Act was completed on 04.12.2007 determining total loss of ;17,73,71,490/- and subsequently under rectification u/s.154 of the Act dated 18.08.2008 the total loss was recomputed to ;19,39,20,047/- and assessee has filed an appeal aggrieved by the Assessing Officer order and partial relief was granted by Commissioner of Income Tax (Appeals) and .....

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pect of additional financial charges and non recognition of income in the current year. The Assessing Officer issued notice u/s.142(1) and called for the details. In compliance to notice, the ld. Authorised Representative filed explanations and submitted details called for from time to time. The Assessing Officer on the directions of Commissioner of Income Tax has called for the clarifications about rebate on hire purchase ;4,11,66,754/-. Further, the assessee has not entered into any new hire p .....

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cer on perusal of profit and loss account found ;5,74,75,603/- income from operations comparatively less than earlier assessment year 2004-2005. On examining the Audited accounts and notes on accounts found additional financial charges on account of delayed or non remittance of installment dues pertaining to hire purchase and financial lease contracts are not recognized. The Assessing Officer issued notice and called for the explanations on disputed issue and the assessee filed written submissio .....

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appellate proceedings, the assessee has raised grounds on rebate on hire purchase and reiterated submissions that such sum represented the amount written off as irrecoverable and represents the balance after settlement in the parties accounts and also relied on the Apex Court decision in the case of T.R.F. Ltd vs. Commissioner of Income Tax (2010) 323 ITR 397(SC. Further, the ld. Authorised Representative filed written submissions and supported his arguments and furnished list of rebates on hir .....

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.1 On the next ground of the additional finance charges of ;23,81,38,000/- the ld. Authorised Representative reiterated his submissions made before the Assessing Officer and explained the provisions of Companies Act in respect of NPA and also filed written submissions alongwith judicial decisions and the ld.CIT(A) perused the directors report and also accounting policies in Annual report and found reduction in the finance charges compared to earlier years due to deep financial crisis owing to po .....

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Annamalai Finance Ltd (2010 (186 Taxman 296) (Mad) and ld. Commissioner of Income Tax (Appeals) observed at page No.13 of the order as under:- Section 145 of the Income Tax Act, 1961- Change of method of accounting - assessment year 1997-98 - Assessee was a finance company - during relevant assessment year, it admitted overdue financial charges on hire purchase and lease transactions on cash basis i.e. on receipt basis, and not on accrual basis -Assessing Officer held that since assessee had be .....

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s very difficult to recognize income against overdue charges and therefore, Tribunal was justified in deleting additions made towards overdue charges, acknowledging change of method of accounting of overdue interest alone on cash basis . and allowed the appeal of the assessee by directing the Assessing Officer to delete the addition. Aggrieved by the order of the Commissioner of Income Tax (Appeals), the Revenue has filed an appeal before the Tribunal. 5. The ld. Departmental Representative on t .....

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or remand report from the Assessing Officer and similarly on the next issue of charging additional finance charges not recognized by the assessee due to change in method of accounting from mercantile system to cash system. Further, the ld. Departmental Representative argued that the burden lies on the assessee to support with evidence to claim deductions under the provisions of law and the ld.CIT(A) unilaterally decided the issue without calling for comments and no opportunity was provided to A .....

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Revenue appeal. 7. We heard the rival submissions of both the parties, perused the material on record and also judicial decisions cited. The assessee company being in finance and leasing Business has claimed rebate on hire purchase written off in the books of accounts based upon the guidelines and accounting policies of ICAI. But no information was submitted to substantiate the claim before completion of assessment. In the appellate proceedings, the assessee has submitted written submissions an .....

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