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Supreme Court Rules in Favor of M/s Shriram Investments in Tax Dispute

Last Updated: 05-10-2024 12:58:41pm
Supreme Court Rules in Favor of M/s Shriram Investments in Tax Dispute

In a noteworthy ruling on October 4, 2024, the Supreme Court conveyed its judgment in Civil Appeal No. 6274 of 2013, including M/s Shriram Speculations and the Commissioner of Income Tax III, Chennai. The case, which rotated around the translation of pay acknowledgment in fund and venture companies, saw the Court siding with the appealing party, M/s Shriram Investments, over a long-standing assess debate.

The center issue in this case was whether intrigued salary from non-performing assets (NPAs) may be saddled on an collection premise, as demanded by the Income Tax Department, or whether it ought to as it were be saddled when really realized. M/s Shriram Investments, a Non-Banking Financial Company (NBFC), had contended that pay from NPAs ought to not be recognized until it was really gotten, in line with the Reserve Bank of India (RBI) rules for NBFCs. The Income Tax Department, be that as it may, fought that such wage ought to be burdened on an collection premise beneath the Income Tax Act, 1961. 

In its ruling, the Supreme Court stressed that RBI guidelines particularly govern NBFCs and supersede inconsistent sections in the revenue Tax Act when it comes to revenue recognition. The Court held that since M/s Shriram Investments followed RBI norms in classifying NPAs, interest income on such assets could not be taxed until it was realized.

This verdict provides clarity and relief to the financial and investment sector by reaffirming the idea that real income, rather than notional income, should be the foundation for taxation in the case of NBFCs.

 

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TAGS: Supreme Court Shriram Investments NBFC Income Tax Act RBI guidelines non-performing assets tax dispute.


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