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TMI Blog2007 (5) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of activity undertaken by the assessee can be decided on the basis of other facts. As stated, the assessee is engaged in granting of loans on regular basis and interest income has also been shown as business income which also reflects the intention of the assessee. We are also of the view that pendency of recovery proceedings cannot come into the way of allowing of bad debts, if other facts clearly establish that there are no chances of any recovery of the money even if a decree in favour of the assessee is pronounced by the Court. The bad debt of Mr. K.M. Nemani stand on the same footing. However, in the absence of details regarding loan transactions with M/s. Videocon Holding (P.) Ltd. the same cannot be allowed. Thus, we are of the view that the decision of the Tribunal in the earlier assessment year is not applicable and assessee s claim in respect of bad debts of Mr. K.M. Nemani is justified. Accordingly, order of the ld. CIT(A) stands modified and we direct the Assessing Officer to allow the claim of bad debt in respect of this account. Thus ground No. 1 stands partly allowed and ground Nos. 2 and 3 stand accepted. In the result, the appeal filed by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oan was not proved. The Assessing Officer also drew support from the decision of the Hon ble Bombay High Court in the case of Chinai Co. (P.) Ltd. v. CIT [1994] 206 ITR 616 . Aggrieved by this, the assessee carried the matter before the ld. CIT(A) wherein the assessee pointed out that the Assessing Officer did not consider the appellate order for 1997-98 wherein the ld. CIT(A) had allowed the claim of the assessee. The assessee also reiterated the submissions made before the Assessing Officer. The ld. CIT(A) however upheld the action of Assessing Officer and recorded his findings as under : "10. After going through the facts of the case for the assessment order and after hearing the arguments of the ld. AR, I find that, the Assessing Officer was justified in holding that, the debts were not representing money lent in normal course of business of money lending, since, the money lending business requires valid license from the concerned authority, and since, in money lending business only, the loans were debts. As held by the Hon ble Bombay High Court in the case of Chinai Co. (P.) Ltd. , 206 ITR 616 that, the income of interest and dividend earned by the assessee through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son that the Tribunal, in deciding the issue against the assessee, placed reliance on the decision of Jurisdictional High Court in the case of Phalton Sugar Works Ltd. v. CWT [1994] 208 ITR 989 (Bom.) which was overruled by Hon ble Supreme Court in the case of S.A. Builders Ltd. v. CIT [2007] 288 ITR 1 . The ld. Counsel also contended that the decision of Hon ble Calcutta High Court in the case of Turner Morrision Co. Ltd. v. CIT [2000] 245 ITR 724 , being the direct decision on the issue, was not followed by the Tribunal being binding. However, in view of these subsequent developments, this decision was not required to be followed. The ld. Counsel thereafter, contended that the assessee had given these loans on interest in earlier years and declared interest thereon as business income which was assessed so as well. Hence, all the preliminary conditions for claiming the bad debt were satisfied. The ld. Counsel also contended that, for the purpose of Income-tax Act, the requirement of money lending licence to hold a person engaged in money lending business was not specified, hence, the engagement of a person in the money lending business had to be consideration on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment year 1995-96 which has been deployed by the assessee in granting loans and advances on interest. It is also in dispute that the assessee has also carried on share dealing business subsequently in the capacity of sub-broker or a trader for assessment year 1997-98 ( sic ) the Tribunal rejected the claim of the assessee regarding write off of bad debts for the reason that, in the absence of money lending licence, no other evidence or material was produced to establish that the assessee was carrying on money lending business. The Tribunal also relied on the decision of Hon ble Jurisdictional High Court in the case of Phalton Sugar Works Ltd. ( supra ) and followed the same in preference to the order of Hon ble Calcutta High Court in the case of Turner Morrision Co. Ltd. ( supra ). Now, the position has changed a little bit in view of the decision of the Hon ble Supreme Court in the case of S.A. Builders Ltd. ( supra ), wherein advances to subsidiary company has been held as given for the purpose of business of the assessee-company. It is also noted that in the assessment year 1997-98 the Assessing Officer had assessed the income from interest under the head Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of loans on regular basis and interest income has also been shown as business income which also reflects the intention of the assessee. We are also of the view that pendency of recovery proceedings cannot come into the way of allowing of bad debts, if other facts clearly establish that there are no chances of any recovery of the money even if a decree in favour of the assessee is pronounced by the Court. In the present case the bad debt of Mr. K.M. Nemani stand on the same footing. However, in the absence of details regarding loan transactions with M/s. Videocon Holding (P.) Ltd. the same cannot be allowed. We are further of the view that the decision of Hon ble Jurisdictional High Court in the case of Chinai Co. ( supra ) is in other context, hence, the same is not applicable to the facts of the case. In this view of the matter and taking into consideration facts of the year under appeal, subsequent legal developments, we are of the view that the decision of the Tribunal in the earlier assessment year is not applicable and assessee s claim in respect of bad debts of Mr. K.M. Nemani is justified. Accordingly, order of the ld. CIT(A) stands modified and we direct the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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