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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. Dharmadhikari, B.P. Colabawalla, JJ.
L & T Finance Limited - Appellant
Versus
Dcit, Circle 2 (2) - Respondent
Income Tax Appeal (It) Nos. 256 and 267 of 2016
Decided On : 17-09-2018
Income Tax Act, 1961 - Section 260-A - Assessee takes exception - Impugned order - Memo of Appeal - Memo of Appeal of Income Tax Appeal what is submitted is impugned order gives rise to following substantial questions of law - Whether on the facts and in circumstances of case and in law, the Tribunal was right in holding that the amount credited to profit and loss account on account of securitization of lease rentals receivable in subsequent years is chargeable to tax in assessment year ? - Whether on the facts and in the circumstances of the case and in law, Tribunal was right in holding that the amount is chargeable to tax merely because the same is credited to the profit and loss account of the Appellant? - Whether on the facts and in the circumstances of case and in law, the Tribunal was right in holding that the amount was chargeable to tax in assessment year when whole amount has been offered and assessed to tax in subsequent years" - Held, amortization is specifically provided for such as in section 35D of the Act. The Supreme Court also held that, normally, the ordinary rule is that revenue expenditure incurred in a particular year is to be allowed in that year - Thus, if the assessee claims the expenditure in that year, the Department cannot deny it - However, in a case where the assessee himself wants to spread the expenditure over a period of ensuing years, it can be allowed only if the principle of the "matching concept" is satisfied, which up to now has been restricted only to cases of debentures - Whether matching concept would also apply to "income" is wholly a different matter and which would be considered in an appropriate case, as and when it so arises, provided the factual foundation is laid for the same - There was no factual foundation laid by appellant - Assessee for contending that "matching concept" was not applied by the authorities below - In fact, on going through the orders passed by authorities below, "matching concept" was never even argued or raised before them - Court find argument can never give rise to a substantial question of law in facts and circumstances of the present case - Present appeals is dismissed.
JUDGMENT
B.P. Colabawalla J. - By these two appeals filed under Section 260-A of the Income Tax Act, 1961 (for short "I.T. Act, 1961"), the appellant - assessee takes exception to the common Judgment and Order dated 5th May, 2015, passed by the Income Tax Appellate Tribunal (for short "ITAT"). The ITAT, by the impugned order, upheld the order of the CIT (A) who inter alia held the gain arising to the assessee on account of securitization of lease receivables and credited to the Profit & Loss Account of the assessee was a taxable receipt in the current assessment year. Income Tax Appeal No. 256 of 2016 is with reference to A.Y. 2002-03 and Income Tax Appeal No. 267 of 2016 is with reference to A.Y. 2003-04.
2. In the Memo of Appeal of Income Tax Appeal No. 256 of 2016 what is submitted is that the impugned order gives rise to the following substantial questions of law, which read thus:
(1) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the amount of Rs. 1.69 Crores credited to the profit and loss account on account of securitization of lease rentals receivable in subsequent years is chargeable to tax in the assessment year 2002-03 ?
(2) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the amount of Rs. 1.69 Crores is chargeable to tax merely because the same is credited to the profit and loss account of the Appellant?
(3) Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the amount of Rs. 1.69 Crores was chargeable to tax in assessment year 2002-03 when the whole amount of Rs. 9.33 Crores has been offered and assessed to tax in subsequent years"
3. In the Memo of Appeal in Income Tax Appeal No. 267 of 2016, identical questions are raised except that the Assessment Year is different and the amount mentioned therein is also different. Barring this, the questions are identical. Since both the appeals are factually similar and common questions of fact and law arise in both the appeals, they are being disposed of by this common judgment. For the sake of convenience, we shall refer to the pleadings and facts as set out in Income Tax Appeal No. 256 of 2016.
4. Before dealing with the legal submissions, it would be apposite to refer to some necessary facts. The appellant - assessee is a company registered under the Companies Act and is registered as a non-banking Finance Company with the Reserve Bank of India inter alia engaged in the business of leasing, hire purchase and other financial activities. According to the appellant, for the financial years 2001-02 ( i.e. Assessment Year 200203) the appellant securitized rent receivables from April-2002 to March-2004. The total amount receivable during the aforesaid period was Rs. 10.39 Crores which was securitized at the rate of 10.50% for the net present value at Rs. 9.33 Crores. This amount of Rs. 9.33 Crores was received by the appellant in financial year 2001-02 (A.Y. 2002-03) but which related to the financial years 2002-03 and 2003-04. According to the appellant, this amount of Rs. 9.33 Crores received on securitization, was adjusted against the outstanding rent receivable of Rs. 7.64 Crores in the books of accounts of the appellant and the balance amount of Rs. 1.69 Crores was recognized as a profit on securitization of lease receivables in the profit and loss account of the appellant. The appellant, accordingly, filed its return of income for the A.Y. 2002-03 on 29th October, 2002.
5. Thereafter, the appellant''s return was selected for scrutiny. After scrutinizing the return filed by the appellant, the Assessing Officer (for short "A.O."), vide his assessment order under Section 143(3) of the I. T. Act, 1961 added an amount of Rs. 1.69 Crores as an income of the appellant on the ground that the appellant - assessee itself had credited this amount to its profit and loss account. He held so, taking into con
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