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2017 (11) TMI 1156 - HC - Income TaxTreatment of loss on sale of loan portfolio which was not accepted as falling in the capital stream but treated as income - Held that - The assessee, a non-banking financial company, had relied upon Section 36(2)(i) which reads as follows 36.(2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or moneylending which is carried on by the assessee. The Court notices that the assessee relied upon an identical treatment of a similar amount for the previous year i.e. A.Y. 2004-05 and the order of the Tribunal. No substantial question of law
Issues: Treatment of loss on sale of loan portfolio as income instead of capital gain.
In this case, the primary issue before the Delhi High Court was the treatment of loss on the sale of a loan portfolio by a non-banking financial company. The Revenue contended that the loss should be treated as income rather than falling under the capital stream. The assessee, relying on Section 36(2)(i) of the Income Tax Act, argued that the deduction for bad debt should be allowed as the debt was taken into account in computing the income of the previous year. The Court observed that the assessee had followed a similar treatment in the previous year and that the Tribunal had also upheld this approach for A.Y. 2004-05. The Court, after considering the arguments presented, concluded that no substantial question of law arose in this matter. Consequently, the appeals made by the Revenue were dismissed. The judgment reaffirmed the application of Section 36(2)(i) in determining the treatment of bad debts and highlighted the importance of consistency in such matters based on past practices and judicial decisions.
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