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TMI Blog2015 (11) TMI 1203X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is that the assessee is engaged in the business of manufacture of Jute and in the course of its business had paid advance for purchase of jute to Shri.R.K.Jalan in the early 1990s amounting to Rs. 70,02,013/-. The said party Shri.R.K.Jalan did not supply the Jute to the assessee and accordingly the same was converted into loan transaction by the assessee commencing from Asst Year 1991-92 onwards and interest was charged thereon. The assessee had duly offered the interest income derived thereon from Asst Years 1991-92 to 1997-98 amounting to Rs. 66,46,543/- in total under the head "income from business" and the same was accepted by the revenue in section 143(3) proceedings. During the period from Asst Years 1991-92 to 1995-96, the assessee was also in receipt of certain principal dues from the said party Shri.R.K.Jalan to the extent of Rs. 23,00,000/- and the balance of advance receivable from Shri.R.K.Jalan was Rs. 47,02,013/- from Asst Year 1995-96 onwards. The assessee stopped charging interest on the aforesaid advance from Asst Year 1998- 99 onwards as it found that the recovery of principal amount of advance itself is doubtful of recovery. 4.1. On knowing the information ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money lending. In response to this, the Learned AR argued that the basic finding of the Learned AO that the interest income on the trade advances made to Shri.R.K.Jalan was offered to tax in earlier years as income from other sources, is factually incorrect. He placed on record various scrutiny assessment orders for the earlier assessment years wherein the subject mentioned interest income has been accepted as business income by the Learned AO in section 143(3) proceedings and hence ground no. 3 raised by the revenue deserves to be dismissed. He further argued that the said advance was paid for purchase of jute to Shri.R.K.Jalan which has to be construed only as a trade advance. He argued that no fresh evidences were filed before the Learned CITA in this regard and hence ground no. 4 raised by the assessee is factually incorrect and deserves to be dismissed. On merits, the Learned AR argued that the assessee treated the advance only as a trade advance and since no supplies of Jute were made by Shri.R.K.Jalan, the assessee sought to charge interest on the said advance and had accordingly offered interest income upto Asst Year 1997-98 under the head "income from business". He furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -company. A crop of sugarcane took about 18 months to mature, and these agreements took place at the harvest season each year, in preparation for the next crop. In the year 1948-49, due to drought, the assessee company could not work its sugar mills and the sugarcane growers could not grow or deliver the sugarcane. The advances made in 1948-49 thus remained unrecovered, because they could only be recovered by the supply of sugarcane to the assessee-company. The Mysore Government realising the hardship appointed a Committee to investigate the matter and to make a report and recommendations. The Committee recommended that the assessee-company should ex gratia forgo some of its dues, and in the year of account ending 30-6-1952, the company waived its rights in respect of Rs. 2,87,422. The company claimed this as a deduction under section 10(2)(xv) of 1922 Act. The ITO declined to make the deduction, because, in his opinion, this was neither a trade debt nor even a bad debt but an ex gratia payment almost like a gift. An appeal to the AAC also failed. The Appellate Tribunal upheld the disallowance. On reference the High Court held that the expenditure was not in the nature of a capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no additional evidences were filed by the assessee before the Learned CITA with regard to this issue as the fact of trade advance paid to Shri.R.K.Jalan stands clearly established in the earlier years scrutiny orders placed on record by the Learned AO. Hence the ground no.4 raised by the revenue that there is violation of Rule 46A of Income Tax Rules by the Learned CITA is dismissed. 4.5. It is not in dispute that the assessee had indeed written off the balance principal portion of Rs. 47,02,013/- and interest receivable portion of Rs. 66,46,543/- in its books by treating the same as irrecoverable and due to the death of the concerned party. It is also not in dispute that the corresponding credit is given to the concerned party account in the books of accounts. We are in agreement with the arguments of the Learned AR that even otherwise the entire write off if not allowable in terms of section 36(1)(vii) read with section 36(2) of the Act is allowable as deduction as a regular trading loss u/s 28 of the Act. Reliance in this regard is placed on the decision of Hon'ble Bombay High Court in the case of Harshad J. Choksi vs CIT reported in (2012) 25 taxmann.com 567 (Bom), wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... negatived by the Court and it was held that even where the debt is not held to be allowable as bad debts yet the same would be allowable as a deduction as a revenue loss in computing profits of the business under section 10(1) of the Indian Income-tax Act, 1922. [Para 12] * Therefore, the amount of Rs. 44.98 lakhs, which was held to be not deductible as bad debts in view of the provisions of section 36(2), could be considered as an allowable business loss. [Para 13] Respectfully following the aforesaid judicial precedents and in view of the facts and circumstances, we find no infirmity in the order of the Learned CITA in this regard. Accordingly, the grounds raised by the revenue in this regard are dismissed. 5. The next issue to be decided in this appeal is as to whether the Interest payable by the assessee to ICICI Bank Ltd and whether ICICI Bank would fall under the category of a Scheduled Bank so as to fall within the ambit of section 43B of the Act. 5.1. We have heard the rival submissions on this issue and we deem it fit and appropriate to set aside this issue to the file of the Learned AO with a specific direction to give a finding as to whether ICICI Bank Ltd was a sc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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