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TMI Blog2015 (10) TMI 2370X X X X Extracts X X X X X X X X Extracts X X X X ..... d-1(2)/05-06 dated 19.05.2006 passed against the order of assessment for the Asst Year 2003-04 framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. Shri.Sanjay Mukherjee, JCIT, the Learned CIT DR argued on behalf of the revenue and Shri. P.K.Himmatsinghka, Advocate, the Learned AR argued on behalf of the assessee. 3. The only issue to be decided in this issue is as to whether the Learned CITA is justified in granting deduction towards bad debts claimed by the assessee in the sum of ₹ 11,08,326/-. 4. The brief facts of this issue is that the assessee is engaged in the business of hire purchase financing as a non-banking finance company. The income of the assessee mainly consisted of hire purchase management fees and interest on advances / loans provided for hire purchase. During the course of its business, the assessee had advanced monies under hire purchase scheme to Poddar Associates ; Chandra Sekhar Upadhyay and Shri.Swapan Kanti Dey, among others, who defaulted in payment of instalments. The assessee after taking all reasonable steps for recovery of the dues treated the recoverability of the dues from the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ff of the debts and claiming the same as deduction u/s 36(1)(vii) of the Act could not be appreciated . Moreover, he further argued that the principal portion of the Hirepurchase dues is never offered to tax as income . He argued that the statute provides for deduction towards bad debts u/s 36(1)(vii) read with section 36(2) of the Act. Since no income is offered to tax for the principal portion, no deduction could be granted for the secured loans of the assessee. In response to this, the Learned AR argued that the entire instalments recoverable (instalments mean principal and interest) have been duly written off in the books as irrecoverable and credited to the concerned parties account. Moreover, the assessee is engaged in the business of money lending under hire purchase scheme and this is evident from the fact of showing the instalments receivable from various parties as a current asset (stock in trade). He further argued that the assessee had taken enough steps for recovery of the dues and all its efforts were in vain and for this purpose, he took us to the various pages of the paper book containing pages 1 - 45 comprising of audited annual accounts for the year ended 31st Mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . , Tiljala, Kolkata 700039 36,375 Swapan Kanti Dey, Sreemanto Market, No.319, AT Road, Guwahati, Assam 781001 1,02,776 11,08,326 Reliance in this regard is placed on the following decisions :- 326 ITR 315 (Mad) CIT vs Y. Ramakrishna Sons Ltd Held, dismissing the appeal, that the transaction of the assessee of financing the subsidiary company was genuine and bona fide. The assessee paid further advances in its own interest with a view to recover the amount given earlier, to sustain a share and to avoid the guarantee being invoked. The mere fact of payment of money after the stoppage of interest from the subsidiary company by itself could not be a ground to hold that the transactions were not in the course of the business. There was no bar in law for financing the subsidiary company. The income received by the assessee from the subsidiary company by way of interest was subjected to tax and the advance made by the assessee to that company was also subjected to tax. At the time of writing off the debt, the subsidiary company had accumulated huge l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would prima facie establish that it was a bad debt unless the Assessing Officer for good reasons holds otherwise. The writing off in the accounts had to be bona fide. Once that be the case, the assessee was not called upon to discharge any further burden. After the 1989 amendment in section 36(1)(vii) it was neither obligatory nor was the burden on the assessee to prove that the debt written off by him was indeed a bad debt as long as it was bona fide and based on commercial wisdom or expediency. [Para 10] In the instant case, the assessee has written off bad debt when it was felt that the amount is not recoverable. The satisfaction of the assessee is sufficient for claiming write off the bad debt. Moreover, both the companies have disappeared from Lucknow without making any payment. [Para 13] In the light of the above discussion and by considering the totality of the facts and circumstances of the case, there was no reason to interfere with the impugned order passed by the Tribunal. [Para 14] Dy. CIT vs Oman International Bank Saog in ITA No. 7431 (Mum) of 1997 dated 17.5.2006 for Asst Year 1994-95 passed by Mumbai Tribunal Special Bench. Held the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof, which is established to have become a bad debt in the previous year has been conspicuously omitted by the amendment and substituted by the expression written off as irrecoverable . The words of the law are clear and the intent and purpose of the amendment are manifest. The earlier rule of establishing that the debt has become bad is omitted from the provisions of law. Therefore, there is no occasion or provocation to consider whether the assessee has again to establish that the debt has become dad. In fact, there is no provocation at all to go to that extent of discussion because the amendment has omitted the expression debt which is established to have become a bad debt . When the amendment has been brought o cure a defect and the amendment has omitted the expression which has made way for such defect there is no reason to ponder over the past and to decide the matter still under the law which stood prior to the amendment [ Para 33]. We also hold that since the assessee is engaged in the business of money lending through hire purchase scheme, the principal portion obviously could not have been offered to tax as income and hence claim of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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