9911796707
TMI Blog2008 (6) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... Hongkong Shanghai Banking Corporation 13,83,102.00 2. HDFC Bank Ltd. 76,254.00 3. Others 26,024.00 4. Others-TAM Media Research P. Ltd. 65,25,000.00 5. ORG-Marg Research Pvt. Ltd. 19,99,313.00 Total 1,00,09,693.00 4. The Assessing Officer noticed that the assessee has earned interest on FDR and on loans given to other parties, therefore, same is taxable under the head income from other sources because income from other sources is a specific head for taxing the interest income . The assessee claimed interest expenditure Rs. 1,44,60,241 against the above interest income. The Assessing Officer disallowed the said interest expenditure with the observation that interest paid is allowable expenditure out of interest earned provided interest is paid on funds borrowed and utilized for giving further loan/deposit on which interest is earned. In the case of the assessee the interest has been paid on the funds borrowed for business purposes and not on funds used for earning interest, therefore, claim of the assessee for allowing the deduction of interest pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A). The same is reproduced from the order of the ld. CIT(A) which is as under : "It is submitted that the interest from the two companies should be treated as part of Business Income for the following reasons : 1.The Appellant has given loans to these companies from whom not only interest is received but also rent is received in respect of premises leased to them. 2.The Appellant has business transactions with them also, as shown by the copy of the separate account submitted to you. The Appellant has paid courier charges, electricity, telephone bills etc., on account of these two companies and debited their accounts and received the payment for such expenses incurred on their behalf. 3.TAM Media Research Pvt. Limited is held 50 per cent by A.C. Nielson, USA and 50 per cent by Kantar Research which is also US Company. Similarly, ORG Marg Research Pvt. Ltd. is wholly owned subsidiary of A.C. Nielson, USA. This will show the business relationship of the two borrowers with the Appellant-Company. 4.There is an agreement for the loan by the Appellant-Company with TAM Media Research Pvt. Limited copy of which is filed with you. You have raised the point about the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e floated by the group and they were in need of funds to survive. The business of the assessee which is confined to business of market research and investigate specific market issues to customers. 7.2 In the light of the above discussion, we find that the CIT(A) has rightly held that the impugned interest income is assessable under the head income from other sources . 8. One more ground raised in assessment year 2002-03 pertains to bad debts. The Assessing Officer disallowed bad debts claim of the assessee amounting to Rs. 14,74,525 on the ground that the said amount is not credited to parties account but same was credited to make provision for doubtful debts. The disallowance made by the Assessing Officer is confirmed by the ld. CIT(A) with the observation that explanation to section 36(1)( vii ) is very clear that bad debts provisions cannot be allowed to the assessee when the amount is credited to provisions for bad debts account. 9. The ld. Authorised Representative of the assessee reiterated the submissions which were made before the ld. CIT(A) and submitted that requirement of section 36(1)( vii ) was complied with even when the amount was credited to doubtful de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponding credit to debtor s account or ( ii ) by giving corresponding credit to the bad and doubtful debts account. The first method is only employed where it is desired to close the account of the debtor. The second method is employed where there are some chances of recovery. When we talk of writing off of debt it means raising a debit entry. This can only be to the debit of P L account. This is the only debit which can be raised as a result of writing off of a bad debt. If the debit entry posted by the assessee indicate that the bad debt has been written off as irrecoverable in the account of the assessee, then the statutory conditions stand fully complied with, if the assessee has posted entries in the P L account and corresponding entries have been posted in bad debt reserve/provision account it would be seen as sufficient compliance with the provisions of the statutory requirement for writing off as irrecoverable the concerned debt in the books of the assessee. This above view is fortified by the judgment of Hon ble High Court in the case of CIT v. General Insurance Corpn. of India (No. 2) [2002] 254 ITR 204 (Bom.). In the light of above principle discussion, now we con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: Provision for Doubtful 8,496,447 5,546,894 Debts 46,048,161 49,138,922 From above factual position of the facts in the present case we noticed that the assessee has two types of accounts, one is provision for doubtful debts and another is bad debts written off. The assessee has not claimed bad debts for the provision account. The assessee s claim is only in respect of bad debts written off account. The provision account is covered by explanation to section 36(1)( vii ). Therefore, the assessee is not entitled for provision account and same has not been claimed by the assessee as bad debts under section 36(1)( vii ). The assessee s claim is only in respect of bad debts written off account. The assessee has debited this account in P L account and has made corresponding entries in bad debts written off account, we find that the effective claim of the assessee for bad debt is Rs. 14,11,120 which is in accordance with section 36(1)( vii ). The assessee satisfied the condition of the provision in respect of writing off . In the light of above discussion the claim of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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