The Bangalore division of the Income Tax Appellate Tribunal ( ITAT ) provided Toyota Financial with relief by instructing a reevaluation of the tax implications related to the interest income derived from Non-Performing Assets ( NPAs ).
During the assessment proceedings, the Assessing Officer (AO) observed that the assessee, Toyota Financial Servcies India Limited had claimed a deduction of Rs. 2,55,45,277 as income deferred on Non-Performing Assets ( NPAs ) under section 43D of the Income Tax Act, 1961. Additionally, Rs. 60,76,889 was claimed as income deferred in the previous year but realized as income in the books during the financial year 2016-17, and offered for taxation in the respective previous year.
Similarly, the assessee claimed a deduction of Rs. 1,44,19,621 as income deferred in the previous year, which was not accounted for in the books due to the write-off of related accounts as bad debt during the Assessment Year 2017-18. However, it was offered for taxation in the respective previous year. Despite furnishing a breakdown of this amount, it was found upon verification that the deduction of Rs. 4,60,41,857 was not claimed in the return.
Subsequently, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)], accompanied by detailed written submissions. The CIT (A) partially accepted the claim, allowing Rs. 2,55,45,277. The assessee also contested the issue concerning interest under Section 234C before the CIT (A), who upheld the AO’s decision. Dissatisfied with this, the assessee appealed to the Income Tax Appellate Tribunal ( ITAT ).
The assessee raised the contention that interest income from NPAs, totaling Rs. 5,38,33,424, was offered for taxation on an accrual basis despite not being realized during the relevant year. Hence, the assessee sought a reduction of this income from the total income computation.
The tribunal, comprising George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member), remanded the matter to the CIT (Appeals) after granting a reasonable opportunity to the assessee. Additionally, the assessee was instructed to adhere to the hearing notice and refrain from seeking unnecessary adjournments to expedite the case’s resolution.
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