TMI Blog2017 (7) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... they are revised. The purpose of classification of debts as NPA by the NHB and the purpose for non-recognition of income for the purposes of the Act are different. Given the wording of the relevant provisions of the Act and the NHB Act, it is not possible to agree to HUDCO's proposition that with every change in the NHB guidelines there would be a corresponding automatic change in Rule 6EB. As pointed out by the ITAT, the real income principle would have no application as far as Section 43D of the Act. A distinction is required to be drawn between the concept of 'deductions' claimed under the Act which has to satisfy the conditions laid down therein to qualify as such and the prudential norms that the NHB Act may lay down for determining an NPA. The present case is similar to Southern Technologies Ltd. v. CIT (2010 (1) TMI 5 - SUPREME COURT OF INDIA) where the Supreme Court had to deal with the claim for deduction on account of the method for determining - Decided in favour of the Revenue and against the Assessee. - ITA Nos.440/2016, 442/2016, 444/2016, 445/2016 & 446/2016 - - - Dated:- 3-7-2017 - S. Muralidhar And Chander Shekhar, JJ. For the Appellant : Mr. Gagan Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as NPA. The interest corresponding to such NPA was only to be considered for deduction for non-recognition of the interest income. In other words, the AO held that the NPA was to be classified as per Rule 6EB of the Rules and not by the amended guidelines of the National Housing Bank ( NHB ) effective from 31st March, 2005. 6. In the absence of calculations furnished by HUDCO, the AO allowed 50% of the revenue de-recognition of ₹ 54,13,48,468/- thereby disallowing ₹ 27,06,74,234/-. This was added back to the income of HUDCO. The Commissioner of Income Tax (Appeals) concurred with the findings of the AO and sustained the addition. 7. Similar additions proposed by the AO for the AYs 2006-07, 2007-08, 2008-09 and 2009-10 were likewise confirmed by the CIT(A) with dismissal of HUDCO's appeals on that issue. 8. By the impugned common order for all the AYs, the ITAT rejected the contention of HUDCO and held that it was entitled to deduction as per Rule 6EB of the Rules only. However, since the AO had computed the disallowance only on an estimate basis, the matter was restored to the AO to compute the deduction strictly in terms of Rule 6EB of the Rules and allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to such categories of bad or doubtful debts as may be prescribed having regard to the guidelines issued by the National Housing Bank in relation to such debts, shall be chargeable to tax in the previous year in which it is credited by the public financial institution or the scheduled bank or the State financial corporation or the State industrial investment corporation or the pubic company to its profit and loss account for that year or, as the case may be, in which it is actually received by the institution or bank or corporation or company, whichever is earlier. 13. This has to be read along with Rule 6EB, which reads thus: Rule 6EB Categories of bad or doubtful debts in the case of a public company under clause (b) of section 43D. The provisions of clause (b) of Section 43D shall apply in the case of every public company where its income by way of interest pertains to the following categories of bad and doubtful debts, namely, - (a)(i) doubtful asset, that is, a debt which has remained a non-performing asset of the nature specified in sub clause (ii) for a period exceeding two years; (ii) non-performing asset referred to in sub clause (i) shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f housing finance institutions or to any housing finance institution in particular as to (a) the purpose for which advances or other fund-based or non-fund-based accommodation may not be made; and (b) the maximum amount of advances or other financial accommodation or investment in shares and other securities which, having regard to the paid-up capital, reserves and deposits of the housing finance institution and other relevant considerations, may be made by that housing finance institution to any person or a company or to a group of companies. 36. Chapter V to override other laws. The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. 15. While it is true that the Assessee is governed by the instructions issued by the NHB as to what should be considered as an NPA, the fact remains that as far as the permissibility of deduction for the purposes of computing the taxable income is concerned, it is the Act that applies. In the first place, it requires to be noticed that in terms of clause (b) of Section 43D of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the RBI Act does not override the provisions of the Act. The Court reconciled the said judgment with the decision in TRO v. Custodian appointed under the Special Court (Trial of Offences relating to Transaction in Securities) Act, 1992 [2007] 293 ITR 369 (SC) which held that where an Act makes a provision with a non-obstante clause, that would override the provisions of all other Acts. 21.1 In CIT v. Vasisth Chay Vyapar Ltd. (2011) 330 ITR 440 (Del.), the Court was concerned with the concept of income recognition. In that case, the Assessee was a non-banking financial company which had advanced certain Inter-Corporate Deposits ( ICDs ) to a company 'S'. No interest was received on such deposits for more than six months. In terms of directions given by RBI, the Assessee treated the said ICDs as NPAs. It did not disclose interest income thereon which, according to it, was not realizable. The AO, however, added the interest as income of the Assessee holding that it had 'accrued' to the Assessee since the Assessee was following the mercantile system of accounting. The AO held that the provisions of the Reserve Bank of India Act ( RBI Act ) read with NBFCs Pru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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