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Gruh Finance Ltd. Versus JCIT, Range-4, Ahmedabad

2016 (10) TMI 989 - ITAT AHMEDABAD

Disallowance made by the Assessing Officer out of prepayment charges made to NHB(National Housing Bank) - NCD(non-convertible debenture) expenses - Held that:- The issue raised in these two assessment years with regard to NHB prepayment charges is the similar issue that we already dealt with while dealing the issue of NCD expenses, where following the decision of Hon’ble Supreme Court in Taparia Tools Ltd (2015 (3) TMI 853 - SUPREME COURT ), we held that assessee is entitled to the entire deduct .....

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essee and revenue respectively against the orders of the Commissioner of Income-tax (Appeals)-VII, Ahmedabad, except ITA No. 3338/Ahd/2009 for AY 2006-06, which is assessee s appeal against the order of ld. CIT(A)-VII, Ahmedabad. 2. The common ground raised by the assessee in AYs 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 with regard to NCD(non-convertible debenture) expenses reads as under:- The learned Commissioner of Income-tax (Appeals)-VIII, Ahmedabad has erred in law and on facts of th .....

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2005-06. The facts with regard to expense on account of NCD as emerge from the record of AY 2005-06 are that during the course of assessment proceedings the Assessing Officer has observed that in the statement of income the assessee has claimed expenses on issue of NCD at ₹ 21,49,419/- and the same was not claimed in the profit and loss account. The assessee was asked to explain about its claim of expenses on issue of NCD at ₹ 21,49,419/- in the statement of income but not having cla .....

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es was reduced from the share premium account in the books of accounts and not debited to profit and loss account but separately claimed as deduction while computing the income. The assessee relied on the case of Tuticorn Alkali Chemicals & Fertilizers Ltd vs. CIT, 227 ITR 172 (SC) on the issue of accounting entry vis-à-vis determination of income. The assessee has also placed reliance on the following judgments:- i) CIT vs. Indian Discount Co. Ltd., 75 ITR 191 (SC) ii) CIT vs. Mogull .....

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t is also against the matching principles of income and expenditure. He relied on the decision of Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs. CIT, 225 ITR 802 (SC). 2.4 He also relied on the decision of Hon ble Bombay High Court in the case of Taparia Tool Ltd, reported in 260 ITR 102 (Bom) wherein the Hon ble High Court after considering the judgment of Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs. CIT, 225 ITR 80 .....

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be accrued from the said expenditure will be available to the assessee in the period of five years. He also held that the claim of the appellant is also against the matching principles of income and expenditure. The ld. CIT(A) placed reliance on the decision of Hon ble Supreme Court in the case of Madras Industrial Investment Corporation Ltd vs. CIT (supra) and the Hon ble Bombay High Court in the case of Taparia Tools Ltd (supra). 2.6 The ld. Counsel for the assessee submitted that the expendi .....

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ne through the orders of the lower authorities. The Hon ble Supreme Court in the case of Taparia Tools Ltd (372 ITR 605) has held that where assessee-company issued debenture for 5 years and the assessee did not want to spread over the interest expenditure over a period of 5 years, it claimed entire deductible expenditure in the same year in the return filed by it, in such a situation it was permissible in law to the assessee in consonance with the provisions of the Act to claim the expenditure .....

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isions of the Act which permit the assessee to claim the expenditure in the year in which it was incurred, the fact that a different treatment was given in the books of account could not be a factor which would bar the assessee from claiming the entire expenditure as a deduction. Once a return in that manner was filed, the Assessing Officer was bound to carry out the assessment applying the provisions of the Act and not to go beyond the return. There is no estoppels against the statute and the A .....

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are also allowed for the aforesaid reasoning. 3. The second ground of the assessee for AYs 2005-06 and 2006-07 is against the disallowance made by the Assessing Officer out of prepayment charges made to NHB(National Housing Bank). 3.1 For AY 2005-06, the Assessing Officer observed that the assessee- company has claimed in the statement of income a deduction on account of pre-payment charges to NHB amounting to ₹ 2,62,45,000/-. The assessee claimed the said expenses in the Profit & Los .....

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account the same has been amortized at ₹ 42,02,920/- and claimed ₹ 2,62,45,400/- as deduction from the total income on actual payment basis. Treatment given in the books of accounts has no relevance to the computation of income under the provisions of the Income-tax Act, 1961. The assessee also relied on the decision of Hon ble Supreme Court in the case of Tuticorn Alkali Chemicals & Fertilizers Ltd v/s. CIT ( 227 ITR 172 (SC)) wherein the issue in respect of accounting entry vis .....

