CIT v. Brahmaputra Capital & Financial Services Ltd.

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The Tax PublishersITA No. 107/2012 2012 TaxPub(DT) 2453 (Del-HC) : (2013) 357 ITR 0241 IN THE DELHI HIGH COURT S. RAVINDRABHAT & R.V. EASWAR CIT v. Brahmaputra Capital & Financial Services Ltd. ITA No. 107/2012 3 September, 2012 Appellant by : Deepak Chopra, Sr. Standing Harpreet Singh Ajmani, Advocate. Respondent by : None (OPEN COURT) *R.V. Easwar, J* This is an appeal by the Revenue under section 260A of the Income Tax Act, 1961 ('Act' for short) and the following substantial questions of law are sought to be raised:-- '(A) Whether the order of the Tribunal is perverse since it fails to take note of the changed facts for the year under consideration? (B) Whether the Tribunal erred in not appreciating that the whole basis of the assessee not recognizing interest income from such loans was that the borrowers were in a weak financial position whereas in the year under consideration the assessing officer found that the borrowers had made huge profits and as such these loans could not be treated as non-performing assets?' 2. The assessee is a non-banking finance company registered with the Reserve Bank of India. In the return of income filed for the assessment year 2007-08, it claimed that it was not assessable in respect of any interest on the loans advanced by it in the previous years relevant to the assessment years 1996-97 and 1998-99, on accrual basis, since there was a resolution of the Board of Directors dated 4-3-2004 not to charge interest in respect of those loans having regard to the financial difficulties in which the debtor-companies were placed. It was also claimed before the assessing officer that the claim of the assessee was accepted by the Income Tax Appellate Tribunal ('Tribunal' for short) in the assessment years 2003-04 to 2006-07. The assessing officer examined the facts for the year under appeal and found that the companies to whom the assessee advanced loans were financially well off. He noticed from the balance sheets of the companies that they were making profits for the year under appeal and, therefore, the assessee was no longer justified in not charging interest on the loans to them. The details of the loans and the amount of interest on them for the year under appeal are as under:-- SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA No. 107/2012
2012 TaxPub(DT) 2453 (Del-HC) : (2013) 357 ITR 0241

IN THE DELHI HIGH COURT

S. RAVINDRABHAT & R.V. EASWAR

CIT v. Brahmaputra Capital & Financial Services Ltd.

ITA No. 107/2012

3 September, 2012

Appellant by : Deepak Chopra, Sr. Standing Harpreet Singh Ajmani, Advocate.

Respondent by : None

(OPEN COURT)

R.V. Easwar, J

This is an appeal by the Revenue under section 260A of the Income Tax Act, 1961 ('Act' for short) and the following substantial questions of law are sought to be raised:--

'(A) Whether the order of the Tribunal is perverse since it fails to take note of the changed facts for the year under consideration?

(B) Whether the Tribunal erred in not appreciating that the whole basis of the assessee not recognizing interest income from such loans was that the borrowers were in a weak financial position whereas in the year under consideration the assessing officer found that the borrowers had made huge profits and as such these loans could not be treated as non-performing assets?'

2. The assessee is a non-banking finance company registered with the Reserve Bank of India. In the return of income filed for the assessment year 2007-08, it claimed that it was not assessable in respect of any interest on the loans advanced by it in the previous years relevant to the assessment years 1996-97 and 1998-99, on accrual basis, since there was a resolution of the Board of Directors dated 4-3-2004 not to charge interest in respect of those loans having regard to the financial difficulties in which the debtor-companies were placed. It was also claimed before the assessing officer that the claim of the assessee was accepted by the Income Tax Appellate Tribunal ('Tribunal' for short) in the assessment years 2003-04 to 2006-07. The assessing officer examined the facts for the year under appeal and found that the companies to whom the assessee advanced loans were financially well off. He noticed from the balance sheets of the companies that they were making profits for the year under appeal and, therefore, the assessee was no longer justified in not charging interest on the loans to them. The details of the loans and the amount of interest on them for the year under appeal are as under:--