Gruh Finance Ltd.,, Ahmedabad vs Department Of Income Tax

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD "A" BENCH, AHMEDABAD

[Coram: Pramod Kumar AM and S.S. Godara JM]

ITA No.3698/Ahd/2004 Assessment Year: 2001-02

Gruh Finance Limited, ............................Appellant 'Gruh' Netaji Marg,Nr. Mithakhali Six Roads, Ellisbridge, Ahmedabad. [PAN: AAACG 7010 K]

Vs.

Assistant Commissioner of Income Tax, ........................Respondent Circle-4,Ahmedabad.

ITA No.3803/Ahd/2004 Assessment Year: 2001-02

Dy. Commissioner of Income Tax, ........................Respondent Circle-4,Ahmedabad.

Vs.

Gruh Finance Limited, ............................Appellant 'Gruh' Netaji Marg, Mithakhali Six Roads, Navrangpura, Ahmedabad. [PAN: AAACG 7010 K]

ITA No.2525/Ahd/2006 Assessment Year: 2001-02

Assistant Commissioner of Income Tax, ........................Respondent Circle-4, Ahmedabad.

Vs.

Gruh Finance Limited, ............................Appellant 'Gruh' Netaji Marg, Nr. Mithakhali Six Roads, Ellisbridge, Ahmedabad.

[PAN: AAACG 7010 K] ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

Page 2 of 15 ITA No.1463/Ahd/2005 Assessment Year: 2002-03

Gruh Finance Limited, ............................Appellant 'Gruh' Netaji Marg, Nr. Mithakhali Six Roads, Ahmedabad.[PAN: AAACG 7010 K]

Vs.

Dy. Commissioner of Income Tax, ........................Respondent Circle-4, Ahmedabad.

ITA No.1699/Ahd/2005 Assessment Year: 2002-03

Assistant Commissioner of Income Tax, ........................Respondent Circle-4, Ahmedabad.

Vs.

Gruh Finance Limited, ............................Appellant 'Gruh' Netaji Marg, Nr. Mithakhali Six Roads, Ahmedabad. [PAN: AAACG 7010 K]

ITA No.1920/Ahd/2006 Assessment Year: 2003-04

Assistant Commissioner of Income Tax, ........................Respondent Circle-4, Ahmedabad.

Vs.

Gruh Finance Limited, ............................Appellant Netaji Marg, Nr. Mithakhali Six Roads, Navrangpura, Ahmedabad [PAN: AAACG 7010 K]

Appearances by:

M.G. Patel with Aarti Shah, for the assessee Subhash Bains, for the Revenue

Date of concluding the hearing : April 23, 2015 Date of pronouncing the order : July 22, 2015 ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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O R D E R

Per Pramod Kumar:

1. These six appeals pertain to the same assesse, involve some common issues and were heard together. As a matter of convenience, therefore, we will dispose of all these nine appeals by way of this consolidated order.

ITA No.3698 and 3803/Ahd/2004 Assessment Year: 2001-02

2. These cross appeals are filed against the order dated 11 th October 2004 passed by the learned CIT(A) in the matter of assessment under section 143 (3|) of the Income Tax Act, 1961, for the assessment year 2001-02.

3. In the appeal filed by the assesse (i.e. ITA No. 3698/Ahd/2004), following grievances have been raised:

1. The Learned Commissioner of Income Tax (Appeals)-VIII, Ahmedabad has erred in confirming the disallowance of bad debt of Rs.1 crore made by the Assessing Officer after holding that the same is related to Debentures held by the Appellant and cannot be deductible either as a bad-debt u/s 36 or as business loss.

2. The Learned Commissioner of Income Tax (Appeals)-VIII, Ahmedabad has erred in confirming the disallowance in respect of depreciation of Rs.29,56,367/- made by the Assessing Officer in respect of sale and lease-back transactions of assets after relying on ITAT, Mumbai bench decision in case of ICICI Ltd.

