Lakshmi General Finance Company vs The Assistant Commissioner of Income Tax

V. Ramasubramanian, J.—This Tax Case Appeal has been admitted on the following substantial questions of law:--

(1) Whether on the facts and in the circumstances of the case the Tribunal was 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?

(2) Whether the Appellate Tribunal was justified in not appreciating that the provision made in respect of Non Performing assets if no allowable as a bad debt is allowable as a business loss?

(3) Whether on the facts and in the circumstances of the case the Tribunal was justified in remanding to re-examine whether the appellant had given on hire commercial vehicles or only motor cars ignoring the third proviso and explanation to Section 32(1) of the Act?

(4) Whether on the facts and in the circumstances of the case, the Tribunal was justified in confirming the order of the CIT (A) after holding that Section 234D introduced with effect from 01.06.2003 by Finance Act, 2003 cannot apply to the assessment year under consideration?

Heard Mr. P. Venkatanarayanan, learned counsel appearing for the appellant and Mr. T. Ravikumar, learned Standing Counsel for the respondent.

The learned counsel for the appellant conceded that questions of law 1 and 2 are covered against the assessee by the judgment of the Supreme Court in Southern Technologies Ltd. Vs. Joint Commnr. of Income Tax, Coimbatore, . Accordingly, questions 1 and 2 are disposed of.

Insofar as the fourth question of law is concerned, the Tribunal has merely confirmed the order of the Commissioner of Income Tax (Appeals) with regard to the applicability of section 234D. Despite recording the fact that section, 234D introduced with effect from 1.6.2003 by Finance Act, 2003, cannot have retrospective effect, the Tribunal has confirmed the order of the Commissioner of Income Tax (Appeals) in this regard. But, unfortunately, the appellant herein did not take up the matter before the Tribunal as against the order of the Commissioner of Income Tax (Appeals). Therefore, we cannot allow the appellant to raise this question. There is also one more reason for us not to take up that issue. After all, the Tribunal has remitted the matter back. Therefore, if permissible in law, it is open to the appellant to take advantage of the finding of the Tribunal.

Insofar as question No. 3 is concerned, the case of the appellant is that it has a non-banking finance Company which is engaged in the purchase and leasing of commercial vehicles. According to the learned counsel for the appellant, the benefit of higher rate of depreciation under the third proviso to section 34(1) is available even to motor cars, by virtue of explanation (a) under section 32(1) .

The learned counsel for the appellant also invited our attention to the decision of the Supreme Court in I.C.D.S. Ltd. Vs. Commissioner of Income Tax, Mysore and Another, . The said decision also related to a non-banking finance Company.

But, as seen from para 21 of the decision, the Supreme Court drew a distinction between a simple lease of vehicles and a hire purchase agreement entered into by such Finance Companies with prospective buyers. The nature of the agreement that the appellant generally enters into with its customers, is not borne out by records. Therefore, the remand order for examining this question, which is essentially, a question of fact, cannot be interfered with. If, after going through the agreements that the appellant has entered into with its customers, the assessing officer considers that the case of the appellant is similar to the decision of the Supreme Court in ICDS, he would certainly grant the benefit to the appellant. But, if it is not so, the appellant may not be entitled. Therefore, we do not think that a finality has been attached to the finding with respect to the entitlement of the appellant to higher rate of depreciation and consequently, question No. 3 does not arise for consideration at this stage. It will be open to the original authority, who is now obliged to consider the issue, from all perspectives. The Tax Case Appeal is dismissed. No costs.