Operating Lease and Hire Purchase Co. Ltd. vs Assistant Commissioner of Income Tax

F.M. Ibrahim Kalifulla, J.—The assessee has come forward with this appeal, raising 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

in respect of reversal of income which was offered to tax on the basis of Hire Purchase transaction which did not materialize?

(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in not appreciating that the amount of income offered in the

earlier year has become irrecoverable and hence the same is allowable as bad debt or business loss?

(3) 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

in respect of interest on Inter Corporate Deposit availed in the earlier assessment year but crystallized for payment only in the current assessment

year?

As far as the first two questions are concerned, they related to a reversal of income earned on Securitisation to the value of Rs. 87,89,706,

According to the appellant, it entered into Hire Purchase Agreements with two parties, by which, an amount of Rs. 15 lakhs as finance charges,

totalling a sum of Rs. 30 lakhs and further sum of Rs. 57'',89,706 by way of additional finance charges were reflected in its return in the year

ending 31 -3-2003. It is the further case of the appellant that at the instance of the hirers, the Hire Purchase Agreements were cancelled and the

transactions were withdrawn after 1 -4-2003. The Board is stated to have passed a resolution on 30-9-2003, granting permission to cancel the

hire purchase agreements and reverse the entries booked as income amounting to Rs. 87,89,706 in the books of account on 30-9-2003. The

authorised representatives were empowered to file necessary returns before the Income Tax authorities and claim the deduction as on 31 -3 -

2003. While dealing with the said claim made on behalf of the appellant, the assessing authority has noted that the appellant failed to produce the

copy of the agreement or the cancellation of it and also did not produce the books to prove the accounting of income and subsequent reversal. It

also noted that the circumstances under which the agreements came to be cancelled were also not placed before the assessing authority. The

assessing authority, therefore, held that since the cancellation took place on 30-9-2003, i.e., in the financial year 2003-04, the effect can be given

only in the assessment year 2004-05. The above conclusion of the assessing authority was confirmed by the Commissioner of Income Tax

(Appeals) as well as by the Tribunal. The Tribunal, by order dated 30-4-2008, held that even before the Tribunal, the assessee was not able to

produce the necessary supporting documents and, therefore, it had no option and, hence, it confirmed the order of the lower authorities.

In the light of such categorical findings rendered by the authorities below as well as the Tribunal, which were purely questions of fact, with which

we are not in a position to interfere with inasmuch as it does not involve any question of law, much less substantial question of law.

As far as the third question is concerned, it relates to the interest paid by the appellant in respect of a loan borrowed to the tune of Rs. 225

lakhs in the financial year 2001-02. In respect of the said loan, admittedly, the interest to the tune of Rs. 40.5 lakhs was stated to have been paid

as on 31-3-2003. As affirmed by the appellant, the interest for the period ending on 31-3-2002 could not be paid inasmuch as the rate of interest

was finalised with the finance company only in the financial year 2002-03 and therefore, the interest payment along with the accrued interest was

also made in the year ending on 31 -3-2003. When we asked the learned Counsel for the appellant as to the relevant statutory provision, which

would enable the appellant to claim for the said deduction in the subsequent financial years, the learned Counsel fairly stated that there is no such

provision available for the assessee to claim the said benefit. In the said circumstances, the conclusion of the assessing authority that the interest for

the period ending on 31-3-2002 ought to have been claimed by the assessee in the assessment year 2002-03 and the same cannot be allowed in

the assessment year 2003-04, is in consonance with law and we do not find any illegality in the said conclusion arrived at by the assessing

authority, which came to be confirmed by the Commissioner of Income Tax (Appeals) as well as by the Tribunal. We, therefore, do not find any

valid ground to entertain this appeal on that ground as well.

Consequently, the appeal fails and the same is dismissed.