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Income Tax Appellate Tribunal, “C”, BENCH
Before: SHRI M.BALAGANESH, AM & SHRI AMARJIT SINGH, JM
आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-8, Mumbai in appeal No.CIT(A)-8/IT-263/15-16 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 24/03/2015 by the ld. Deputy Commissioner of Income Tax, Circle 3(2)(2), Mumbai (hereinafter referred to as ld. AO).
M/s. Pegasus Asset Reconstruction Pvt. Ltd
This appeal was originally disposed off by this Tribunal vide its order dated 25/07/2018, wherein the additional ground raised by the assessee was not adjudicated by this Tribunal. In the said order, the decision on the original grounds raised by the assessee was held against the assessee. Subsequently, pursuant to the miscellaneous application preferred by the assessee for non-adjudication of the additional ground, this Tribunal had recalled the earlier order dated 25/07/2018 for the limited purpose of adjudication of the additional ground raised by the assessee. The miscellaneous application was disposed off in M.A. No.743/Mum/2018 dated 15/05/2019. We find that the assessee had raised the additional grounds as under:-
“1. On the facts and in circumstances of the case and in law, the Deputy Commissioner of Income-Tax Circle 3(2)(2), Mumbai ("the AO") erred in not allowing the deduction of Rs. 2,18,092/-, being the revenue expenses incurred in earlier years on loan assets which were realized during the captioned previous year by the Appellant, despite holding that the said revenue expenses are allowable in the year of realization of the loans.
2. He failed to appreciate and ought to have held that: a) the said expenses were suo-motu disallowed by the Appellant in the return of income as the same were claimed as deduction in the earlier assessment years (in year of incurrence); b) such expenses were disallowed by the AO in earlier assessment years on the ground that the same would be allowable in the year of realization of the loan assets; c) the loan assets on which the said expenses had incurred, was realized during the captioned previous year by the Appellant and as such the said revenue expenses ought to have been allowed by the AO during the captioned assessment year.
3. The Appellant prays that the said expenses be allowed as deduction.
The Appellant craves leave to add to, amend, alter and / or delete any / all of the above.”
M/s. Pegasus Asset Reconstruction Pvt. Ltd
We have heard rival submissions. We find that in the facts and circumstances of the case, the additional ground raised by the assessee deserves to be admitted as it is purely legal and no investigation of facts is involved. We find that assessee is an asset reconstruction company wherein it has purchased NPA’s (non-performing assets) from banks and had incurred certain expenses for the purpose of running its business. These expenses are capitalised to the cost of NPA’s purchased by the assessee in its books of accounts. However, the same are claimed as revenue expenses in the year of incurrence by the assessee for income tax purposes. The ld. AR stated that as per the accounting policy consistently followed by the assessee, these expenses together with the cost of NPA’s that were purchased, would be debited in the profit and loss account in the books in the year in which the settlement of the said loans were made. In other words, for the purpose of books of accounts, the assessee would shift the amounts lying in the balance sheet i.e. cost of purchase of NPA’s plus expenses incurred by the assessee company, to the profit and loss account in the year in which the loans were actually settled by the borrowers. However, since assessee had already made a claim of revenue expenses incurred as a deduction for income tax purpose in the respective years in which those expenses were actually incurred, the assessee in order to avoid double claim, fairly had added back the revenue expenses portion that were shifted from balance sheet to the profit and loss account in the year of settlement of loan.
3.1. We have gone through the computation of income and we are agreeable to this practice adopted by the assessee. On a question posed to the ld. AR at the bench at the time of hearing as to whether any appeal was preferred by the assessee before the Hon’ble High Court against the Tribunal order, the ld. AR answered in the affirmative. Since
M/s. Pegasus Asset Reconstruction Pvt. Ltd the main issue i.e. the original grounds of appeal raised by the assessee before this Tribunal is subjudice before the Hon’ble High court, it would be premature to decide the allowability of this expenditure in the sum of Rs.2,18,092/- as revenue expenditure, in accordance with the payment by the assessee consistently. Hence, in order to avoid double claim of deduction by the assessee and in order to avoid double disallowance of expenses by the revenue, in the interest of justice and fair play, we deem it fit and appropriate to remand the additional ground raised by the assessee supra to the file of the ld. AO to decide the same based on the final outcome of decision of Hon’ble High Court on the issue of original grounds of appeal raised by the assessee before this Tribunal. This, in our considered opinion, would meet the ends of justice for both the parties. Accordingly, the additional grounds raised by the assessee are allowed for statistical purposes. Both the parties before us agreed for the said decision of the Bench in the open Court.
4. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on this 08/08/2019