Loss on Sale of Assets to ARCIL is allowable irrespective of treatment in Books of Account

Loss on Sale of Assets to ARCIL is allowable irrespective of treatment in Books of Account

We find the assessee had sold NPA.s to ARCIL, that as per the RBI instructions it did not claim the loss in the profit and loss account, that the claim was made before the Department authorities that it had suffered a loss on sale of NPA.s, that the AO and the FAA held that the assessee had not suffered real loss i.e. it was notional loss only. There is no doubt about selling of assets to ARCIL, that ARRIL is not a fake or bogus entity, that the sale has not been doubted by the AO/ FAA,that the entry in the books of accounts have been made as per the instructions of the RBI. In our opinion, following of RBI instruction by a banking company cannot be basis for denying or allowing any claim. It is said that the entries in the books of accounts are not conclusive proof of taxability of any income. What has to be seen is the substance of the transaction. Considering the fact that the assessee had suffered loss while carrying out normal business activity i.e. selling its assets. Therefore,we hold that there was no justification for disallowing the loss suffered in the transaction. Reversing the order of the FAA, we decide Ground no. 8 in favour of the assessee.

Income from Kenyan house property cannot be taxed in India

Article 6 of the DTAA entered into by India and Kenya. The assessee had excluded the house property income from computation as it was covered by the Article 6. The AO and the FAA had treated the business income and house property income as one source of income for tax purposes. But, the DTAA contains two different Articles. Business income is governed by Article 7 and Article 6 deals with house property income. Secondly, any notification or circular cannot alter the nature of income that has been specifically included in DTAA.s. Even amendment in a section of the Act would not affect the provisions of tax treaties, unless same are not rectified by both the signatories of the treaty. So, we hold that house property income had to taxed as per Article 6 of the DTAA and as per that Article income from Kenyan house property could not be taxed in India.

Deduction of amount written off under Agricultural Debt Relief and Waiver Scheme (ADRWS)

During the assessment proceedings, the AO found that the assessee had claimed deduction of Rs. 9.45 crores under the head ADRWS, it was claimed that the Govt. of India had formulated the scheme in terms of which loan given to agriculturists were either waived or reimbursed by the Govt., that in accordance with the scheme the bank waived or partly waived the loans, that in some cases claims were rejected by Govt. of India, that in such cases bank was not in a position to recover the amount from the borrowers,that the assessee wrote off such amounts.