TMI Blog2022 (1) TMI 604X X X X Extracts X X X X X X X X Extracts X X X X ..... S CANFIN HOMES LTD. [ 2011 (8) TMI 178 - KARNATAKA HIGH COURT] , whereby identical questions have been considered and answered in favour of the assessee and against the revenue. It has been categorically observed that the contention of the revenue that in respect of nonperforming assets even though it does not yield any income as the assessee has adopted mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. Therefore, substantial questions of law nos.1 2 requires to be answered in favour of the assessee and against the revenue. Also see DAVANGERE VERSUS M/S. DAVANGERE DISTRICT CENTRAL CO-OPERATIVE BANK LIMITED [ 2020 (11) TMI 654 - KARNATAKA HIGH COURT] and M/S. VASISTH C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses under Section 37 of the Act. The CIT (Appeals) as well as the Tribunal has analyzed the factual aspects in the background of the legal principles, which by any stretch of imagination cannot be held to be perverse or arbitrary. More over, these factual aspects recorded by the fact finding authorities cannot be interfered. Accordingly, the substantial question of law no.3 is answered in favour of the assessee and against the revenue. Amortization premium paid for acquisition of Government securities - Tribunal held as long term investment that are in the nature of capital investment is allowable as revenue expenditure? - HELD THAT:- It is not in dispute that these substantial question of law raised by the revenue are squarely covere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts income chargeable under the head business and profession under hybrid system of accounting when Sec.145 of the Act does not allow the assessee to follow such system of accounting and by ignoring the ratio given by the Hon'ble Supreme Court in the case of Thiagaraja Chetty vs. CIT (1953) reported in 24 ITR page 525 and Moorvi Industries Vs. CIT (1971) reported in 82 ITR page 835 wherein it was held that the income accrues, when it falls due and legally recoverable, irrespective of whether it is actually received or not, further failed to consider the law laid down by Hon'ble Supreme Court in the case of State of Travancore vs. CIT (1996) reported in 24 Tax-man page 337, wherein it was held that the concept of reality of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue that in respect of nonperforming assets even though it does not yield any income as the assessee has adopted mercantile system of accounting, he has to pay tax on the revenue which has accrued notionally is without any basis. Therefore, substantial questions of law nos.1 2 requires to be answered in favour of the assessee and against the revenue. This view is also fortified in the other coordinate bench decision in the case of the COMMISSIONER OF INCOME TAX VS M/S. DAVANGERE DISTRICT CENTRAL CO-OPERATIVE BANK LIMITED in ITA No.137/2015 disposed of on 13.11.2020 and in the case of Commissioner of INCOME TAX VS VASISTH CHAY VYAAR LIMITED - (2011)196 TAXMAN 169, which has been confirmed by the Hon'ble Supreme Court in the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsive analysis of the factual aspects, the Tribunal has arrived at a conclusion that though the assessee is promoting the formation of self help groups in the Districts of Dakshina Kannada and Udupi, and the loans are given to such self help groups for home industries like candle making, soap making and such other activities, the income generated by such self help groups come back to the assessee as deposits. The commercial exigency being established under the provisions of Section 37(1) of the Act, the same has been considered in the light of the judgment of the Hon'ble Rajasthan High Court in RAJASTHAN SPINNING AND WEAVING MILLS LTD. - 274 ITR 465, which has been rendered following the decision of the Hon'ble Apex Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve section resulted in public protest. Consequently when section 37 was finally enacted into law, the word 'necessarily' came to be dropped. The fact that somebody other than the assessee is also benefited by the expenditure should not come in the way of an expenditure being allowed by way of deduction under section 10(2) (xv) of the Act if it satisfies otherwise the tests laid down by law. This view is in accord with the following observations made by this Court in CIT v. Chandulal Keshavlal Co. [1960] 3 SCR 38 at page 48: 7. In the light of the said decision, the expenses incurred by the assessee cannot be held to be not allowable expenses under Section 37 of the Act. The CIT (Appeals) as well as the Tribunal has analyz ..... X X X X Extracts X X X X X X X X Extracts X X X X
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