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Pegasus Asset Reconstruction Private Ltd. Versus Dy. Commissioner of Income Tax–3 (2) , Mumbai

2016 (7) TMI 741 - ITAT MUMBAI

Rectification of mistake - expenses so incurred being inextricably linked to NPA were held by the Tribunal to be the part of the work-in-progress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled - Held that:- Tribunal vide its order dated 30th October, 2015 has duly considered the entire factual matrix surrounding the business of the assessee in acquiring and dealing in NPA’s and level of uncertainty w.r.t. length of period of recovery and amount of rec .....

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y settled. Keeping in view of the peculiar factual matrix of the assessee’s business, the Tribunal has arrived at a decision looking into the facts and circumstances surrounding the assessee’s case. - Thus, we conclude that no error has crept in the order of the Tribunal dated 30-10-2015 which can be rectified under the mandate of the provisions of Section 254(2) of the Act as there is no mistake apparent from records. Thus, in the result the miscellaneous application filed by the assessee s .....

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9/Mum/2015 arising out of ITA No. 6331/Mum/2013 for the assessment years 2009-10 & 2010-11 respectively, the assessee has sought rectification of mistake apparent from records u/s 254(2) of the Income Tax Act,1961(Hereinafter called the Act ) in the common order dated 30th October, 2015 passed by the Income Tax Appellate Tribunal , C Bench , Mumbai (Hereinafter called the Tribunal ) for the both the years. 2. In these two miscellaneous applications, the assessee submitted that in ground No. .....

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disposed of the above issue as under:- 5 ..... In view of this the assessee wants to claim the expenses relating to the recovery and maintaining of such NPAs to profit and loss account as revenue expenditure. Assessee has practical difficulties in valuing such NPA because it is not certain as to how much will be the realisation and when. It may be difficult to even partially realise the revenue and to determine the profit. Therefore the assessee is not crediting profit and loss account with rec .....

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should be treated as work-in-progress with each NPA and transferred to profit and loss account only when the NPA is finally settled. Accordingly, CIT (A) was justifies in rejecting the claim of the assessee on this account. This reasoned findings of CIT (A) need no interference from our side because such expenses should be related as work-in-progress with each NPA and transferred to profit and loss account only when the NPA is finally settled Accordingly the appeal filed by the assessee is dismi .....

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ly if the principle of Matching Concept is satisfied. It was also held by the Hon ble Supreme Court that merely because a different treatment was given in the books of account cannot be a factor which would deprive the assessee from claiming the entire expenditure as a deduction. The assessee further submitted that Hon ble Supreme Court further held that the entries in the books of accounts are not determinative or conclusive and the matter is to be examined on the touchstone of the provisions c .....

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ort various propositions relied upon by the assessee duly supported by authorities during the course of hearing on 14-10-2015. It was the say of the learned counsel that these propositions were not discussed by the Tribunal in its orders.It was submitted that the order dated 31-10-2015 be recalled and ruling may be given in their favour. The assessee relied upon decision of Hon ble High Court of Gujarat in Apex Therm Packaging Private limited v. ITO in (2014) 42 taxmann.com 98(Guj.),Hon ble Bomb .....

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ibunal which cannot be rectified u/s 254(2) of the Act otherwise it would lead to review of the order dated 30-10- 2015 of the Tribunal. 3. We have heard the rival contentions and perused the order of the Tribunal dated 30th October, 2015 and other materials available on record including case laws. We have also gone through the various orders of the authorities below and the submission made during the course of hearing and the decision of Hon ble Supreme Court in the case of Taparia Tools Limite .....

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A s and level of uncertainty w.r.t. length of period of recovery and amount of recoveries to be made out of these NPA accounts and there-after the Tribunal has taken the conscious and well reasoned decision to consider these expenses incurred which are inextricably linked to the NPA s so acquired which NPA s were already treated by the assessee as work-in-progress and hence the expenses so incurred being inextricably linked to NPA were held by the Tribunal to be the part of the work-in-progress .....

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A ) from banks and financial institutions and then recover or realize the money from such loan accounts or from the assets acquired with NPA as security. The amount paid for acquiring NPA is capitalized in the books of account and any expenditure subsequent to it, relating to any particular NPA, is also capitalized with it and the same is carried forward as current asset, whereas, normal business expenses of maintaining office, etc. are charged to the Profit & Loss Account. But in the return .....

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ous contention before the CIT(A) vide it letters dated 20.12.2012 and 07.02.2013 which are detailed on pages 2 & 8 of the order of the CIT(A). The CIT(A), having considered the same, upheld the order of the Assessing Officer. 4. The same stand has been taken before us by, inter alia, submitting that the CIT(A) erred in confirming the action of Assessing Officer in disallowing revenue expenditure amounting to ₹ 1,93,93,293/- incurred towards realization of NPA on the ground that the sam .....

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ves acquiring NPAs from banks or financial institutions. These NPAs are loan amounts of various types of parties where loss is outstanding against the party and such party has also given certain assets as security to the bank/ financial institutions. The charge of such securities also comes to the assessee with NPAs. Either the NPA loan is recovered from the party and automatically the charge of the assts by which the loan was secured comes to an end. But generally such loans are bad accounts th .....

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such NPAs to Profit & Loss Account as revenue expenditure. Assessee has practical difficulties in valuing such NPAs because it is not certain as to how much will be the realization and when. It may be difficult to even partially realize the revenue or determine the profit. Therefore the assessee is not crediting Profit & Loss Account with recovery as and when made whereas that is transferred to NPA A/c. and only at the end, net profit or loss is transferred to the Profit & Loss Accou .....

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CIT(A) was justified in rejecting the claim of the assessee on this account. This reasoned findings of the CIT(A) need no interference from our side because such expenses should be treated as work-in-progress with each NPA and transferred to Profit & Loss Account only when the NPA is finally settled. Accordingly the appeal filed by the assessee is dismissed. We have observed that although the decision of the Hon ble Supreme Court in the case of Taparia Tools Limited (supra) has not been spec .....

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