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TMI Blog2014 (5) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... 2000 (3) TMI 34 - CALCUTTA High Court] - claim of advance given on interest on being written off has been allowed as a bad debt u/s. 36 of the Act - the loss of advance by the assessee company to its 100% subsidiary company is to be allowed as a business loss – there was no error or infirmity in the order of the CIT(A) – Decided against Revenue. Deletion of interest – Held that:- The AO has not demonstrated that the assessee has advanced money out of its borrowed capital - the assessee was having its own capital with Reserves and Surplus aggregating to Rs. 656.42 lakhs - The Commissioner of Income Tax Versus Reliance Utilities & Power Ltd. [2009 (1) TMI 4 - HIGH COURT BOMBAY] - the assessee was charging interest on advance to AIR Engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatutory notices were issued and duly served on the assessee. During the scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has debited Rs. 61,60,166/- to the Profit and Loss account of bad debt. The right off was on account of the following: 1) AIR Engineering Co. Pvt. Ltd. Rs. 59,09,599/- 2) Mangala Binding Rs. 567/- 3) Amrit Natural Chemicals Rs. 2,50,000/- 3.1. The assessee was asked to justify its claim. The assessee filed copy of ledger account in the case of M/s. AIR Engineering only. The AO was of the firm belief that the assessee Co. is not engaged in the business of generating income from interest. The assessee was once again asked to explain the claim of bad debt written off and the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the assessee has made substantial investment in M/s. AIR Engineering since its inception and was charging interest on the investment made to the subsidiary. Such interest was being assessed in the hands of the assessee as business income of the assessee. Drawing support from the decision of the Calcutta High Court in the case of Turner Morrison Co. Ltd Vs CIT 245 ITR 724(Cal), the Ld. CIT(A) was convinced that the assessee has lost the advance given to its subsidiary. Therefore, the loss of advance by assessee company is required to be allowed as business loss if not as bad debt. Drawing further support from the decision of the Hon ble Supreme Court in the case of S.A. Builders 288 ITR 01 (SC), the addition was deleted. 5. Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on interest on being written off has been allowed as a bad debt u/s. 36 of the Act. Even otherwise on the facts and the circumstances of the case, the loss of advance by the assessee company to its 100% subsidiary company is to be allowed as a business loss. We therefore do not find any error or infirmity in the findings of the Ld. CIT(A). First grievance of the Revenue is accordingly dismissed. 10. The second grievance relates to the deletion of addition on account of interest of Rs. 49.69 lakhs. On scrutiny of the return, the AO noticed that the assessee has debited a sum of Rs. 97,05,426/- as interest which comprises of bank interest which comprises of bank interest of Rs. 61,02,058/- and other interest of Rs. 31,54,003/-. The AO fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm belief that the primary burden of establishing the claim is on the assessee and in the instant case the assessee has not lead any evidence in this regard. The AO further observed that the assessee has nowhere discharged the primary burden of proving that the interest paid by the assessee was utilized for the purpose of its own business. Drawing support from the various judicial decisions, the AO computed the proportionate disallowance of interest at Rs. 49,69,279/-. 12. The assessee carried the matter before the Ld. CIT(A). The facts of the case were explained to the Ld. CIT(A) and after perusing the facts, the Ld. CIT(A) was of the belief that the decision of Hon ble Supreme Court in the case of S.A. Builders (supra) squarely apply ..... X X X X Extracts X X X X X X X X Extracts X X X X
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