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ractice. Accounting practice cannot override Section 56 or any other provision of the Act. As was pointed out by Lord Russell in the case of B.S.C. Footwear Ltd., the IT law does not march step by step in the footprints of the accountancy profession. The assessee has also placed reliance on the following judgments.:- i) CIT vs. Indian Discount Co. Ltd., 75 ITR 191 (SC) ii) CIT vs. Mogullines Ltd, 46 ITR 590 (Bom) iii) CIT vs. Shoorji Vallabhdas & Co., 46 ITR 144 (SC) iv) CIT vs. Kalooram Gov .....

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tated that this was the reason why the assessee itself had claimed such expenses to the extent of ₹ 42,02,920/- in the Profit and Loss account and the balance was amortized in the books of account. The AO placed reliance on the decision of Hon ble Bombay High Court in the case of Taparia Tools Ltd, reported in 260 ITR 102 (Bom) wherein the Hon ble High Court after considering the judgment of Hon ble SC in the case of Madras Industrial Investment Corporation Ltd vs. CIT, 225 ITR 802 (SC) ha .....

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e submissions of the assessee, confirmed the aforesaid disallowances for both assessment years. Keeping in view the rational on the basis of which NCD expenses have been disallowed by following the decision of Hon ble Supreme Court in the case of Madras Industrial Investment Corpn vs. CIT, 225 ITR 802 and the decision of the Hon ble Bombay High Court in the case of Taparia Tools Ltd, 260 ITR 102. 3.3 Aggrieved by the order of the CIT(A), the assessee preferred this ground before the Tribunal. Th .....

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ears with regard to NHB prepayment charges is the similar issue that we already dealt with while dealing the issue of NCD expenses, where following the decision of Hon ble Supreme Court in Taparia Tools Ltd (372 ITR 605), we held that assessee is entitled to the entire deduction of NCD expenditure. In view of the above facts and legal findings, we allow this ground of appeal of the assessee. Thus, the grounds of assessee s appeals on the same issue for AYs 2006-07 are also allowed for the afores .....

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ollowing mercantile system of accounting and provision was made more than the prescribed norms of NHB. In response thereof, the assessee submitted that the National Housing Bank(NHB) has revised the norms for recognizing Non-Performing Assets(NPA) with effective from March 31,2005. As per the new norms, NPA are recognised on the basis of 90 days overdue as against 180 days past due under the old norms.As per the new norms,NPA are to be treated as Bad& Doubtfull if they remain outstanding for .....

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t the interest accrued upto 30.03.2005 was required to be recognized as per earlier norms effective till 30.03.2005 and he accordingly added the accrued interest of ₹ 24,01,200/- in the income of the assessee. 4.2 Aggrieved, the assessee went in appeal before the ld. CIT(A) who, after considering the submissions of the assessee, confirmed the action of the Assessing Officer and dismissed the assessee s ground in this respect. 4.3 Aggrieved by the aforesaid order of the CIT(A), the assessee .....

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zing NPA was effective from 31.03.2005 and the accounts have been closed on 31.03.2005, therefore, the assessee has rightly followed the new norms of NHB for recognizing NPA, the action of Assessing Officer in this regard is not justified and the same may be deleted. 4.5 The ld. DR, on the other hand, supported the orders of the lower authorities. 4.6 We have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities. We find force .....

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assessee. Thus, this ground of the assessee is allowed for statistical purposes. 5. Next ground of the assessee relates to the disallowance of bad debts made by the Assessing Officer for A.Y.2005-06 toA.Y. 2009-10 In the A.Y.2005-06, the Assessing officer has not allowed the bad debt claim of the assessee holding that the same has not become bad during the year under consideration. The ld. CIT(A) inclined his views to the AO s finding that the debt under reference cannot be claimed bad when the .....

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for the assessee contended that the bad debts written off during the year AY 2005-06 of ₹ 2,44,43,353/- was in respect of individual home loans which were not recovered. He referred to various pages of submission in this regard furnished in the paper-books. It was stated that interest earned thereon has been duly credited to the Profit & Loss A/c in the earlier year and justify its claim of bad-debt. He further submitted that It is business loss of the assessee to be allowable under t .....

