J U D G M E N T

S.VAIDYANATHAN, J.

AND C.SARAVANAN, J.

The assessee has filed this Tax Case Appeal under Section 260A of the Income Tax Act, 1961 [hereinafter referred to as 'Act'] against the order dated 11.04.2008 passed by the Income Tax Appellate Tribunal [hereinafter referred to as “Tribunal”] in I.T.A.Nos.78/Mds/2007.

2. By the common order dated 11.04.2008, I.T.A.No.78/Mds/2007 filed by the appellant was partly allowed and the appeal filed by the respondent Income Tax Department in I.T.A.No.564/Mds/2007 was dismissed. Aggrieved by the same, the assessee has filed this appeal. 3. This appeal was heard along T.C.A No.1025 of 2009. T.C.A No.

1025 of 2009 is being disposed by a separate order. The order impugned in the said appeal arises out of the conclusion arrived by the Tribunal in the impugned order of the Tribunal in this appeal. The present appeal is confined to issues answered against the appellant in I.T.A.No.78/Mds/2007 filed by the appellant.

4. At the time of admission, the following Substantial Questions of Law were framed:-

i. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the appellant is not entitled to deduction of the provision made in respect of Non-Performing Assets which are considered irrecoverable?

ii. Whether the appellate Tribunal was justified in not appreciating that the provision made in respect of Non Performing Assets if not allowable as a bad debt is allowable as a business loss?

iii. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the appellant is not entitled to deduction of diminution in value of investments?

iv. Whether on the facts and in the circumstances of the case the Tribunal was right in law in holding that the loss computed by the appellant on account of diminution in value of repossessed vehicles is only a notional and unascertained loss and hence cannot be allowed as a deduction?

5. The factual background of the case indicates that the appellant had filed a return of income on 01.12.2003 for the Assessment Year 2003-2004, declaring a total taxable income of Rs.78,65,45,000/- under Section 139 of the Income Tax Act, 1961.

6. A notice under Section 143(2) of the Act was issued to the appellant on 24.12.2004. The assessment was completed on 24.03.2006 under Section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2003-2004. The total income of Rs.91,63,33,629/- was determined in the assessment order dated 24.03.2006.

7. Aggrieved by the order of the Assessing Officer dated

24.03.2006, the appellant preferred an appeal before the Commissioner of Income Tax (Appeals) [hereinafter referred to as “Appellate Commissioner”] on 24.04.2006 in I.T.A.No.176/2006-07/A.III. The Appellate Commissioner vide his order dated 11.12.2006 confirmed the order of the Assessing Officer dated 24.03.2006.

8. Against the order of the Appellate Commissioner dated

11.12.2006, both the appellant and the respondent Income Tax Department filed separate appeals before the Tribunal in I.T.A.No.78/Mds/2007 and I.T.A.No.564/Mds/2007 respectively.

9. We have heard the learned counsel for the appellant and the learned counsel for the respondent Income Tax Department.

10. We shall deal with the issues that were answered against the appellant in I.T.A.No.78/Mds/2007, in respect of which the present appeal has been filed namely:-

i. The diminution in the value of investment in two unlisted companies for a sum of Rs.53,98,000/-, ii. The deduction of provision disallowed towards Non-Performing Assets (NPA) for a sum of Rs.1,44,12,000/-, and iii. The diminution in the value of re-possessed vehicles for a sum of Rs.4,18,63,000/-.

DIMINUTION IN THE VALUE OF INVESTMENT:

11. As far as the diminution in value of investment and the provision for Non-Performing Assets (NPA) are concerned, the Tribunal has dismissed the appeal of the appellant by placing reliance on the decision of the Income Tax Appellate Tribunal in the appellan