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TMI Blog2013 (11) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... to another public limited company named M/s Peermade Tea Company Limited and interest amount of Rs. 23,76,274/- accrued on the above said loan amount. The Assessing Officer noticed that the bad debts claimed u/s. 36(1)(vii) of the Act can be allowed only if the conditions specified u/s. 36(2)(i) is complied with. The conditions specified in sec. 36(2)(i) are that (a) the debt or part thereof has been taken into in computing the income of the assessee of the previous year in which the amount of such debts or part thereof are written off or in the earlier previous year or (b) it represents money lent in the ordinary course of the business of banking or money lending. The AO held that the inter corporate deposit made by the assessee cannot be considered as having been lent in the ordinary course of the business of banking or money lending. The Assessing Officer has also observed that the assessee could not furnish any documentary evidence to show that the interest provision of Rs.23,76,274/- has been accounted as income in the previous years. Accordingly, the Assessing Officer rejected the entire claim of bad debts and added the sum of Rs. 53,76,274/- to the total income returned b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd hence, the amount advanced by the assessee-company may not be recoverable. Accordingly, the Board has decided to write off the loan in the books of the accounts of the assessee-company. In this regard, he invited our attention to the copy of Board resolution submitted by him. 5.2 The Ld. Counsel submitted that the provisions of sec. 36(1)(vii) of the Act, subject to sec. 36(2), states that the bad debt is allowable if it is written off as irrecoverable in the accounts of the assessee. The Ld. Counsel submitted that the assessee-company herein has written off the above said amount in its books of accounts as irrecoverable. He submitted that the provisions of sec. 36(2) states that the deduction prescribed u/s 36(1)(vii) is admissible if the amount has already been offered as income in the same year or in any of the previous years or is lent in the ordinary course of business of lending money. The Ld. Counsel submitted that the tax authorities have taken the view that the lending of money is not part of the business activities of the assessee, without considering the activities carried on by the assessee company. He submitted that the assessee-company has lent the above stated am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its books of accounts as required u/s 36(1)(vii) of the Act. With regard to the interest component of Rs.23,76,274/-, the submission of the assessee is that it has offered the said amount as its income and hence the condition specified in sec. 36(2)(i) stands satisfied with regard to this amount also. 8. The assessee has placed reliance on the three case laws referred supra. We have gone through the case laws relied upon by the assessee. In the case of Goetze (India) Ltd. supra, we notice that the Delhi Bench of the Tribunal has given a clear finding in paragraph 8 of its order that in the facts prevailing in that case it cannot be said that lending of money was only a casual activity or one time placing of fixed deposits. It was further stated that the assessee was carrying on the same by way of regular business activity. 9 In the case of Poysha Oxygen (P) Ltd.(supra), the Third Member has given a categorical finding that the sequence of events and the documents proved that the transaction was a loan transaction and not a transaction of investment. For the sake of convenience, we extract below the head notes reported in 19 SOT 711 in the above said case: "Business expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect to the directions of the CIT(A), he had allowed deduction in respect of the interest, which was the interest for the very year under appeal and no appeal was filed by the Department against the order of CIT(A)--Fact that the advance was described by assessee as 'inter-corporate deposit' would not be decisive of the question whether it was given in the course of the money-lending business of the assessee for purposes of income-tax proceedings--The fact that it was a single transaction was not an impediment to it being called money-lending business-- The transaction relating to the advance of inter corporate deposit of Rs. 1 crore by the assessee was a loan transaction and represented money lent in the ordinary course of the business of money-lending carried on by the assessee therefore, the claim of the assessee for bad debts of Rs. 1 crore was allowable in view of the provisions contained in s. 36(1)(vii) r/w s. 36(2)(i) 10. In the case of ITW Signode India Ltd.(supra), we notice that the Tribunal has decided the issue on the basis of commercial expediency, which is not a case herein. 11. Accordingly, in our view, the assessee could not place reliance on the above said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on this kind of transactions repeatedly. Hence, in the facts and circumstances of the case, in our view, the condition laid down u/s. 36(2)(i) has not been satisfied by the assessee in this regard. Accordingly, we do not find any infirmity in the decision of the Ld. CIT(A) in rejecting the bad debt claim of Rs. 30.00lakhs u/s. 36(1)(vii) of the Act. 14. We notice that the tax authorities have rejected the bad debt claim of interest amount of Rs. 23,76,274/-. The assessee has filed before us a paper book, wherein he has attached account copies of interest received account for financial years 1996-97 to 2005-06 relating to the assessment years 1997-98 to 2006-07 respectively. The contention of the assessee is that it has accounted for the accrued interest in all the years and offered the same for taxation. We notice that this aspect has not been examined by the tax authorities. They have rejected the claim of the assessee only for the reason that the assessee could not substantiate that the interest amount was offered for tax in the earlier years. Since the assessee has filed the copies of the interest received account for various years, in our view, this matter requires fresh exami ..... X X X X Extracts X X X X X X X X Extracts X X X X
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