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ery of loan amount with outstanding dues becomes irrecoverable even after legal action, the outstanding amount is written off. It was also submitted that as per the amended provisions of Section 36(1)(viii), once the amount is written off as bad debt, the same has to be allowed as deduction under the said provision. Reliance is placed on the judgment of Hon ble High Courts in the case of (i) CIT vs. Morgen Securities & Credits Pvt Ltd, 292 ITR 339 (Del), (ii) CIT vs. Autometers Ltd, 292 ITR .....

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ival contentions, perused the material available on record and gone through the orders of the lower authorities. We find that the Hon ble Supreme Court in the case of TRF Ltd (supra) has held that it is not necessary for assessee to establish that debt, in fact, has become irrecoverable, it is enough if bad debt is written off as irrecoverable in accounts of assessee. The Hon ble Apex Court in the case of Vijaya Bank (supra) has held as under:- The first question which arises for determination c .....

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However, as stated by the Tribunal, in the present case, besides debiting the P&L a/c and creating a provision for bad and doubtful debt, the assessee-bank had correspondingly/simultaneously obliterated the said provision from its accounts by reducing the corresponding amount from loans and advances/debtors on the asset side of the balance sheet and, consequently, at the end of the year, the figure in the loans and advances or the debtors on the asset side of the balance sheet was shown as .....

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. 36(1)(vii) as there was an actual write off by the assessee in its books, as indicated above. We, therefore, respectfully following the aforesaid decisions of Hon ble Apex Court in the case of TRF Ltd and Vijaya Bank (supra), delete the disallowance of bad debts made by the Assessing Officer. Thus, the grounds of assessee s appeals on the identical issue for AYs 2006-07, 2007- 08, 2008-09 and 2009-10 are also allowed for the aforesaid reasoning. 6. Next ground of the assessee relates to claim .....

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per Explanation (e) to clause (viii) to sub-section (1) of Section 36 of the Act long term finance means only loan or allowances where the terms under which money are loaned or advanced provide for repayment along with interest there of during a period of not less than 5 years. The assessee claimed that in Section 36(1), nowhere it is provided that deduction u/s 36(1)(viii) will not be allowed if the tenure of the loan is reduced to less than 5 years.Once long term housing finance was made and n .....

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as stood in the relevant assessment year stipulated as under "in respect of any special reserve created [and maintained] by a financial corporation which is engaged in providing long- term finance for [industrial or agricultural development or development of infrastructure facility in India or by a public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purpo .....

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) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (c) "Government company" shall have the meaning assigned to it in section 617 of the Companies Act, 1956 (1 of 1956);] [(d) "infrastructure facility" shall have the meaning assigned to it in clause (23G) of section 10;] [(e) "long-term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment .....

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loan portfolio transferred before holding for 5 years at ₹ 1,27,02,648/- and other charges related to such transferred loan portfolio at ₹ 9,78,625/-. The Assessing Officer has also observed that the assessee computed deduction u/s 36(1)(viii) by including bad debt recovered at ₹ 18,73,000/- which was otherwise not an income derived from long term housing finance business. Similarly, the AO also noticed that the EMI residual related to earlier year transferred to the P & L .....

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84 (SC); ii. Eastern Seafood Exports P Ltd, 215 ITR 64 (Mad.); iii. CIT vs. Sterling Foods, 237 ITR 579 (SC); iv. CIT vs. Cement Distributors Ltd, 208 ITR 355 (Del.); v. CIT vs. Cochin Refineries Ltd, 135 ITR 278 (Ker.); vi. Pandian Chemicals Ltd vs. CIT, 262 ITR 278 (SC) 6.2 In view of above stated facts the AO has disallowed deductions u/s 36(1)(viii) of the following income:- (i) Bad Debts recovery - ₹ 18,73,000 (ii) Interest earned on the loan portfolio Sold/transferred before 5 years, .....

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for deduction u/s 36(1)(viii). The Ld.CIT (A) held that exclusion of ₹ 1,27,02,648/- on portfolio transferred to HDFC in computing the deduction u/s 36(1)(viii) is justified, similarly the fees and charges amounting to ₹ 9,78,625/- do not fall within the purview of Section 36(1)(viii). The ld. CIT(A) also held that bad debt recovery amounting to ₹ 18,73,000/- was not established by the assessee with any cogent materials as income from long term housing finance. Regarding EMI re .....

