Case Law Details
TVS Finance & Services Ltd Vs ACIT (ITAT Chennai)
The undisputed facts that emerges are that the assessee is engaged in equipment leasing, hire purchase financing and bill discounting. As a part of its business, it has assigned / sold its outstanding receivables valuing at Rs.51 .07 Crores to M/s Piramal Financial Services Ltd. for consideration of Rs.40 Crores vide assignment deed dated 30.09.1999. The consideration was settled partly by cheques and partly by transfer of certain vacant parcels of land in favor of the assessee which were under litigation and finally, sold in this year. For assessee, the receivables constitute business debt and any loss / gains arising in settlement thereof would be business income / loss for the assessee. In fact, the assessee has claimed losses on re-possessed assets as business loss in this year which has been allowed also. The assignment of debt in favor of another entity partly in exchange of land was integral part of the business activities of the assessee and any gain / loss arising on such an asset should be viewed as business profits only. The situation is no different from a situation wherein the assessee in exchange of loan debts, repossesses the assets of the borrower and sell the same subsequently in discharge of loan assets. Any resultant gains / losses arising therefrom would be part of normal business activities of the assessee.
It is also clear that origin of the parcels of land so acquired is business asset only and therefore, the resultants gains would be business income of the assessee. The said proposition is duly supported by the decision of Hon’ble Supreme Court as referred to in the impugned order. The case law of Pune Tribunal has rightly been distinguished by Ld. CIT(A) and we concur with the same. We also concur with the findings that the land was received in lieu of a business loan foregone. The assets so received by the assessee would assume the character of same business assets irrespective of its treatment by the assessee in the books of accounts.
The Ld. AR has averred that the land has been shown as part of fixed asset and therefore, the same should be taken as capital asset. However, it is settled position that entries in the books of accounts would not be determinative of nature of income of the assessee.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
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