4. So far as first grievance of the assesse is concerned, the relevant material facts are as follows. During the course of the assessment proceedings, the Assessing Officer noted that the assesse has claimed a deduction of Rs 1,0,00,000 in respect of the bad debt written off in respect of IFB Finance Limited. The Assessing Officer also noted that the amount written off represents amount of debentures issued by the IFBFL to the assesse company. The assessee's claim was that these debentures were issued to the assesse in satisfaction of his a loan, advanced during normal course of business, interest on which was assessed as business income in the hands of the assesse. It was ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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also pointed out that undisputedly the assesse was a non-banking finance company, in which public are substantially interested, and the assesse is engaged in the business of providing long term finance for housing, besides providing finance and leasing of assets, and bill discounting etc. In these circumstances, according to the assesse, the amount written off in respect of IFBFL was wholly incidental to business and was liable to be allowed as deduction under section 36(1)(vii). However, the Assessing Officer rejected these contentions and disallowed this claim of deduction. He was of the view tha "money receivable in respect of the debentures held by the assessee cannot be held as deductible under section 36(1)(vii)". While he did not dispute that "the amount of original loan given by the assesse was later on converted into debentures", he was of the view that non redemption of debentures by the IFBFL does not partake the character of bad debt. He also noted that the amount written off must also constitute "bad debt" but the assesse has not demonstrated that this condition is satisfied. He thus disallowed Rs 1,00,00,000. Aggrieved by the stand so taken by the Assessing Officer, assesse carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A) held that the debentures were shown to be investments in the books of accounts of the assesse, that these debentures were never shown as stock in trade, and that, therefore, any loss on account of these debentures cannot be allowed as a bad debt or business loss. Learned CIT(A) also held that since neither the debentures are transferred during the year nor rights in these debentures have extinguished in this year, the assesse cannot be held to have incurred any loss, including a capital loss, in this assessment year. The disallowance was thus not only confirmed but also further fortified. The assesse is aggrieved and is in appeal before us.

5. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

6. We have noted that it is an undisputed position that the assesse is engaged in the business of, inter alia, providing finance to businesses and it was ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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in the course of this business activity that the assesse had advanced Rs 1,00,00,000 to IFBFL. As the Assessing Officer himself notes at page 18 of the assessment order, originally the assesse company had given a loan of Rs 1 crore to IFB Finance Ltd which was later on converted into debentures". It is also an undisputed position that the loan was advanced in the ordinary course of assesse's business activities and interest on the same was assessed as business income. On these facts, the amount due to IFBFL being written off can only be considered to be incidental to the business carried on by the assesse. It is wholly immaterial as to how the debentures are reflected in the balance sheet drawn up by the assesse as that aspect of the matter is governed by the statutory requirements rather than realities of business. In any case, as is the well settled legal position, the accounting entries cannot be determinative of the true character of business transactions.

7. In the case of A V Thomas & Co Vs CIT [(1963) 48 ITR 67 (SC)], Hon'ble Supreme Court has, dealing with the question as to what will constitute a bad debt, for the purpose of deduction as a bad debt, will constitute, observed as follows:

Now, a question under section 10(2)(xi) can only arise if there is a bad or doubtful debt. Before a debt can become bad or doubtful it must first be a debt. What is meant by debt in this connection was laid down by Rowlatt J. in Curtis v. J . & G. Oldfield Ltd. [1925] 9 Tax Cas 319 as follows:

"When the rule speaks of a bad debt it means a debt which is a debt that would have come into the balance-sheet as a trading debt in the trade that is in question and that it is bad. It does not really mean any bad debt which, when it was a good debt, would not have come in to swell the profits."

A debt in such cases is an outstanding which if recovered would have swelled the profits. It is not money handed over to someone for purchasing a thing which that person has failed to return even though no purchase was made. In the section a debt means something more than a mere advance. It means something which is related to business or results from it. To be claimable as a bad or doubtful debt it must first be shown as a proper debt. The observations of Rowlatt J. were applied by the Privy Council in Arunachalam Chettiar v. Commissioner of Income-tax [1936] 4 ITR 173 (PC), where their Lordships observed as follows:

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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"Their Lordships moreover can give no countenance to a suggestion that upon a dissolution of partnership a partner's share of the losses for several preceding years can be accumulated and thrown into the scale against the income of another partner for a particular year. No principle of writing off a bad debt could justify such a course, whether in the year following the dissolution or, as logic would permit, in some subsequent year in which the partner's insolvency has crystallised. The 'bad debt' would not, if good, have come in to swell the taxable profits of the other partner."

