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Issues Involved:
1. Disallowance of interest u/s 36(1)(iii). 2. Disallowance of bad debts claim u/s 36(1)(vii). Summary: 1. Disallowance of Interest u/s 36(1)(iii): The primary issue was whether the amount advanced to Strong Investments & Finance Pvt. Ltd. was a loan or share application money. The Assessing Officer disallowed Rs. 3,26,027, arguing that the assessee incurred a loss by advancing money at a lower interest rate than the debenture interest rate. The assessee contended that the amount was for share application money, which is part of its business activities, and thus the interest should be allowed u/s 36(1)(iii). The Tribunal found that the assessee had borrowed money for business purposes, advanced it as share application money, and paid interest on the debentures. The Tribunal concluded that all conditions of section 36(1)(iii) were met and deleted the disallowance, allowing the interest paid in full. 2. Disallowance of Bad Debts Claim u/s 36(1)(vii): The assessee claimed a bad debt of Rs. 6,75,102 for lease rent receivable from Apollo Dealers & Consumers Welfare Trust. The Assessing Officer disallowed the claim, stating there was no evidence of the debt or its write-off. The Tribunal referred to the amended section 36(1)(vii) and relevant case law, noting that the mere write-off of the debt in the accounts is sufficient for deduction. The Tribunal found that the assessee had properly written off the lease rent receivable in its accounts, satisfying the statutory requirements. Consequently, the Tribunal allowed the bad debt claim. Conclusion: The appeal was partly allowed, with the Tribunal deleting the disallowance of interest and allowing the bad debt claim.
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