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Income Tax Appellate Tribunal, DELHI BENCHES : C : NEW DELHI
Before: SHRI R.S. SYAL & SHRI K. NARASIMHA CHARY
Date of Hearing : 24.05.2017 Date of Pronouncement : 26.05.2017 ORDER PER R.S. SYAL, VP: This appeal filed by the Revenue is directed against the order passed by the CIT(A) on 13.03.2013 in relation to the assessment year 2007-08.
First issue raised in this appeal is against allowing `Impairment loss’ of Rs.4,55,51,155/- in view of Accounting Standard-28.
Succinctly, the facts of the case are that the assessee claimed deduction on account of impairment loss of Rs.4.55 crore from the block of fixed assets on the basis of valuation of assets done by it. The Assessing Officer refused to allow such loss. The assessee contended that AS-28 recognises such impairment loss. The Assessing Officer opined that the Accounting Standard could not affect the taxability of income. That is how he disallowed the loss after noticing in para (c) on page 3 of his order that the assessee had not claimed depreciation on assets worth Rs.5.38 crore. The ld. CIT(A) got convinced with the assessee’s submission and allowed the loss.
Having heard the rival submissions and perused the relevant material on record, we find that the Accounting Standard simply deals with accounting treatment and cannot lay down the taxation principles.
The Hon'ble Supreme Court in the case of Tuticorin Alkalies Chemicals & Fertilizers Ltd. vs. CIT (1997) 227 ITR 172 (SC) has laid down to this extent. The amount of impairment loss of Rs.4.55 crore has resulted simply because of valuation of the fixed assets done by the assessee. By no standard, such an impairment loss, being the suo motu lower valuation of the fixed assets can be allowed as deduction in the computation of total income. We cannot approve the view taken in the impugned order. However, we find that the assessee did not claim depreciation because of claiming the impairment loss. As depreciation is mandatory and has to be allowed, we direct the Assessing Officer to allow depreciation at the relevant rates.
The second issue raised in this appeal is against the deletion of addition of Rs.1,65,17,610/-, being the amount of unsecured loans waived by the creditors. The Assessing Officer treated such amount of unsecured loans taken by the assessee in earlier years and written off in this year, as income. The ld. CIT(A) deleted the addition on the premise that this did not constitute trading receipt.
Having heard the rival submissions and perused the relevant material on record, we find that the assessee took loans in earlier years and reflected the same as its liability in the balance sheets. These unsecured loans were waived in the current year. Since the raising of loans did not constitute any deduction in the year when these were raised, their write off cannot equally result in a taxable event. We, therefore, uphold the impugned order on this score in deleting the addition of Rs.1.65 crore.
The last issue raised in this appeal is against the deletion of addition of Rs.2,91,92,240/-. The facts apropos this issue are that the assessee credited interest of Rs.2.91 crore to its Profit and loss account, which was waived by Oriental Bank of Commerce out of monies due to it as part of settlement of its dues and other items of interest. The Assessing Officer treated the entire sum of Rs.2.91 crore as income.
The ld. CIT(A) deleted the addition.
Having heard the rival submissions and perused the relevant material on record, it is observed from the impugned order that interest of Rs.1,42,36,124/- was not allowed as deduction in the assessment of the assessee in the earlier years because of non-payment and the same was disallowed u/s 43B. In view of the fact that the assessee did not get benefit of deduction of interest when such liability was incurred, the same amount when written off cannot be treated as income. Another amount of Rs.16,98,114/- was found by the ld. CIT(A) to be capitalized by the assessee as attributable to pre-production expenses and the same was not claimed as deduction. The reversal of such interest in the year under consideration would not attract taxability. The factual position as recorded in the impugned order on this score has not been disputed by the ld. DR. The remaining amount of Rs.1,31,78,008/- (Rs.2,91,12,246/- (-) Rs.1,42,36,124/- (-) Rs.16,98,114/-), which has been written back is liable to tax because such amount was allowed as deduction in earlier years.
In the result, the appeal is partly allowed.
The order pronounced in the open court on 26.05.2017.