T N POWER FINANCE AND INFRASTRUCTURE DEVELOPMENT CORPORATION LTD Vs. JOINT COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AGAINST the order of the Appellate Tribunal in ita. Nos. 1864 & 1865/mds/2000, dated 27. 11. 2001, the assessee has preferred the appeals and raised the following common substantial question of law: "whether the Tribunal is correct in upholding the order of the Commissioner of Income-tax (Appeals) in disallowing provisions for non-performing assets which was debited to profit and loss account?"

(2.) THE assessee is the appellant. THE assessment year involved is 1998-99. THE assessee engaged in the business of providing long term finance for infrastructure development, in the return for the assessment year 1998-99, admitted a total income of Rs. 5,16,48,010/- which was processed under section 143 (1) (a) of the Income-tax Act. THE assessing officer issued a notice under section 154 of the Act calling upon the assessee to show-cause as to why the provision for non-performing assets which is debited to profit and loss account should not be disallowed in view of Explanation to section 36 (vii ) (a) of the Act. Even though the assessee filed a reply, the assessing officer held that any provision debited to profit and loss account cannot be allowed as a deduction unless it is an ascertained liability as the provision made by the assessee is only contingent in nature. On appeal, the commissioner of Income-tax (Appeals) held that non-performing assets related to capital goods/assets whereas bad and doubtful debts were revenue in nature/trade related and the direction of the Reserve Bank of India could not override the mandatory provisions of the Act. Even in the rectification petition filed by the assessee, the Commissioner (Appeals) held that the fact that the debts of the assessee doing the business of financial investments in power sector, etc. ,were revenue in nature had already been considered and accordingly, rejected the plea of the assessee for rectification. THE Appellate Tribunal confirmed the order of the Commissioner (Appeals ). THE said order of the Appellate Tribunal is put in issue in the present appeals.