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n the case of CIT vs. Weizmann, [2013] 33 taxmann.com 171 (Kar.), Rural Electrification Corporation Ltd, 221 CTR (AAR) 210. The ld. Counsel for the assessee also stated that the claim of the assessee regarding bad debt recovery of Ra.18,73,000/- for deduction u/s 36(1)(viii) is covered in favour of the assessee vide combined order of ITAT, Ahmedabad for AY 2004-05 and 2000-01 and referred to the various pages of paper-book. 6.6 The ld. DR relied on the order of the lower authorities. 6.7 We have .....

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he AO haws observed that ratio of operating income from long term finance is 97.01%. In the year in which the loans have gone bad and the assessee has written off them, the eligible profit derived from long term housing finance was reduced by the amount written off by the assessee as bad debt. In this year, when the assessee recovered bad debts, its income from long term finance would be enhanced by that much amount. Thus, the AO has erred in rejecting the claim of the assessee. The AO has made .....

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.e. interest income. It was reduced by virtue of written off of certain debts which has direct nexus with the income derived by the assessee. This year, these entries have been reversed by recovery of this bad debt. Thus, nexus is available. The AO is not justified to exclude the amount of bad debts recovered by the assessee for calculating the claim under section 36(1)(viii) of the Act. 6.8 Regarding the claim of the assessee pertaining to ₹ 1,27,02,648/- interest earned on the loan portf .....

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oviding long term finance for industrial, agriculture or housing projects, then, out of profit derived from such business of providing long term finance, the assessee could claim a deduction of 40% and create a reserve of that amount. It is pertinent to observe that in this year, the assessee has created a special reserve of ₹ 210 lakhs. As far as the conditions enumerated in section 36(1)(viii) is concerned, there is no dispute between the parties that the assessee has fulfilled condition .....

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Section. According to the ld.AO, this clause suggests that loan account should be older than five year, only thereafter, the interest from such loan account would qualify for deduction. The case of the issue is that by assignment of loan portfolio the character of loan account does not change. It still remains a long term finance. The right to receive interest has changed the hands. Accordingly the new company if fulfills other conditions contemplated in the Act, then, assessee will be entitled .....

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eaning construed by us can be further fortified by considering section 155 of the Income Tax Act. Under this section AO has been empowered to withdraw certain deduction to an assessee. For example investment allowance is being granted to an assessee u/s.32A in respect of ship and such ship was transferred before expiry of eight years in violation to the conditions, then u/s.155 it will be construed that such allowance was granted wrongly. Similarly, a provision has been made to withdraw number o .....

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years, which continues even after assignment, then, interest income from those accounts upto the date of assignment would qualify for deduction under section 36(1)(viii) of the Act in the hands of the assessee. These directions are subject to fulfillment of other conditions which are not disputed before us. The ld.AO shall also ensure that double deduction should not be made i.e. by assessee as well as by HDFC. 6.10 In view of the above cited facts and judicial findings, we remit this issue to t .....

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sure that double deduction should not be made, i.e., by assessee as well as by HDFC. 7. Now, coming to Department s appeal for AY 2005-06. The ground No.1 reads as under:- 1. The ld. CIT(A) erred in law and on facts in deleting the addition of ₹ 9,83,32,951/- being the amount of EMI residuals accrued for the AY 2005-06. 7.1 During the course of assessment proceedings, the Assessing Officer noticed from the notes forming part of accounts that the assessee company act as receiving and paying .....

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o tax. The assessee explained that the same cannot be taxed as income of the year on the following grounds:- 5.1 In the computation of income filed along with the Return of Income, a sum of ₹ 1,45,79,144/- has been reduced from the total income. The Appellant has sold/transferred/assigned individual loan portfolios in earlier year and profit in respect of the said loan portfolios was duly booked in profit of relevant previous year. During the year under consideration, due to earlier paymen .....

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borrowers during the remaining tenure of loan and payable to the Buyer for the remaining tenure of the loan was recognized during the year in books of account. Out of the said EMI residual, the Appellant company has further set aside ₹ 3,10,17,864/- being Reserve for contingencies to meet any contingency arising out of prepayment and the balance of ₹ 6,73,15,087/- is transferred to Profit & Loss account. The said amount pertains to the whole un-expired period of loan portfolio. 5 .....

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ognized in the book of the year under consideration. In other words, amount of ₹ 6,73,15,087/- has been added to the income and amount of ₹ 5,27,35,943/- has been excluded from the total income for the reason that the same cannot be said to have accrued for the year under consideration. This treatment is in line with the guidance note on "Accounting for securitisation" issued by the Institute of Chartered Accountants of India. 5.4 Thus, after excluding EMI residual income o .....

