THE COMMISSIONER OF INCOME TAX II vs. MODI RUBBER LTD.

ITA - 946 / 2009HC Delhi05 October 20091 pages

For Petitioner: MR.SANJEEV SABHARWAL

AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose for its consideration. The Tribunal had confirmed the CIT(A)'s order, which had set aside the AO's disallowance and addition. The key reasoning was that the amounts written off by the assessee were in respect of Assessment Year 1988-89, whereas the provision that might have been relevant (though not explicitly named in the judgment) came into force from Assessment Year 1989-90. Therefore, the provision was not applicable to the assessee's case for the assessment year in question. The appeal was dismissed on this ground.

What were the facts?

The Assessing Officer (AO) disallowed notional interest and made an addition for interest for Assessment Year 1987-88. The Commissioner of Income Tax (Appeals) [CIT(A)] set aside these actions, allowing the assessee's appeal. The Income Tax Appellate Tribunal (ITAT) confirmed the CIT(A)'s order. The assessee had written off a loan as bad debt because the company to which it was granted was in liquidation, arguing that interest was also unrecoverable. The ITAT noted that the amounts written off pertained to Assessment Year 1988-89, and the relevant provision came into force from Assessment Year 1989-90, thus not being applicable.

What were the issues?

1. Whether the ITAT erred in confirming the CIT(A)'s decision to set aside the AO's disallowance of notional interest and addition for interest for Assessment Year 1987-88, considering the write-off of the loan as bad debt due to the borrower company's liquidation. Assessee's Contention: The assessee argued that since the loan was written off as a bad debt due to the borrower company's liquidation, the interest on that loan was also unrecoverable and therefore, no notional interest should be disallowed or added. Revenue's Contention: The revenue's position, as reflected in the AO's action, was to disallow notional interest and make an addition for interest. The ITAT's reasoning indicates that the revenue likely contended for the allowability of the disallowance/addition, but the judgment does not explicitly detail the revenue's arguments before the ITAT or High Court.

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 05.10.2009 2# Present: Mr. Sanjeev Sabharwal, Adv. for the appellant. . + ITA No.946/2009 The Assessing Officer had disallowed the notional interest and also made addition qua interest. The matter is related to the Assessment Year 1987-88. The CIT(A) set aside the aforesaid disallowance and addition made by the AO by allowing the appeal of the assessee. Order of the CIT(A) has been confirmed by the Income Tax Appellate Tribunal. The loan amount was written off as bad debt, as the company to whom loan was granted is in liquidation. On this basis, it was considered by the assessee that interest also was not recoverable. The Tribunal has reproduced the relevant portion of the orders of the CIT(A) and further found that the amounts written off are in respect of the Assessment Year 1988-89. The provision came into force from 01.04.1989, viz., from Assessment Year 1989-90 and therefore, rightly was not held applicable in the case of assessee. Therefore, no substantial question of law arises for our consideration, the appeal is accordingly dismissed. . A.K. SIKRI, J. . . . SIDDHARTH MRIDUL, J. October 05, 2009 pmc .

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