This court also approved the dictum of Rowlatt J. in Commissioner of Income-tax v. Abdullabhai Abdulkadar [1961] 41 ITR 545 (SC) and referred to the observations of Venkatarama Aiyar J. in Badridas Daga v. Commissioner of Income-tax [1958] 34 ITR 10 (SC), where the learned judge speaking for this court said that a business debt "springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business". Section 10(2)(xi) is in two parts. One part deals with an assessee who carries on the business of a banker or money-lender. Another part deals with business other than the aforesaid. Since this was not a loan by a banker or moneylender, the debt to be a debt proper had to be one which if good would have swelled the taxable profits.

(Emphasis by underlining supplied by us)

8. In this case, Their Lordships held the issue against the assessee by observing that, "Applying these tests, it is quite obvious that an advance paid by the assessee company to another to purchase shares cannot be said to be incidental to the trading activities of the assessee company"" but then what clearly is important is whether the amount written off can be said to be incidental to the business activities of the assessee.

9. Viewed thus, acquisition of debentures, on the facts of the case before us, was in the course of the business carried on by the assessee and, therefore, it cannot be seen on standalone basis divorced from the peculiar facts under which the assessee company came to own these debentures and incur the loss on non-redemption of these debentures. The form of transaction is not important. What is important is that the de facto transaction was of finance and the amount advanced during the course of the financing business had become bad. It is a matter of record, as noted by the CIT(A), that the assessee pursued the matter before Hon'ble Calcutta High Court in winding up petition against IFB Finance Limited, and all this was essentially, and undisputedly, integral part of ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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the financing business carried on by the assessee. As for the question whether the amount has actually become bad and whether loss can be claimed as a deduction for bad debts in the current year, suffice to note that the assessee has written off the amount in this year and, following the law laid down by Hon'ble Supreme Court in the case of TRF Limited Vs CIT [(2010)323 ITR 397 (SC)], the deduction is to be allowed in the year of write off.

10. In view of the above discussions, as also bearing in mind entirety of the case, we are of the considered view that learned CIT(A) was indeed in error in confirming the impugned disallowance of Rs 1,00,00,000. We direct the Assessing Officer to delete the same.

11. Ground no. 1 is thus allowed.

12. Turning to the second ground of appeal, the relevant material facts are like this. During the course of the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has claimed depreciation of Rs 1,71,04,473 which includes depreciation on the assets covered by sale and lease back transactions. On these facts, and relying upon the decision of this Tribunal in the case of ICICI Limited Vs DCIT (87 ITD 537 SB), the Assessing Officer disallowed depreciation claimed on leased assets, i.e. assets of sale and lease back transactions entered into earlier years, amounting to Rs 29,66,367. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without much success. While learned CIT(A) agreed with the stand of the Assessing Officer in principle, he held that since the transactions are held to be not genuine lease transactions, only interest element attributable to the same may be included in the income and the relief may be granted in respect of the same. The assessee is not satisfied with the relief so given by the CIT(A) and is in further appeal before us.

13. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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14. We find that there are significant legal developments post the special bench decision in the case of the ICICI Bank Ltd (supra), based on which the disallowance was so made by the Assessing Officer, and in the case of ICICI Bank itself, a coordinate bench has, in the judgment reported as ICICI Bank Ltd Vs JCIT (2014 TIOL 235 ITAT MUM; judgment dated 2 nd May 2014), has summed up these developments as follows:

4.3 We have carefully perused the order of the lower authorities and the relevant material evidences brought on record before us. We have also carefully gone through the decisions relied upon by both the parties. In so far as the issue relating to the claim of depreciation on leased transactions is concerned, we find force in the submission of the Ld. Sr. Counsel that the Hon'ble Supreme Court in the case of ICDS vs. CIT, 350 ITR 527 had the occasion to consider the question -

"whether the Assessee is entitled to depreciation on vehicles financed by it which is neither owned by the Assessee nor used by the Assessee?"