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lained above, the amount in question pertains to the entire un- expired period of loan portfolio. The same cannot be said to have accrued for the year under consideration and therefore, the same cannot be brought to the tax as income of the year under consideration. (b) In the present case, the Appellant is appointed as agent by buyer for the purpose of recovery of loan amount assigned to buyer and for performing that tasks, the Appellant is entitled to certain portion of interest collected from .....

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throughout the period for which the installments are outstanding. Attention is invited to Clause 5.5 of the Agreement which reads as under: "The seller shall act and continue to act as the Receiving and Paying Agent until all the Receivables shall have been paid. In the event of the occurrence of any Event or Default, and if so decided by the Beneficiary, the Seller shall cease to act as the Receiving and Paying Agent. In that event the Beneficiary may, at its option, terminate the appointm .....

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continue to act as agent for buyer. In the event of non-acting as agent, question of getting remuneration will not arise. Even otherwise, the Appellant is entitled to service charges for carrying out the work of collecting the amount from the loanee over a period of years. Under the circumstances, the difference between the amount of installments in respect of interest to be collected and be paid to buyer cannot be said to be income of the current year in as much as the said income is for runnin .....

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ll arise only if the borrower continues to serve the loan for the agreed term of loan. However in case if the borrower exercises the option of making the prepayment of loan, the EMI residual calculated may not actually become realizable and will have to be reversed in book in the year of prepayment, as the loan is foreclosed before the expiry of the agreed tenure, for the this reason during the under assessment reversal entry has been passed as mentioned in above para. In such case no income for .....

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case an assessee had claimed deduction of expenditure in one year though benefit of the same was available to it over a period of 12 years. The Supreme Court observed as under :- "Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety of years even if the assesses has written it off in his books over a number of years. However, the facts may justify an assessee who has ; incurred expenditure in a particular year .....

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sidual Income in the books of accounts, it is submitted that the accounting entries cannot be made base for deciding the taxability of income. Attention is invited to the Supreme Court's decision in the case of Tuticorn Alkali Chemicals and Fertilizers Ltd. v. C.I.T. [227 ITR 172 (SC)J, wherein issue in respect of accounting entry vis-a-vis determination of income has been discussed which is reproduced herein below: - "It is true that this Court has very often referred to accounting pra .....

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Ltd. 91970) [77 ITR 857], 860 (CA), the income tax law does not march step by step in the foot steps of the accountancy profession. " Reliance is also placed on the following judgments: (a) CIT v. Indian Discount Co. Ltd. [75 ITR 191 (SC)] (b) CIT v. Mogullines Ltd. [46 ITR 590 (Bom)] (c) CIT v. Shoorji Vallabhdas & Co. [46 ITR 144 (SC)] (d) CIT v. Ashokbhai Chimanbhai [56 ITR 42] (e) CIT v. Kalooram Govindram (57 ITR 630 (SC)] (i) It is also submitted that as per the scheme of Income T .....

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nd 2004-05 and the Learned CIT(A)-VIII, Ahmedabad has decided the issue in our favour. It is therefore requested not to make any addition with this regard. 7.2 The AO has not accepted the explanation of the assessee and stated that in view of the detailed reasons mentioned in the orders of earlier yars for AY 2001-02 to AY 2004-05, the above sum of ₹ 9,83,32,951/- was added back to the total income being the EMI residual not accounted by the assessee as income. 7.3 The ld. CIT(A) deleted t .....

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these circumstances, there does not appears to be any justification for taxing the future income which has not accrued to the appellant during the relevant period, merely on the basis of book entries. 8.6 It is seen that similar addition was made on the identical facts in the income of the appellant in the A.Yrs.2001-02 to 2004-05. The additions so made were deleted by my Ld. Predecessor by his appellate orders for respective assessment years. My Ld. Predecessor while deleting the addition on si .....

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correctly offered in the computation statement and nothing more is required to be added. Further, the appellant has not sold its Housing Loan Portfolio with both principal and future interest components. It has only sold the principal loan part outstanding as on the date at par and the future interest components are to be recovered from the borrowers and passed it on to HDFC. HDFC has not paid to the appellant anything to cover the future interest accruals. As such the observation of the A.O. th .....

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ill be taxed in this year and that is what the appellant has already offered. The agreement between the appellant and the HDFC has to be understood in a holistic perspective and any disjointed view would lead to incorrect understanding. In the light of the foregoing discussions and as laid down by the Apex Court cited above (227 ITR 172), addition made by the A.O. in this case is not sustain able and I direct him to delete the said addition as it only represents income for the future years." .....

