M/s. Beryl Securities Ltd.,, Indore v. The Dy. CIT, Indore

ITA 4/IND/2010 | 2006-2007
Pronouncement Date: 01-03-2011 | Result: Dismissed

Appeal Details

RSA Number 422714 RSA 2010
Assessee PAN AABCB2663A
Bench Indore
Appeal Number ITA 4/IND/2010
Duration Of Justice 1 year(s) 1 month(s) 27 day(s)
Appellant M/s. Beryl Securities Ltd.,, Indore
Respondent The Dy. CIT, Indore
Appeal Type Income Tax Appeal
Pronouncement Date 01-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 01-03-2011
Date Of Final Hearing 01-03-2011
Next Hearing Date 01-03-2011
Assessment Year 2006-2007
Appeal Filed On 04-01-2010
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.4/IND/2010 A.Y. 2006-07 BERYL SECURITIES LTD. INDORE PAN AABCB 2663 A APPELLANT VS DCIT-1(1) INDORE RESPONDENT APPELLANT BY : SHRI SUBHASH JAIN CA RESPONDENT BY : SH. PRADEEP KUMAR MITRA SR. DR O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER O F THE LEARNED CIT(A)-I INDORE DATED 25.8.2009 ON THE GROUND THA T THE LD. FIRST APPELLATE AUTHORITY ERRED IN CONFIRMING THE DISALLO WANCE OF RS.10 24 253/- ON ACCOUNT OF PROVISION FOR NON-PERF ORMING ASSET WHICH WAS PROVIDED UNDER THE STATUTORY PROVISION PRESCRIB ED BY RBI FOR NON- BANKING FINANCE COMPANY AND FURTHER ERRED IN CONFIR MING THE DISALLOWANCE OF NPA PROVISION WHICH IS ALLOWABLE U /S 37 OF THE ACT. 2 2. DURING HEARING OF THE APPEAL WE HAVE HEARD SHRI SUBHASH JAIN LD. COUNSEL FOR THE ASSESSEE AND SHRI PRADEEP KUMAR MITRA LEARNED SR. DR. AT THE OUTSET THE LD. SR. DR POINTED OUT THAT THE IMPUGNED ISSUE IS COVERED AGAINST THE ASSESSEE BY THE DECISION FROM T HE HONBLE APEX COURT IN SOUTHERN TECHNOLOGIES LTD. VS. JCIT (2010) 228 CTR (SC) 440. THIS FACTUAL MATRIX WAS CONSENTED TO BE CORRECT BY THE LD. COUNSEL FOR THE ASSESSEE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GON E THROUGH THE MATERIAL ON RECORD. BRIEF FACTS ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY WAS ENGAGED IN THE FINANCE BUSINESS BEING NON-BANKING FINANCE COMPANY (IN SHORT NBFC) AS REGISTERED WITH RBI AND CLAIMED A SUM OF RS.10 24 253/- ON ACCOUNT OF PROVISION FOR N ON-PERFORMING ASSET. DURING ASSESSMENT PROCEEDINGS THE CLAIM OF THE ASS ESSEE WAS THAT THE PROVISION WAS MADE ON THE BASIS OF NEW NON-PERFORMI NG BORROWERS ACCOUNTS AS PER THE PRESCRIBED GUIDELINES OF RBI. T HE SAME WAS CLAIMED TO BE MADE IN EARLIER YEAR ALSO AND NO DISA LLOWANCE WAS MADE ON ACCOUNT OF ABOVE PROVISION. THE PROVISION WAS CL AIMED TO BE MADE FOR BAD DEBTS THEREFORE DURING ASSESSMENT PROCEED INGS IT WAS CLAIMED THAT BY VIRTUE OF EXPLANATION BELOW SEC. 36(1)(VII) OF THE ACT THE BAD DEBTS ARE PART THEREOF WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. THIS CLAIM OF THE ASSESSEE COULD NOT FIND FAVOUR DURING ASSESSMENT PROCEEDINGS WHICH WAS