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Facts
The assessee is a financial corporation that filed several appeals against orders of the CIT(A) related to additions made on account of NPA provision written back and interest on seed money for various assessment years. The ground related to disallowance under section 14A was not pressed.
Held
The Tribunal found that the issues regarding NPA provision write-back and interest on seed money required fresh examination. Both issues were remanded to the Assessing Officer for adjudication afresh after verifying the facts and accounting methods.
Key Issues
Whether the write-back of NPA provision previously allowed as deduction can be treated as taxable income, and whether interest on seed money disbursed as a nodal agency is taxable when not received.
Sections Cited
250(6), 14A
AI-generated summary — verify with the full judgment below
िनधा"रती की ओर से/Assessee by : Shri Nalin Nohria, C.A and Shri B.K. Nohria, C.A राज" कीओर से/ Revenue by : Smt. Meenakshi Vohra, CIT, DR & Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई की तारीख/Date of Hearing : 23/07/2025 उदघोषणा की तारीख/Date of Pronouncement : 24/07/2025 आदेश/Order PER BENCH: The appeals in to 1353/Chd/2019 for the A.Y’s 2013-14 to 2015-16 have been filed against the separate orders of the Ld. CIT(A)-3, Ludhiana each dt. 01/06/2019 and appeals in ITA Nos. 900 & 914/Chd2024 pertaining to A.Y’s 2013-14 & 2014-15 have been filed against the order of the Ld. CIT(A)/NFAC, Delhi each dt. 26/06/2024.
Since all the appeals were heard together therefore they are being disposed off by this consolidated order for the sake of convenience and brevity.
We shall take appeal of the Assessee in for the A.Y. 2013- 14 as a lead case for discussion.
This appeal by the assessee is directed against the order dated 01.06.2019 passed by the Ld. Commissioner of Income Tax (Appeals)-3, Ludhiana, under section 250(6) of the Income Tax Act, 1961, for the assessment year 2013-14. The assessee has raised various grounds in the present appeal relating to the disallowance made under section 14A, addition on account of provision for NPAs written back, and addition on account of interest on seed money.
During the course of hearing, the Ld. Counsel for the assessee submitted that the ground relating to disallowance made under section 14A may not be pressed. In view of the above, the ground taken by the assessee on this issue is dismissed as not pressed. 6. As regards the addition of Rs.4,29,72,691/- on account of provision for NPAs written back, the assessee submitted that it had furnished sufficient documentary evidence to establish that the said provision had been claimed and allowed as deduction in the computation of income in earlier years. In this regard, the assessee 3 placed reliance on the computation of income, audited financial statements, assessment orders, orders passed by the CIT(A) and ITAT in preceding assessment years, and the appeal effect order passed pursuant to the directions of the Tribunal. It is the case of the assessee that once the provision for NPA has been allowed in the earlier assessment years, the write-back of the same in the year under appeal cannot be treated as taxable income again. The assessee thus contended that the impugned addition made by the AO was not sustainable.
On the issue of addition of Rs.35,60,752/- on account of interest on seed money, it was contended by the assessee that it follows the mercantile system of accounting and during the year under consideration, it had neither received any interest from the borrowers nor had paid the same to the Haryana State Government. It was further submitted that the assessee was acting as a nodal agency for the State Government in relation to the seed money disbursed to industrial units and the corresponding accounting entries were merely for reconciliation/statistical purposes. In the absence of any real accrual or receipt of income, the assessee contended that the addition on this account was unjustified.
The Ld. DR, relied upon the order passed by the lower authorities and submitted that the assessee did not file the documents before the lower authorities.
Ground Nos. 2 and 3 – Addition on account of NPA provision written back and interest on seed money 9.1 We have considered the submissions of the assessee and perused the material available on record. In our considered view, the issues relating to the addition on account of NPA provision written back require a fresh examination and verification at the end of the Assessing Officer. The assessee has contended that the provision for NPAs was allowed as a deduction in the preceding assessment years, and therefore, the write-back of such provision ought not to be taxed again. However, the correctness of these assertions can only be determined upon due verification of the supporting documents and the relevant facts surrounding the claim. 9.2 It is indeed regrettable that the assessee, being a Government Organisation, is constrained to pursue repeated litigation even though most of the information now being sought or alleged to be unavailable had already formed part of the record in 4 earlier assessment proceedings. In view of the above, we deem it appropriate to restore the issue of addition on account of NPA provision written back to the file of the Assessing Officer with a direction to verify the factual contentions of the assessee and adjudicate the matter afresh, in accordance with law, after affording a reasonable opportunity of being heard to the assessee. Accordingly, Ground No. 2 is restored to the file of the Assessing Officer and is allowed for statistical purposes. 9.3 As regards Ground No. 3, which pertains to the addition on account of interest on seed money, the assessee has submitted that it follows the mercantile system of accounting, and the deduction on account of interest debited to the State Government is thus eligible. However, this aspect has not been duly examined either by the Assessing Officer or by the CIT(A). Since Ground No. 2 is being remanded, we also consider it just and proper to remand Ground No. 3 to the file of the Assessing Officer. The Assessing Officer shall verify the method of accounting consistently followed by the assessee in the relevant and prior years and decide the issue afresh in light of the applicable legal position and binding precedents of the Hon’ble High Courts and the Hon’ble Supreme Court. Accordingly, Ground No. 3 is also allowed for statistical purposes.
In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Both the parties fairly submitted that the facts and circumstances of other appeals i.e and 1353/ Chd/2019 are exactly identical to the Appeal in ITA No. 1351/Chd/2019 and similar contentions raised therein may be considered, therefore, our findings and directions given in ITA No. 1351/Chd/2019 shall apply mutatis mutandis to these two appeals which are accordingly allowed for statistical purpose.
ITA Nos. 900 & 914/Chd/2014 – A.Ys. 2013-14 and 2014-15 12.1 These appeals pertain to the Assessment Years 2013-14 and 2014-15 respectively. Since the quantum appeals of the assessee for the relevant assessment years have been remanded to the file of the Assessing Officer in the earlier part of this order, the present appeals being consequential to the quantum additions are also remanded back to the file of the Assessing Officer. The Assessing Officer shall decide these appeals afresh in accordance with law, after taking into consideration the outcome of the 5 quantum proceedings in terms of the directions given above. Accordingly, these appeals are treated as allowed for statistical purposes.