9911796707
TMI Blog2001 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of case for our opinion: During the course of assessment, the Assessing Officer has noticed that the assessee has claimed bad debt to the tune of Rs.2,15,751, which has been written off by the assessee-company, in the name of Thakur Paper Mills Ltd. This amount related to the interest on loan of Rs.4 lakhs advanced by the assessee-company to Thakur Paper Mills Ltd. The assessee claimed before the Tribunal that the loan was assigned to one Sterling Investment and Trading Company for the amount of Rs.4 lakhs. That has been paid to the assessee for full and final settlement against the loan and interest payable by Thakur Paper Mills Ltd. That claim was rejected by the Income-tax Officer. According to him, the assessee failed to establis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this year. In these circumstances, there is no question of disallowing the claim of the assessee. He placed reliance on Kamla Cotton Co. v. CIT [1997] 226 ITR 605 (Guj) and Jethabhai Hirji and Jethabhai Ramdas v. CIT [1979] 120 ITR 792 (Bom). On the other hand, Mr. Agarwal, learned counsel for the Revenue, submits that whether the debt has become bad or not is basically a question of fact. That should not be interfered with by this court. He further submits that when the loan can be recovered by Sterling Investment and Trading Co., why that part of the interest cannot be recovered by the assessee? Therefore, the loan has not become bad and that has been rightly disallowed. He further submits that as the loan has been assigned to Sterli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to take legal proceedings against the debtor for recovery of the claim before writing it off as a bad debt. In our opinion, when the creditor bona fide writes off the debt as there appears no chance of its recovery in the foreseeable future or where the recovery proceedings would be so cumbersome and expensive as to outweigh any advantage of instituting any recovery proceedings, he discharges the onus and would be entitled to claim deduction under the said clause (vii) of section 36(1) as it stood at the relevant time." In Jethabhai Hirji and Jethabhai Ramdas v. CIT [1979] 120 ITR 792 (Bom) at page 804, the observations of the Madras High Court in Devi Films Ltd. v. CIT [1963] 49 ITR 874, 877, have been quoted for considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and the views expressed by the other High Courts as referred to above, we are of the view that the assessee was correct in claiming the interest loss as bad debt. Even otherwise in this case the Commissioner of Income-tax (Appeals) as well as the Tribunal-they have accepted that there was a loss. But they have taken the view that it is a capital loss-not a revenue loss. The admitted facts are the assessee has advanced a loan of Rs.4 lakhs to Thakur Paper Mills, as it was not possible to recover from Thakur Paper Mills, if the assessee assigns this loan and interest against Rs.4 lakhs to Sterling Investment, how did the character of the loan change in the hands of the assessee. How that can it take the character of capital? Mere ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
