9911796707
TMI Blog2017 (4) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (2) of sec. 36 of the Act have been fulfilled and, therefore, the Ld. CIT(A) has rightly deleted the addition and allowed the claim of the assessee. Disallowance under Rule 8D(2)(ii) - CIT(A) held that if net of interest received and interest paid is positive figure, no part of interest can be disallowed under rule 8D(2)(ii) as attributable to earning tax free dividend - Held that:- We note from the P&L Account of the assessee that the net interest reflected is an interest income of ₹ 58,23,756/-. Rule 8D(2)(ii) cannot be applied when there is no net interest expenditure upon setting up of interest credited to the P&L Account and, therefore, no part of interest debited can be disallowed as attributable to earning ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular in paying interest and later on, the debt became bad debt and, therefore, it was categorized as Non-Performing Asset. It was brought to the knowledge of the AO that since the loan given to M/s. Dhanani International Ltd. became bad consequently the debt and the interest thereon was written off in the books in the instant assessment year. The AO rejected the claim of writing off of debt on the ground that it was not sundry debtor and interest was not being accounted for past several years. Aggrieved by the aforesaid order of the AO, the assessee preferred an appeal before the Ld. CIT(A), who was pleased to allow the appeal of the assessee and deleted the addition. Aggrieved by the decision of the Ld. CIT(A), the revenue is in appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 money lending which is carried on by the assessee. So far as interest component of the amount written of is concerned, the same was duly taken into account in computing income for those years to which it pertains. Though the appellant has, in the past several years, not accounted for interest income, the interest written off pertains to the years in which such interest had been recognized and taken into accounts income. So far as the principal amount is concerned, it is true that the amount was never considered in computing income of any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey lending which is carried on by the assessee and which has become irrecoverable and has been written off in the books of account. We further note that the assessee a NBFC has lent and advanced money amounting to ₹ 2,07,58,000/- in the ordinary course of its business. The assessee has credited interest in the assessee s books in the FYs 1999-2000 and 2000-01 amounting to ₹ 71,99,443/- and ₹ 62,98,553/- received out of which the assessee was able to realize only ₹ 68,383/-. In the light of the said fact, the unrealized interest income which has been booked as income in FYs 1999-2000 and 2000-01 amounting to ₹ 1,34,59,613/- attracts the first limb of sub-clause (i) of clause (2) of section 36 of the Act. The pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of rule 8D(2)(ii) is restricted to the expense on account of interest attributable to the investment from which tax free income was earned. 7. The main grievance of the revenue is that the Ld. CIT(A) ignored the fact that the provisions of Rule 8D(2)(ii) is restricted to the expenses on account of interest attributable to the investments from which tax free income was earned. The brief facts of the case as noted by the Ld. CIT(A) reads as under: The appellant is engaged in the business of loan financing. During the year the appellant had paid interest of ₹ 6,68,38,624/- on the loans obtained and received interest of ₹ 7,26,62,380/- on loans advanced in the course of business. Net result was positive interest income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred an appeal before the Ld. CIT(A) who was pleased to allow the claim of the assessee and deleted the disallowance of ₹ 3,91,97,029/-. Aggrieved by the said decision of Ld. CIT(A), the revenue is now in appeal before us. 8. We have heard rival submissions and gone through facts and circumstances of the case. We note that during the year the assessee has paid interest of ₹ 6,68,38,624/- on the loans obtained and received interest of ₹ 7,26,62,380/- on loans advanced in the course of business. In the P L Account net interest is reflected showing a positive interest income of ₹ 58,23,756/-. In the year under consideration apart from the interest income the assessee has earned dividend of ₹ 5,20,74,730/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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