Sundaram Finance Limited vs Assistant Commissioner of Income Tax

K. Raviraja Pandian, J.—The assessee filed an appeal against the order of the income tax Appellate Tribunal, Madras, "A" Bench made in I. T. A. No. 54/Mds/2002 dated July 31, 2006. The relevant assessment year is 1998-99. The substantial questions of law formulated for entertainment of the appeal are as follows:

Whether, on the facts and in the circumstances of the case, the Appellate 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 ?

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 Appellate Tribunal was right in treating the amount of Rs. 36,47,585 collected as contingent deposit as income of the appellant?

The facts of the case as culled out from the grounds of appeal are as follows:

The appellant-company is engaged in the business of hire purchase financing, equipment leasing and allied activities. For the assessment year 1998-99, the appellant filed a return of income on November 30, 1998, declaring a total income of Rs. 50,38,16,950 The regular assessment u/s 143(3) was completed on March 30, 2001, determining the total income at Rs. 79,16,75,880. While completing the assessment the Assessing Officer disallowed the deduction for provision for non-performing assets and contingency deposit. Aggrieved against the above order, the appellant preferred an appeal to the Commissioner of income tax (Appeals). The Commissioner of income tax (Appeals) by following the earlier order of his predecessor for the assessment year 1995-96 allowed the appeal. Aggrieved against the order of the Commissioner of income tax (Appeals), the Revenue preferred an appeal before the income tax Appellate Tribunal. The Tribunal following the decision of this Court in T.N. Power Finance and Infrastructure Development Corporation Ltd. Vs. The Joint Commissioner of Income Tax, Special Range-X, decided the issue against the appellant. With regard to the collection of contingency deposits, the Tribunal followed its order for the earlier assessment years and reversed the order of the Commissioner of income tax (Appeals). The correctness of the said order is now put in issue before this Court.

We heard the counsel for appellant and perused the materials on record.

The first and second questions of law are inter-related to each other. Learned Counsel appearing for the assessee submits that the issue involved in these questions of law is squarely covered by the decision of this Court in the case of T.N. Power Finance and Infrastructure Development Corporation Ltd. Vs. The Joint Commissioner of Income Tax, Special Range-X, against the assessee. In the said judgment, the Division Bench of this Court has held that the assessee was not entitled to deduction in view of the Explanation to Section 36(1)(viia) of the income tax Act which says that the provision for bad and doubtful debt made in the accounts of the assessee is not an allowable deduction. Likewise, the third question of law is also covered by the decision of this Court in the case of The Commissioner of Income Tax Vs. Sakthi Finance Ltd., , wherein it was held that as long as the receipt of the amount by the assessee was clearly associated with liability to refund the amount, such receipt of the amount would not be characterised as an income and, therefore, the same cannot be taxed vide The K.C.P. Limited Vs. Commissioner of Income Tax, Bangalore, and Commissioner of Income Tax Vs. Southern Explosives Co., . Thus, the third question of law is also covered by the decisions against the assessee. Thus, as all the questions of law raised are already answered against the assessee, the questions of law so formulated need not be reconsidered by us again as the issue is already settled.

For the above reasons, the tax case appeal is dismissed.