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2016 (11) TMI 1187 - MADRAS HIGH COURT

2016 (11) TMI 1187 - MADRAS HIGH COURT - TMI - Method of accounting - recognition of additional finance charges on cash basis - interest in relation to bad or doubtful debts - Held that:- Overdue charges can be charged to tax only on cash receipt basis and not on accrual basis - Decision in the case of Commissioner of Income Tax v. Annamalai Finance Limited, [2009 (11) TMI 11 - MADRAS HIGH COURT] and CIT v. Annamalai Finance Limited, [2004 (10) TMI 51 - MADRAS High Court ] - Decided in favor of .....

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cial Corporation or State Industrial Investment Corporation nor viz., a Public Financial Institution, as defined clearly in Section 4A of the Indian Companies Act, 1956. The assessee does not fall in any one of those categories specified. Consequently, the assessee's case does not fall within the sweep of clause (a) of Section 43D of the Income Tax Act, 1961. - Civil Miscellaneous Appeal No. 1422 of 2010 - Dated:- 15-11-2016 - Nooty Ramamohana Rao And Anita Sumanth, JJ. For the Appellant : Mr. J .....

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quot;1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the assessee was entitled to account for only the additional finance charges on a cash basis, while it was otherwise following the mercantile the system of accounting and also accounting for the very same transaction on a mercantile basis under the Company Law? 2. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in ho .....

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in the taxable business income, ignoring the special provisions contained in Section 43 D of the Income Tax Act and Rules made thereunder, specifying the classes of assessees and categories of bad and doubtful debts in respect of which such exclusion could be made? 4. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the provision for the bad debts could not be added back while computing the book profits u/s 115JB in view of th .....

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alai Finance Limited, (2005) 275 I.T.R. 451 and CIT v. Annamalai Finance Limited, (2009) 319 I.T.R. 196 (Mad.), it was held that overdue charges can be charged to tax only on cash receipt basis and not on accrual basis. Same view was subscribed to, in a judgment, dated 22.06.2015, rendered in Tax Case Appeal Nos.1230, 1232, 1234 of 2007 and 638, 969 and 970 of 2009. Hence, it is agreed on both sides that question Nos.1 and 2 be answered in favour of the assessee and against the Revenue. 4. So fa .....

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ases of Public Financial Institutions, Scheduled Banks, State Financial Corporations, State Industrial Investment Corporations or Public Companies, which charge interest in relation to bad or doubtful debts. It is not in dispute that the assessee before us is not a Schedule Bank or the State Financial Corporation or State Industrial Investment Corporation nor viz., a Public Financial Institution, as defined clearly in Section 4A of the Indian Companies Act, 1956, as herein below:- "Section .....

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