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TMI Blog2015 (8) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... doubtful debts from M/s. GSB Capital Market Ltd. This consisted of the aggregate of principal and interest payable by M/s. GSB Capital Market Ltd. It was in the subject Assessment Year that a settlement was arrived at between the parties and the Respondent-Assessee received 15 lakhs from M/s. GSB Capital Market Ltd. and the balance amount of 34.82 lakhs being nonrecoverable was being claimed as bad debts by writing off the same in its books of account. It would thus be noticed the amount of 34.82 lakhs which constitutes partly the principal amount of the intercorporate deposits and partly the interest which is unpaid on the principal debt. The Assessing Officer's contention that amount of 34.82 lakhs was not offered to tax earlier and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra), no substantial question of law arises for our consideration.It is clarified that in view of the Respondent-Assessee being entitled to deduction on bad debts in view of first part of Section 36(2)(i) of the Act, we have not opined on the second part thereof viz: whether or not the Assessee was engaged in the business of money lending and/or banking. This is so as in the present facts it becomes academic. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... t was arrived at between M/s. GSB Capital Market Ltd. and the Respondent-Assessee whereby an amount of ₹ 15 lakhs was paid to the Respondent-Assessee and the balance amount of ₹ 34.82 lakh were written off by the Respondent-Assessee as bad debts. 4. During the subject Assessment Year,the Respondent-Assessee claimed the deduction on account of bad debts of ₹ 34.82 lakhs being the debts written off out of an intercorporate deposit given to one M/s. GSB Capital Markets Ltd. The Assessing Officer in its Assessment Order dated 29th November, 2006 did not accept the Respondent's contention and disallowed the claim for bad debts. This disallowance was on the ground that the condition of Sections 36(1)(vi) read with Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed. 7. Mr. Tejveer Singh, learned Counsel appearing for the Appellant submits that the activity of the Respondent-Assessee is of carrying on manufacturing and sale of paper. Consequently, the Respondent-Assessee cannot be said to be engaged in the activity of the money lending or business of banking Consequently, deduction of bad debts is hit by Section 36(2)(i) of the Act. Thus, the impugned order calls for interference. 8. Mr. Murlidahran, learned Counsel appearing for the Respondent-Assessee points out that the issue arising in the present facts is covered in favour of the Respondent-Assessee by the decision of this Court in CIT v/s. Shreyas S. Morakhia 342 ITR 285. It is further submitted that the Respondent-Assessee is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llip;. (2) In making any deduction for a bad debt or part thereof, the following provisions shall apply- (i) no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or moneylending which is carried on by the assessee." 10. So far as Section 36(1)(vii) of the Act is concerned, it is a settled position in law that after 1st April, 1989, it is not necessary that the debt itself must be proved to be irrecoverable. The only requirement is that the amounts claimed as bad d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t between the parties and the Respondent-Assessee received ₹ 15 lakhs from M/s. GSB Capital Market Ltd. and the balance amount of ₹ 34.82 lakhs being nonrecoverable was being claimed as bad debts by writing off the same in its books of account. It would thus be noticed the amount of ₹ 34.82 lakhs which constitutes partly the principal amount of the intercorporate deposits and partly the interest which is unpaid on the principal debt. The Assessing Officer's contention that amount of ₹ 34.82 lakhs was not offered to tax earlier and, therefore, deduction under Section 36(2)(i) of the Act is not available, is no longer reintegra. This very issue came up for consideration before this Court in Shreyas S. Morakhia (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X
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