Indbank Merchant Banking Services Ltd. vs The Assistant Commissioner of Income Tax

K. Raviraja Pandian, J.—The assessee on appeal against the order of the Income Tax Appellate Tribunal Madras ""A"" Bench passed in ITA

Nos. 2445/2446/(Mds)/06 dated 22.09.2008 by formulating the following questions of law:

Whether the Appellate Tribunal is right in law in holding that the appellant is not entitled to deduction of the provision made in respect of Non

Performing Assets which are considered irrecoverable?

Whether the Appellate Tribunal was justified in not appreciating that the provision made in respect of Non Performing Assets if not allowable as

a bad debt is allowable as a business loss?

Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the appellant is not entitled to amortisation of

preliminary expenses u/s 35D towards share issue expenses?.

The issue involved in these two appeals is one and the same. The facts relating to the assessment year 1998-99 are stated below for the

disposal of the appeals:

The assessee is engaged in the business of Banking, stock broking and allied financial services. For the assessment year 1998-99, the assessee

filed return of income on 17.11.1999 admitting loss of Rs. 3,29,99,169/-. The return was processed u/s 143(1) on 02.11.1999. Subsequently, the

Assessing Officer reopened the assessment by issuance of notice u/s 148 on 24.12.2004. Notice u/s 143(2) was issued. The Assessing Officer

has completed the assessment u/s 143(3) read with Section 147 on 28.02.2006 and determined the total income at Rs. 14,16,54,688/-. While

completing the re-assessment, the Assessing Officer disallowed the provisions made for bad debts and Non-Performing Assets amounting to Rs.

5,03,59,458/- and preliminary expenses of Rs. 31,13,223/-under Section 35(D) of the Act and added the same for the purpose of taxation.

Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), who by his

order dated 16.10.2006, following the assessee''s earlier year''s order rejected the contention of the assessee and upheld the order of the

Assessing Officer. Aggrieved against that order, the assessee filed an appeal to the Income tax Appellate Tribunal. The Tribunal, vide its order

dated 22.09.2008, rejected the contention of the assessee and confirmed the disallowance of provision for bad debts and non performing assets

by relying the judgment of the jurisdictional High Court the case of T.N. Power Finance and Infrastructure Development Corporation Ltd. Vs. The

Joint Commissioner of Income Tax, Special Range-X, . As regards to amortisation of preliminary expenses, the Tribunal by following the decision

of the assessee''s own case for the assessment years 1995-96 upheld the order of the lower authorities. The correctness of the same is put in issue

by the assessee in these two appeals by formulating the questions of law referred to above.

We have heard the argument of the learned Counsel, who fairly admitted that the issue has been squarely covered against the assessee by the

Division Bench Judgment of this Court in respect of the assessee''s earlier years in the Judgment made in T.C.A. Nos. 1969 to 1971 of 2008

dated 19.02.2009, wherein this Court has held as follows:

We have heard the argument of the learned Counsel, who fairly admitted that the two questions of law now formulated relating to the years

1999-2000 and 2001-2002 in these appeals have been considered by a Division Bench of this Court and by its order dated 09.02.1999 made in

Tax Case Appeal Nos. 107 to 110 of 2002 decided against the assessee.

For the assessment year 2000-01, in addition to the above two questions of law, one more question of law to the following effect has also been

formulated:

Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the appellant is not entitled to amortisation of

preliminary expenses u/s 35D towards share issue expenses?.

The learned Counsel for the assessee has also submitted that this issue has also been decided against the assessee by a Division Bench of this

Court in the case of Commissioner of Income Tax Vs. Sakthi Finance Ltd., , wherein the Division Bench has held that Section 35D was

inapplicable having regard to the increase in the share capital being subsequent to the establishment of the business and because the assessee had

not established any new industrial unit nor had it expanded the existing industrial undertaking.

Following the aforesaid Judgments, the first two questions of law now raised are answered against the assessee following the Judgment dated

09.02.2009 made in T.C.A. Nos. 107 to 110 of 2002. In respect of the 3rd question of law relating to the assessment year 2000-01, following

the Judgment of the Division Bench in the case of Commissioner of Income Tax Vs. Sakthi Finance Ltd., , that question of law is also answered

against the assessee. Hence all the appeals are dismissed....

Following the reasoning stated in the above said Judgment, the appeals are dismissed. No costs. Consequently, connected miscellaneous

petition is also dismissed.