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e the addition of ₹ 9,83,32,951/-. The appellant succeeds in this ground of appeal. 7.4 The ld. DR relied on the order of the Assessing Officer. The ld. Counsel for the assessee contended that this is covered issue and the Co-ordinate Bench of ITAT, Ahmedabad in assessee s own case vide a combined order for AY 2004-05 and 2000-01 in ITA No.2238/Ahd/2007 and 2601/Ahd/2008 has confirmed the order of the ld. CIT(A) in which the similar addition made by the Assessing Officer was deleted. 7.5 W .....

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appeal filed by the Assessing Officer, the assessee has raised the following grievance: The ld. CIT(A) erred in law and on facts of the case in deleting the disallowance of EMI residual account amounting to ₹ 803.40 lacs, without appreciating the definition of income as explained by the Hon ble Supreme Court in the case of Shiv Prakash Janak Raj & Co. reported at 222 ITR 583. 19. So far as this issue is concerned, the relevant material facts are as follows. During the course of the ass .....

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op that the assessee computed the surplus of ₹ 932.42 lakhs being the difference between EMI recoverable form the borrowers during the remain loan tenure, and the amount payable by the assessee to the buyer of assessee s home loan portfolio. This represented, what was termed as, EMI residual. Out of this amount, the assessee further set aside a sum of ₹ 428.31 lakhs on account of contingencies of pre- payments. The balance amount of ₹ 507.29 lakhs was transferred to the profit .....

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be brought to tax in this year itself. He also held that even the amount of contingency set aside by the assessee at ₹ 428.31 lakhs could not be allowed as it is only a contingent, and not real, liability. He thus proceeded to bring to tax the balance amount of ₹ 803.40 lakhs ( i.e. EMI residual of ₹ 935.42 lakhs minus the amount already offered to tax amounting to ₹ 132.02 lakhs) in this assessment year. Aggrieved by the stand so taken by the Assessing Officer, assessee .....

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he CIT(A) and is in appeal before us. 20. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 21. In the landmark judgment of Chainrup Sampatram Vs CIT [(1953) 24 ITR 481 (SC)], Hon ble Supreme Court has observed that While anticipated loss is thus taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader wo .....

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ts, unrealised profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following year's account in a business that is continuing are not brought into the charge as a matter of practice, though, as already stated, loss due to a fall in price below cost is allowed even if such loss has not been actually realised. The principle is thus unambiguous. The principles of conservatism, and considerations of prudence, in the accounti .....

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by Hon ble Supreme Court. No matter how reasonable is it to assume that the assessee will make these profits, these profits cannot be brought to tax at this stage. That is what the legal position, for the detailed reasons set out above, is. 22. In the case before us, whatever be certainty of the assessee realizing the profits in future as a result of this arrangement, these profits can only be brought to tax when these actually accrue and arise and that stage comes only when the recoveries are .....

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no infirmity in the well reasoned conclusion arrived at by the CIT(A) and decline to interfere in the matter. 23. The appeal filed by the Assessing Officer is thus dismissed. 24. To sum up, for the assessment year 2001-02 in quantum assessment proceedings, while the appeal filed by the assessee is partly allowed, the appeal filed by the Assessing Officer is dismissed. 6. There is no disparity of facts. The ground raised by the AO is identical, as was raised in the Asstt.Year 2001-02. Following t .....

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9-10 are also rejected. 8. Ground No.2 of the Revenue s appeal for AY 2005-06 reads as under:- The ld. CIT(A) erred in law and on facts in allowing the disallowance of ₹ 1,71,000/- made by the Assessing Officer under the provision of Section 35D of the Act. 8.1 In their return of income the assessee had claimed deduction u/s 35D of the Act at ₹ 1,71,000/- being the FCD issue expenditure; the AO disallowed the claim on the basis of earlier year s disallowance made on the similar groun .....

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. However, after the business has been commenced the expenditure mentioned therein can be amortized and allowed deduction u/s.35D of the Act only if the said expenditure is incurred in connection with the extension of industrial undertaking. It emerges out from the record that the assessee had incurred expenditure for issuance of fully convertible debenture. It has claimed 1/10 th of the expenditure. In this year, such expenditure was claimed at ₹ 11,63,048/-. The ld.CIT(A) has allowed thi .....

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