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TMI Blog2016 (8) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... enue for assessment year 2000-01 relating to lease rental income. 2. The ground No. 7 raised by the assessee in its appeal reads as under : "7. The learned CIT(A) erred in confirming addition of Rs. 4,17,888/- and Rs. 19,20,000/- to the income of the appellant in respect of lease rental income rejecting the contention of the appellant that such income had not accrued to the appellant even under the mercantile system of accounting followed by the appellant." 3. The corresponding ground raised by the Revenue in its appeal for assessment year 2000-01 reads as under : "4.1 On the facts and in the circumstances of the case, the Ld. CIT(A) erred in holding that the A.O. shall grant deduction of bad debt of Rs. 4,17,888 in A.Y. 2001-02 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court of India rendered in the case of Commissioner of Income Tax Vs. M/s. Excel Industries Ltd. in Civil Appeal No. 125 of 2013 decided on 08-10-2013, although, the same was referred during the course of making submission. The Tribunal recalled the order dated 30-06-2015 for the limited purpose of adjudicating ground No. 7 in ITA No. 1247/PN/2005, ground No. 4.1 to 4.5 in ITA No. 1290/PN/2005 and ground No. 2 in ITA No. 1291/PN/2005. Since, the issue involved in the aforesaid grounds raised by the assessee and the Revenue is same, all the three appeals are taken up together for adjudication. 6. The facts relating to the grounds raised in the appeals are : The assessee amongst other business is also engaged in the business of giving on le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kalies Limited Rs. 4,17,888/- and Inertia Industries Limited Rs. 19,20,000/- in assessment year 2000-01 and directed the Assessing Officer to allow deduction of aforesaid amount in succeeding assessment year i.e. assessment year 2001-02. Against the findings of Commissioner of Income Tax (Appeals), both, the assessee and the Revenue are in appeal. 7. Shri H.P. Mahajani and Shri Bhave appearing on behalf of the assessee submitted that the companies Modi Alkalies Limited, Parasrampuria Industries Ltd., Parasrampuria International Ltd. and Inertia Industries Limited have suffered huge financial losses. These companies have been referred to BIFR. No lease rental income could be recovered from these companies during the period relevant to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputed fact that the assessee has leased out assets to the aforesaid companies and assessee has not received lease rentals. The assessee should have accounted for the lease rentals in the books and in respect of unrecovered lease rentals, the assessee could have claimed bad debt in the subsequent assessment years. The assessee cannot straight away claim the amount of unrecovered lease rental as bad debt. The ld. DR further submitted that the proposition of real income theory put forth by ld. AR would not apply in the facts and circumstances of the present case. 9. We have heard the submissions made by the representatives of rival sides and have perused the orders of the authorities below. The only issue before us for adjudication is, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat in fact no real income but only hypothetical income had accrued to the assessee and Section 28(iv) of the Act would be inapplicable to the facts and circumstances of the case. Essentially, the Assessing Officer is required to be pragmatic and not pedantic." 10. We are of the considered view that this issue needs a revisit to the file of Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) while dealing with the issue in assessment year 2000-01 partly deleted the addition in respect of Parasrampuria Industries Ltd. and Parasrampuria International Ltd. by following the concept of real income and upheld the addition in respect of Modi Alkalies Ltd. and Inertia Industries Ltd. whereas, all the four companies are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable. The appellant opted Plan B. Under this plan only 45% of the principal amount due as on 31.3.2000 was to be paid to the appellant in full and final settlement of all existing and future claims. The Plan was accepted ill March 2001 and the resultant loss has been booked as bad debts and also allowed by the Assessing Officer in the year under appeal. In my opinion, in these circumstances there was no jurisdiction for bringing to tax income of Rs. 16,06,203/-, 55,37,139 and 53,89,360 relating to the period after 31.3.2000. As a matter of fact, the Restructuring Plan having frozen the debts at the figure as on 31.3.2000 and having drastically reduced the same, there was no accrual of income for' the period after that. The addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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