Madras High Court
Ind Bank Housing Limited vs The Commissioner Of Income Tax ... on 29 November, 2021
Tax Case Appeal No. 1822 of 2008
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 29.11.2021
CORAM :
THE HONOURABLE MR. JUSTICE R.MAHADEVAN
AND
THE HONOURABLE MR. JUSTICE MOHAMMED SHAFFIQ
Tax Case Appeal No. 1822 of 2008
IND BANK HOUSING LIMITED
480, Anna Salai, III Floor
Nandanam
Chennai – 600 035 .. Appellant
Versus
The Commissioner of Income Tax (Chennai) – I
Aayakar Bhavan
Nungambakkam High Road
Chennai – 600 034. ..
Respondent
Tax Case Appeal filed under Section 260A of the Income Tax Act,
1961 against the order of the Income Tax Appellate Tribunal, Chennai "A"
Bench, dated 12.06.2008 passed in I.T.A.No.87/Mds/2007.
For Appellant : Mr.Santhoshkrishnan
for M/s. Mahalingam Associates
For Respondent : Mr.Karthik Ranganathan
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Tax Case Appeal No. 1822 of 2008
Senior Standing Counsel
JUDGMENT
(Judgment was delivered by R.MAHADEVAN, J.)
This tax case appeal has been filed by the appellant / assessee,
challenging the order dated 12.06.2008 passed by the Income Tax Appellate
Tribunal, 'A' Bench, Chennai, in I.T.A.No.87/Mds/2007, relating to the
assessment year 1999-2000.
2.By order dated 17.12.2008, this court admitted the aforesaid tax case
appeal on the following substantial question of law:
“1.Whether in the absence of escapement of income, the
Tribunal was right in sustaining the validity of assessment
made under Section 147 of the Income Tax Act?
2.Whether in the light of the mandatory prudential
norms issued by National Housing Bank in exercise of the
powers conferred to it by National Housing Bank Act, 1987
regarding recognition of income in respect of housing finance
companies which are binding and similar to the guidelines
issued by Reserve Bank of India in respect of non-banking
finance companies and on the basis of which an identical
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Tax Case Appeal No. 1822 of 2008
issue has already been decided in favour of the assessee by
this court in the case of CIT vs. Elgi Finance Limited (293 ITR
357), the Tribunal was right in law in upholding the addition
of the sum of Rs.6,70,93,602/- receipt of which is totally
uncertain and extremely doubtful and hence, not permitted to
be recognised as income both under the prudential norms as
also the accounting principles, especially when there is no
provisions under the Income Tax Act, 1961, empowering the
department to force the assessee to recognise such income,
solely for Taxation purposes?”
3. We have heard Mr.Santhoshkrishnan, learned counsel appearing for
the appellant/assessee and Mr.Karthik Ranganathan, learned senior standing
counsel appearing for the respondent/Revenue.
4.It is not disputed that the principal question of law arisen for
consideration in this appeal is the second substantial question of law, which
has already been decided in favour of the assessee by the Apex Court in
Commissioner of Income Tax v. Vasisth Chay Vyapar Ltd. [(2019) 410
ITR 244 (SC)], wherein, it was observed as under:
"The assessee, a non-banking financial company bound
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Tax Case Appeal No. 1822 of 2008
by the directions of the Reserve Bank of India, made certain
inter-corporate deposits upon which it did not receive interest
for more than six months. Since the Non-Banking Financial
Companies Prudential Norms (Reserve Bank) Directions,
1998 mandated a non-banking financial company to declare
such advances as non - performing assets when the accrued
interest therein was not paid by the debtor continuously for
six months, treating the said inter-corporate deposit as a non-
performing asset, the assesee did not show the interest as its
income, which according to the assessee was not realisable.
The High Court held that the assessee-company being a non-
banking financial company, was bound by the provisions of
the Reserve Bank of India Act, 1934, and the 1998
Directions, under which it was mandatory on the part of the
assesee not to recognise the interest on the inter-corporate
deposit as income, having regard to recognised accounting
principles, that the assessee had admittedly not received any
interest on the inter-corporate deposit since the assessment
year 1996-97 as it had become a non-performing asset in
accordance with the Prudential Norms which was entered in
the books of account as well, that even in the succeeding
assessment years, no interest was received and the position
remained the same until the assessment year 2006 -07, that
even the principal itself had become doubtful of recovery and
that therefore it was legitimate to infer that interest thereupon
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Tax Case Appeal No. 1822 of 2008
had not "accrued", that the inter-corporate deposit had
become a non-performing asset and on such non-performing
asset where the interest was not received and the possibility of
recovery was almost nil, it could not be treated to have
accrued in favour of the assessee. On appeal to the Supreme
Court, it was held, dismissing the appeal, that the
consideration of the question had been given a full and
meaningful reasoning and called for no interference. The
decision of the Delhi High Court in CIT v. Vasisth Chay
Vyapar Limited [2011] 330 ITR 440 (Delhi) was affirmed."
5.In the light of the aforesaid decision, the second substantial question
of law is answered in favour of the appellant / assessee and accordingly, this
tax case appeal stands allowed. In regard to the first substantial question of
law, it is left open. No costs.
(R.M.D., J.) (M.S.Q., J.)
29.11.2021
av
Internet : Yes
Index : Yes / No
R.MAHADEVAN, J.
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Tax Case Appeal No. 1822 of 2008
and
MOHAMMED SHAFFIQ, J.
av
To
1. The Commissioner of Income Tax (Chennai) – I
Aayakar Bhavan
Nungambakkam High Road
Chennai – 600 034.
2. The Income Tax Appellate Tribunal,
Chennai "A" Bench.
3. The Assistant Commissioner of Income Tax,
Company Circle II (3),
Chennai.
Tax Case Appeal No.1822 of 2008
29.11.2021
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