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TMI Blog2016 (4) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,90,550/- made by the Assessing Officer on account of interest income not offered to tax. It appears that assessee had not recovered interest on advances made to one M/s AN Builders amounting to Rs. 2,65,87,917/- in his proprietary concern M/s. Rajeev Enterprises. He pleaded that these advances had become sticky and stagnant. And that although he was debiting the interest during the year, no interest was debited to avoid huge amount of write off in the coming year. The Assessing Officer in assessment order dated 29-12-2011 rejected this explanation inter alia by observing that assessee followed mercantile system of accounting on accrual basis and it ought to have declared its interest income till the time the advances in question are not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of the Hon'ble Punjab and Haryana High Court, has been dismissed by the Hon'ble Supreme Court. The same is reported in 144 ITR (SC)50(SC) 4.2 In view of the fact that when the loan given by the appellant to A.N. Builders itself had become doubtful the interest thereon could not be said to have accrued to the appellant. In view of the above, the Assessing Officer was not justified in making addition of Rs. 31,90,550/-. The same is hence, deleted." 4. We have heard both the parties. We find that the CIT(A) has followed real income principal as per various decisions holding that no interest accrues when the principal amount of loan itself becomes doubtful. The Revenue neither points out any illegality therein nor does it take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,73,715/-in the case of Gujarat Psylium Corporation are allowed to be written off as bad debt. He has observed that the principal amount cannot be allowed to be written off as bad debt. The Assessing Officer has not appreciated the fact that the appellant is in the business of giving loans and advances. In fact, it is seen that the appellant has earned interest of Rs. 1,09,43,092/- from financial services. Further, any advances given for the purposes of business if they become bad and is not recoverable the same are allowable as a business loss. In this case, the Assessing Officer has not pointed out any evidence to establish that these advances were not given in the normal course of business. Once it is found that the advance given are f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have incurred interest expenditure of Rs. 2,44,36,874/- comprising of bank interest, interest payable and interest expenditure. The assessee sought to explain his borrowing to have been utilized for business purposes only. The Assessing Officer went through his balance sheet, interest free funds along with investments and deposits to hold that he had utilized interest bearing funds for the impugned investments thereby diverting interest bearing funds. 9. The assessee has succeeded in the lower appellate proceedings as under:- "8. I have gone through the assessment order and submission of the A.R. of the appellant carefully. It is seen that the Assessing Officer has not made detailed examination of the facts in the case of the assessee b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able borrowed funds utilized for the purpose of making investments in shares cannot be allowed as deduction u/s.36(1)(iiii) of the I.T. Act. 8.3 The appellant was asked to furnish the details of investments made in shares. Vide his reply filed on 20.11.2012, the appellant has filed details of investment in RJD Integrated Textile Park Ltd. which shows that the opening balance of investment was Rs. 2,42,500/- the sum of Rs. 1 Crore was invested on 23.02.2009, a sum of Rs. 5 lacs was invested on 25.02.200 and Rs. 6 Crore was invested on 27.02.2009. In view of the facts that the opening balance of investment of appellant was only Rs. 1,92,88,891/- and the appellant had interest free funds available of Rs. 5, 29, 93,800/- hence, only to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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