ALSO CONFIRMED BY THE LD. CIT(A) 3 AND IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. THE HO NBLE APEX COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) HELD AS UNDER: VIDE PARA 9 OF RBI DIRECTIONS 1998 RBI HAS MANDATED THAT EVERY NBFC SHALL DISCLOSE IN ITS BALANCE-SHEET THE PROVISION WITHOUT NETTING THEM FROM THE INCOME OR FROM THE VALUE OF THE ASSETS AND THAT THE PROVISION SHALL BE DISTINCTLY INDICATED UNDER THE SEPARATE HEADS OF ACCOUNTS AS : (I) PROVISIONS FOR BAD AND DOUBTFUL DEBTS AND (II) PROVISIONS FOR DEPRECIATION IN INVESTMENTS IN THE BALANCE-SHEET UNDER CURRENT LIABILITIES AND PROVISIONS AND THAT SUCH PROVISION FOR EACH YEAR SHALL BE DEBITED TO P & L A/C SO THAT A TRUE AND CORRECT FIGURE OF NET PROFIT GETS REFLECTED IN THE FINANCIAL ACCOUNTS OF THE COMPANY. THE EFFECT OF SUCH DISCLOSURE IS TO INCREASE THE CURRENT LIABILITIES B Y SHOWING THE PROVISION AGAINST THE POSSIBLE LOSS ON ASSETS CLASSIFIED AS NPA. AN NPA CONTINUES TO BE AN ASSET DEBTORS/LOANS AND ADVANCES IN THE BOOKS OF NBFC. FOR CREATING A PROVISION THE ONLY YARDSTICK IS DEFAULT IN TERMS OF THE LOAN UNDER RBI NORMS A PROVISION IS MATHEMATICAL CALCULATION ON TIME LINES. THE ENTIRE EXERCISE MENTIONED IN THE RBI DIRECTIONS 1998 IS ONLY IN THE CONTEXT OF PRESENTATION OF NPA PROVISIONS IN THE BALANCE-SHEET OF AN NBFC AND IT HAS NOTHING TO DO WITH COMPUTATION OF TAXABLE INCOME OR ACCOUNTING CONCEPTS. WHILE COMING TO THE AFORESAID CONCLUSION THE HONB LE APEX COURT AFFIRMED THE DECISION PRONOUNCED IN 296 ITR 514 (MA D). IF A SPECIFIC PROVISION WAS ADDED BY WAY OF AMENDMENT TO SEC. 36( 1)(VII) THEN NO INTERPRETATION BY PASSING SECTION 36(1)(VII) COULD BE MADE OF EITHER SEC. 28 OR 29 SO AS TO SET AT NAUGHT THE AMENDMENT. THAT WOULD BE SIMPLY 4 AGAINST THE ESTABLISH CANONS OF INTERPRETATION OF S TATUTES. FURTHER THE ACTUAL ACCOUNT DID NOT REFLECT THESE AMOUNTS AS TRA DING LOSSES. EVEN THE INDORE BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS . M/S. ARMOUR FINANCE COMMERCE LTD. (ITA NO.1124/IND/2004) CONSID ERED THE ISSUE AND FINALLY VIDE ORDER DATED 29.5.2009 HELD THAT EX PLANATION TO SEC. 36(1)(VII) IS CLEARLY ATTRACTED. AS PER THE PROVISI ONS OF THE ACT NO PROVISION OF EXPENSES IS ALLOWABLE UNLESS SPECIFICA LLY PROVIDED IN THE ACT. IN THE PRESENT SET OF FACTS SINCE NO SUCH PRO VISION IS THERE THEREFORE THERE IS NO QUESTION OF ALLOWING MADE FO R NPA. THE DECISION QUOTED ABOVE FROM HONBLE APEX COURT SUPPORTS OUR VIEW THEREFORE WE FIND NO INFIRMITY IN THE STAND OF THE LD. CIT(A) CONSEQUENTLY THIS APPEAL OF THE ASSESSEE IS DISMISSED. FINALLY THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 1 ST MARCH 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 1.3.2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE !VYAS!