Share accepted as consideration interest is deemed to have accrued and allowable and guidelines RBI cannot be override by provision of IT on leas rent due from NPA

Court :
INCOME TAX APPELLATE TRIBUNAL

Brief :
That the Ld. CIT(A) was unjustified in confirming the addition of Notional Interest of Rs.7.18 Crore allegedly due from M/s. V. B. Desai & Co. without any cogent reasons. 1.1. That the Ld. CIT(A) failed to appreciate that after the judgment of the Special Court dated 01.11.2002, the question of any Notional Interest due from M/s. V. B. Desai & Co. on unpaid consideration from M/s. V. B. Desai & Co. does not arise inasmuch as according to the judgment of the Special Court, there was no unpaid consideration due from M/s. V. B. Desai & Co. after May, 1992. We find that it is a fact that assessee has not booked the lease rentals as noted by the AO but on the reason that the assessee being NBFC is following the guidelines issued by RBI and guidelines states that once the party has become a defaulter for at least twelve months that party can be declared as NPA and no income on that part can be booked from the source after failure to get any income. In the present case all parties have become NPAs and, therefore, the assessee has not booked the lease rentals due from them. As argued by Ld. CIT, DR that this issue is squarely covered by the decision of ITAT, Delhi Special Bench in the case of New India Industries Ltd VS. ACIT (2007) 18 SOT 51 (Del.SB) where the issue whether provision made by NBFC in respect of NPAs in its P & L Account in accordance with prudential norms issued by RBI in exercise of powers conferred upon it u/s. 45JA of RBI Act, 1934 be classified as bad debts and be allowed as deduction u/s. 36(1)(vii) of the Act. We find that Special Bench of this Tribunal in the case of New India Industries Ltd. has held the issue against the assessee and in favour of revenue whereint it has held that the norms issued by RBI cannot override the provisions of the Income Tax Act and particularly regarding NPAs or bad debts. Once this is the position that Special Bench has taken a view, we respectfully following the same decide this issue against the assessee and in favour of revenue. This issue of assessee’s Appeal is dismissed.

Citation :
All Bank Finance Ltd. (Appellant) Vs. Deputy Commissioner of Income-tax Circle-6, Kolkata. (Respondent)