The Hon'ble Supreme Court after perusing the lease agreement and other related factors held that the lessor is the owner of the vehicles. As an owner, it used the assets in the course of its business satisfying both the requirements of Sec. 32 of the Act and hence is entitled to claim depreciation.

4.3.1 A similar view was taken by the Hon'ble Delhi High Court in the case of Cosmos Films (supra) wherein the Hon'ble Delhi High Court has considered the implications of Sec. 19 of Sale of Goods Act, 1930.

4.3.2 The Tribunal, Mumbai bench in the case of Development Credit Bank Ltd. (supra) has followed the decision of the Hon'ble Supreme Court in the case of ICDS (supra) and the decision of Hon'ble Delhi High Court in the case of Cosmos Films (supra) and allowed the claim of depreciation.

4.3.3 The Tribunal, Mumbai bench, in the case of L&T (supra) has considered a similar issue at para 27 of its order and at para 28 followed the findings of the Hon'ble Supreme Court in the case of ICDS (supra) and also of the co-ordinate bench in the case of Development Credit Bank Ltd. (supra) and allowed the claim of depreciation on sale of lease back assets

15. We are in respectful agreement with the views so expressed by the coordinate bench. In this view of the matter, we deem it fit and proper to remit the matter to the file of the Assessing Officer for adjudication de novo in the light of the above legal position and the allow the relief, as admissible. As long ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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as assessee is the legal owner of the asset and has used the asset in the course of his business, he is to be allowed depreciation in respect of that asset. The use in leasing business is also a use of the asset. The matter needs to be re-examined in this light. While doing so, the Assessing Officer will give a reasonable opportunity of hearing to the assessee, decide the matter by way of a speaking order and in accordance with the law. Order, accordingly.

16. Ground no. 2 is thus allowed for statistical purposes in the terms indicated above.

17. The appeal filed by the assessee is thus partly allowed in the terms indicated above.

18. In the appeal filed by the Assessing Officer, the assessee has raised the following grievance:

The ld. CIT(A) erred in law and on facts of the case in deleting the disallowance of EMI residual account amounting to Rs.803.40 lacs, without appreciating the definition of income as explained by the Hon'ble Supreme Court in the case of Shiv Prakash Janak Raj & Co. reported at 222 ITR 583.

19. So far as this issue is concerned, the relevant material facts are as follows. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has sold is portfolio of individual home loans aggregating to Rs 8,109.09 lakhs but the assessee is obliged to act as receiving and paying agent for effecting recoveries from the individual borrowers until the point of time when all these loans are fully recovered. Under this arrangement, the assessee is entitled to retain interest in excess of the agreed rate of interest recovered from the borrowers. It was in this backdrop that the assessee computed the surplus of Rs 932.42 lakhs being the difference between EMI recoverable form the borrowers during the remain loan tenure, and the amount payable by the assessee to the buyer of assessee's home loan portfolio. This represented, what was termed as, EMI residual. Out of this amount, the assessee further set aside a sum of Rs 428.31 lakhs on account of contingencies of pre-payments The ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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balance amount of Rs 507.29 lakhs was transferred to the profit and loss account. In the computation of income, it appears, that the assessee reduced this amount from net profit and then offered only Rs 132.02 lakhs as income of the relevant year. This computation was on the basis of income actually earned so far as interest differential was concerned. The Assessing Officer, however, was not satisfied with the same. He was of the view that entire difference between recovery value of housing loans and amount payable to the buyer of loan portfolio should be brought to tax in this year itself. He also held that even the amount of contingency set aside by the assessee at Rs 428.31 lakhs could not be allowed as it is only a contingent, and not real, liability. He thus proceeded to bring to tax the balance amount of Rsa 803.40 lakhs ( i.e. EMI residual of Rs 935.42 lakhs minus the amount already offered to tax amounting to Rs 132.02 lakhs) in this assessment year. Aggrieved by the stand so taken by the Assessing Officer, assessee carried the matter in appeal before the CIT(A) who deleted the addition on the ground that the income is to be brought to tax only when it accrues and the accrual takes place only in the year in which the amounts recovered from the borrowers are more than payable to the buyer of loan portfolio. It was also noted that the EMI residual income has been subsequently brought to tax in the year in which related recoveries have taken place. The Assessing Officer is aggrieved of the relief so given by the CIT(A) and is in appeal before us.

20. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

21. In the landmark judgment of Chainrup Sampatram Vs CIT [(1953) 24 ITR 481 (SC)], Hon'ble Supreme Court has observed that "While anticipated loss is thus taken into account, anticipated profit in the shape of appreciated value of the closing stock is not brought into the account, as no prudent trader would care to show increased profit before its actual realisation. This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower, and it is now generally accepted as an established rule of ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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commercial practice and accountancy. As profits for income-tax purposes are to be computed in conformity with the ordinary principles of commercial accounting, unless of course, such principles have been superseded or modified by legislative enactments, unrealised profits in the shape of appreciated value of goods remaining unsold at the end of an accounting year and carried over to the following year's account in a business that is continuing are not brought into the charge as a matter of practice, though, as already stated, loss due to a fall in price below cost is allowed even if such loss has not been actually realised." The principle is thus unambiguous. The principles of conservatism, and considerations of prudence, in the accounting treatment require that no anticipated profits be treated as income until the profits are realized, and, at the same time, an anticipated loss to be deducted from commercial profits, at the first sign of its reasonable possibility. There may seem to be, at first sight, an element of dichotomy in this approach inasmuch as anticipated losses are taken into account and anticipatory profits are ignored, but that is the impact of accounting principles sanctioned by the statute and the law laid down by Hon'ble Supreme Court. No matter how reasonable is it to assume that the assessee will make these profits, these profits cannot be brought to tax at this stage. That is what the legal position, for the detailed reasons set out above, is.

22. In the case before us, whatever be certainty of the assessee realizing the profits in future as a result of this arrangement, these profits can only be brought to tax when these actually accrue and arise and that stage comes only when the recoveries are made from the individual borrowers. It is also not in dispute, in the light of the categorical finding given by the CIT(A), that the related incomes are brought to tax in subsequent period when these income accrue and arise. As for the reference to Hon'ble Supreme Court's judgment in the case of CIT Vs Shiv Prakash Janak Raj & Co Pvt Ltd [(1996) 222 ITR 583 (SC)], that was a case in which accrual had admittedly taken place. That is not the situation before us. In these circumstances, we see no infirmity in the well reasoned conclusion arrived at by the CIT(A) and decline to interfere in the matter.

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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23. The appeal filed by the Assessing Officer is thus dismissed.

24. To sum up, for the assessment year 2001-02 in quantum assessment proceedings, while the appeal filed by the assessee is partly allowed, the appeal filed by the Assessing Officer is dismissed.

ITA No 2525/Ahd/06 Assessment year 2001-02

25. By way of this appeal, the Assessing Officer has challenged correctness of the order dated 8 th September 2006 passed by the learned CIT(A) in the matter of penalty under section 271(1)(c) of the Income Tax Act, 1961, for the assessment year 2001-02.

26. The impugned penalty is levied in respect of disallowance of bad debt of Rs 1,00,00,000 and depreciation on leased assets amounting to Rs 6,01.978. As the first disallowance is deleted by our order of even date, and as the second issue is remitted to the matter of the Assessing Officer, this penalty deletion is only academic in effect. The appeal filed by the Assessing Officer is therefore infructuous.

27. In the result, in revenue's appeal in penalty matter for the assessment year 2001-02, the appeal is dismissed as infructuous.

ITA No.1463 and 1699 /Ahd/2005 Assessment Year: 2002-03

28. These cross appeals are directed against the order dated 29 th April 2005, passed by the learned CIT(A) in the matter of assessment under section 143 (3|) of the Income Tax Act, 1961, for the assessment year 2002-03.

29. In the appeal filed by the assessee, the grievance raised is as follows:

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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The learned Commissioner of Income Tax (Appeals)-VIII, Ahmedabad has erred in confirming the disallowance in respect of depreciation of Rs.21,87,285 made by the Assessing Officer in respect of sale and lease- back transactions of assets after relying on ITAT, Mumbai Bench decision in case of ICICI Ltd.

