TMI Blog2023 (1) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the balance amount, if any, will be recovered from the defaulter. Merely because there is erosion in the value based on the estimates would not ipso facto entitle diminution to claim deduction. Therefore, we answer the Substantial Question of Law No.2 against the appellant. Revision u/s 263 - whether the Commissioner of Income Tax was entitled to invoke Section 263 of the Income Tax Act, 1961 or not, we are of the view that it has to be also answered against the appellant in view of our answer to Substantial Question of Law No.2. The appellant had wrongly debited a sum of Rs.338.92 lakhs under the headings provision and write-off as the diminution in the value of the repossessed stock. It was not allowable expenditure. Thus, it is evident that the order passed by the Assessing Officer was not only erroneous but also prejudicial to the interest of the revenue. Therefore, Substantial Questions of Law raised in this appeal are answered against the appellant. Thus, the assessment made on 31.05.2005 under Section 143(3) of the Income Tax Act, 1961 was not only erroneous but had also passed in a manner which was prejudicial to the interest of the revenue. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has preferred the present appeal before this Court under Section 260A of the Income Tax Act, 1961 ('Act' in short). The Tribunal relied on its order dated 11.04.2008 in I.T.A.No.78(Mds)/2007 in the appellant s own case for Assessment Year 2003-2004. 7. Following Substantial Questions of Laws were framed for being answered:- i. Whether on the facts and in the circumstance of the case, the Tribunal was right in upholding the jurisdiction of the Commissioner of Income Tax u/s.263 in revising the assessment order? ii. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the loss computed by the Appellant on account of diminution in value of repossessed vehicles is only a notional and unascertained loss and hence cannot be allowed as a deduction? 8. We have considered the arguments advanced by the learned counsel for the appellant and the respondent. 9. Wherever defaults were committed by lessees, the appellant repossessed the vehicles. The appellant treated the amount due from the defaulting lessees as receivable in its books of account. 10. A further sum was reduced from the aforesaid amount as diminution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. 2. In making any deduction for a bad debt or part thereof, the following provisions shall apply- i. no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money- lending which is carried on by the assessee; ii. if the amount ultimately recovered on any such debt or part of debt is less than the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; iii. any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year), but the Assessing Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for accounting of repossessed assets for NBFC s and a revised guideline for accounting of the repossessed assets was given by RBI vide RBI Circular dated 01.01.2002 bearing reference Ref.DNBS(PD).CC.No.18/02.01/2001-02. Relevant portion of the RBI Circular dated 01.01.2002 bearing reference Ref.DNBS(PD). CC.No.18/02.01/2001-02 reads as follows:- Existing Guidelines Revised Guidelines In case the asset is taken as part of fixed asset for own use i. The repossession of the least or hire purchase asset should be treated as foreclosure of the contract of lease or hire purchase finance; ii. The accounting adjustment should be done in these cases by taking the assets at its book value; iii. In Case of Hire Purchase Assets, in arriving at the book value, the asset value should be depreciated by 20% per annum of the cost on the straightline method; iv. The releasable value has to be arrived at after deducting the expenditure likely to be incurred on the sale of the assets; The provision in regard to deficit between book value and the realisable value should be made in the current year itself. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. There are also no materials before us to interfere with the finding of the Tribunal in the impugned order. Further, the balance amount, if any, will be recovered from the defaulter. Merely because there is erosion in the value based on the estimates would not ipso facto entitle diminution to claim deduction. Therefore, we answer the Substantial Question of Law No.2 against the appellant. 23. As far as the Substantial Question of Law No.1 is concerned, the issue as to whether the Commissioner of Income Tax was entitled to invoke Section 263 of the Income Tax Act, 1961 or not, we are of the view that it has to be also answered against the appellant in view of our answer to Substantial Question of Law No.2. 24. The appellant had wrongly debited a sum of Rs.338.92 lakhs under the headings provision and write-off as the diminution in the value of the repossessed stock. It was not allowable expenditure. Thus, it is evident that the order passed by the Assessing Officer was not only erroneous but also prejudicial to the interest of the revenue. Therefore, Substantial Questions of Law raised in this appeal are answered against the appellant. 25. Thus, the assessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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