2020 (4) TMI 254 - AT - Income Tax

Disallowance of the claim of bad debt - Disallowance of interest expenditure - HELD THAT - No infirmity in the order of the CIT(A) regarding the decision in respect of both these issues. Regarding bad debts, he has given a categorical finding that this claim is not allowable neither under section 57(iii) nor under 36(1)(vii) of the IT Act, 1961 and regarding disallowance of interest expenditure also, he has given a categorical finding that this amount is not allowable under section 57(iii) of the IT Act, 1961 and it is not allowable as a business expenditure because the assessee has not produced any details to show that the expenditure was related to his business / trading activity and that overdraft was used for the purpose of business. Hence, decline to interfere in the order of the CIT(A). - Decided against assessee.

Summary

Issues:
1. Disallowance of bad debt claim amounting to ?6,61,216.
2. Disallowance of expenditure of ?1,59,969 out of the interest expenditure claimed by the assessee.

Analysis:
1. Bad Debt Claim Disallowance:
The Assessing Officer (AO) disallowed the bad debt claim of ?6,61,216 made by the assessee against income from other sources. The appellant argued that the amount pertained to bad debts arising from trading on commodities at the National Spot Exchange Limited (NSEL). The AO concluded that this amount was not an allowable expenditure under Section 57(iii) of the Income Tax Act as it was not related to earning interest income. The appellant further claimed that the bad debts had already been written off in previous years, making the claim invalid for the current assessment year. The CIT(A) upheld the AO's decision, stating that the claim could not be allowed as a deduction under Section 57(iii) or Section 36(1)(vii) of the Act. The Tribunal found no infirmity in the CIT(A)'s decision, leading to the dismissal of the appeal.

2. Expenditure Disallowance - Interest Paid on Overdraft:
The appellant claimed a deduction of ?1,59,969 as interest paid on a loan taken against fixed deposits for repaying an overdraft facility. The AO disallowed this claim as the appellant failed to provide evidence linking the expenditure to business or trading activities. The appellant's assertion without supporting documents led to the disallowance of the amount. The CIT(A) upheld the AO's decision, stating that the expenditure was not allowable under Section 57(iii) or as a business expenditure. The Tribunal concurred with the CIT(A)'s findings, emphasizing the lack of evidence connecting the expenditure to business/trading activities. Consequently, the appeal was dismissed.

In conclusion, the ITAT Bangalore upheld the decisions of the CIT(A) regarding the disallowance of both the bad debt claim and the interest expenditure. The appellant's failure to substantiate the claims with relevant evidence resulted in the dismissal of the appeal.