30. Learned representatives fairly agree that whatever we decide for the assessment year 2001-02 on this issue will apply mutatis mutandis on this assessment year as well. Vide our order earlier hereinabove, we have remitted the matter to the file of the Assessing Officer. The same fate and the same directions will apply here as well. Accordingly, for this issue, the matter stands remitted to the file of the Assessing Officer in terms of our observations in paragraphs 12 to 15 above.

31. The appeal filed by the assessee is thus allowed in the terms indicated above.

32. In the appeal filed by the Assessing Officer, the Assessing Officer has raised the following grievances:

1. The Ld. CIT(A) has erred in law and on facts of the case in deleting the addition, which was made by the A.O. considering whole of the amount credited to EMI residual account by assessee company during the year due to sale/transfer assignment of individual home loans to M/s HDFC Ltd. as income accrued to assessee.

2. The Ld. CIT(A) has erred in law and on facts of the case in directing to delete the disallowance of deduction to the tune of Rs.1,10,86,036/- u/s.

36(1)(viii) of the I.T. Act disregarding that the income by way of pre- payment charges and processing/administrative fees cannot be termed as income derived from the business of long term finance for construction/purchase of residential houses.

3. The Ld. CIT(A) has erred in law and on facts of the case in directing that income at Rs.795.39 should be considered as starting point for computation of deduction u/s. 36(1)(viii), without considering the fact that the Assessing Officer had rightly computed deduction by taking income under the IT Act as computed in the computation of total income. The order of the Ld. CIT(A) on this issue is not speaking one at all.

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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33. As for the first ground of appeal, learned representatives fairly agree that whatever we decide for the assessment year 2001-02 on this issue will apply mutatis mutandis on this assessment year as well. Vide our order earlier hereinabove, we have upheld the relief granted by the CIT(A) in this respect. Accordingly, in terms of our observations in paragraphs 18 to 22, we uphold the relief given by the CIT(A) and decline to interfere in the matter.

32. Ground no. 1 is thus dismissed.

33. As for the second ground of appeal, learned representatives fairly agree that the issue is covered by a decision of the coordinate bench, in assessee's own case for the assessment year 1998-99, which is said to have achieved finality at that. Learned Departmental Representative, however, relied upon the stand of the Assessing Officer. However, we see no reasons to take any other view of the matter than the view taken by the coordinate bench which has achieved finality in view of the fact that the same has not been carried in further appeal by the Revenue. Accordingly, we uphold the conclusion arrived at by the CIT(A) on this issue as well and decline to interfere in the matter.

34. Ground no. 2 is also dismissed.

35. In the result, the appeal is dismissed.

36. To sum up, for the assessment year 2002-03, while the appeal of the assessee is partly allowed, the appeal of the Assessing Officer is dismissed.

ITA No. 1920/A/06 Assessment year 2003-04

37. This is an appeal filed by the Assessing Officer and is directed against the order dated 29 th June 2006 in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2003-04, on the following ground:

ITA Nos.3698/Ahd/2004 and 5 other appeals Gruh Finance Limited

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The Ld. CIT(A) has erred in law and on facts of the case in directing to allow a sum of Rs.19,65,42,313/- being the amount of interest EMI residual, without appreciating the fact that the assessee company is following mercantile system of accounting and in view of the Hon'ble Supreme Court decision in the case of Shiv Prakash Janakraj & Co. (222 ITR 583) and Morbi Industries Ltd. (82 ITR 835), the said amount was not allowable.

38. Learned representatives fairly agree that whatever we decide for the assessment year 2001-02 on this issue will apply mutatis mutandis on this assessment year as well. Vide our order earlier hereinabove, we have upheld the relief granted by the CIT(A) in this respect. Accordingly, in terms of our observations in paragraphs 18 to 22, we uphold the relief given by the CIT(A) and decline to interfere in the matter.

39. The appeal filed by the Assessing Officer is thus dismissed.

Pronounced in the open court today on 22 nd day of July 2015

Sd/- Sd/-

S. S. Godara Pramod Kumar (Judicial Member) (Accountant Member)

Ahmedabad, the 22 nd day of July, 2015

Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order etc

Assistant/Deputy Registrar Income Tax Appellate Tribunal Ahmedabad Benches, Ahmedabad