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TMI Blog2020 (10) TMI 359X X X X Extracts X X X X X X X X Extracts X X X X ..... er similar facts and circumstances, the Hon ble Bombay High Court had allowed the claim of write off of ICD as the business loss. No infirmity in the action of the ld. CIT(A) granting relief to the assessee with regard to allowability of write off of ICD amounts as business loss. - Decided against revenue. - ITA No. 4218/Mum/ 2018 - - - Dated:- 6-10-2020 - SHRI JUSTICE P P BHATT, PRESIDENT And SHRI M. BALAGANESH, AM Revenue by : Shri V. Vinodkumar Assessee by : None ORDER PER M. BALAGANESH (A.M): This appeal in ITA No.4218/Mum/2018 for A.Y.2014-15 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-21, Mumbai in appeal No.CIT(A)-21/ACIT-13(3)(2)/IT-460/2016-17 dated 26/03/2018 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 29/12/2016 by the ld. Asst. Commissioner of Income Tax-13(3)(2), Mumbai (hereinafter referred to as ld. AO). None appeared on behalf of the assessee. We proceed to dispose off this issue on hearing the ld. DR. 2. The only effective issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 and that the said interest income had been offered to tax by the assessee under the head income from business which fact is not disputed by the revenue before us. We find that the assessee had submitted before the lower authorities that ICD of ₹ 6 Crores given to M/s. Trusted Aerospace Engineering Pvt. Ltd., in the year 2010 was advanced in the ordinary course of its business. The ld. AO observed that the assessee company is a listed public limited company involved in the business of manufacturing, marketing, installing and maintaining electronic security systems and providing other related electronic security products and services. Hence, advancing monies in the form of ICD cannot be construed to have been done in the ordinary course of assessee s business. Accordingly, he disallowed the claim of business loss of the assessee in respect of ICD written off. We find that the ld. AO had also observed that with regard to write off of the principal portion of ICD, the assessee had also not complied with the provisions of 36(2) of the Act by way of offering of income in the earlier years. Accordingly, he held that the assessee is not entitled to claim deduction towards bad deb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er. The said consent terms were taken on record by the Hon'ble Learned 33rd Metropolitan Magistrate Court on 23/11/ 2012. g) The Borrower had repaid ₹ 1,25,00,000, as per MOU but said cheque was dishonored for the same reason insufficient funds . As a result, the assessee company again served a second statutory notice u/s 138 of Negotiable Instrument Act, 1882, against Borrower on 13/12/2012; and upon receipt of no response from the Borrower, filed the complaint u/s 138 of the Negotiable Instrument Act, before the Hon'ble Learned Metropolitan Magistrate 63rd Court at Andheri. h) Assessee Company filed the summary suit against the borrower in the High Court of Bombay , while the proceedings were pending. i) At the said time, the borrower approached the assessee company and informed their inability to repay the entire sum. The borrower has requested for the amicable settlement of the outstanding amount. As the management of the assessee company was aware of the stress in the borrower company, the assessee company agreed to settle the same at ₹ 2,00,00,000. As agreed, the borrower paid ₹ 2,00,00,000 and as per the agreed terms, the assessee company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of litigations before various judicial forums for recovery of its principal and interest amount in the ICD and had finally arrived at compromise settlement to receive a sum of ₹ 2 Crores as one time settlement which consequentially lead to write off of the remaining sum of ₹ 5,17,76,297/- in the books which was claimed as business loss by the assessee in the return. (e) The aforesaid chronology of events clearly depict the picture and prove the fact beyond doubt that the borrower had duly expressed its inability to refund the remaining principal and interest portion of the ICD. 3.4. It is not in dispute that the interest income on ICD was taxed by the revenue in earlier assessment years under the head income from business . This action itself goes to prove that revenue had factually accepted the fact that ICD was advanced by the assessee in the ordinary course of its business. When such ICD together with its interest portion thereof had been written off by the assessee due to its non-recovery and due to the fact of borrower expressing its inability to pay and finally arriving at one time settlement thereof, any consequential write off of the remaining figure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant (sic.) had since Assessment Year 1998-99 claimed an amount of ₹ 49.82 lakhs as doubtful debts from M/s. GSB Capital Market Ltd. This consisted of the aggregate of principal and interest payable by M/s. GSB Capital Market Ltd. It was in the subject Assessment Year that a settlement was arrived at between the parties and the Respondent- Assessee received ₹ 15 lakhs from M/s. GSB Capital Market Ltd. and the balance amount of ₹ 34.82 lakhs being non-recoverable was being claimed as bad debts by writing off the same in its books of account. It would thus be noticed the amount of ₹ 34.82 lakhs which constitutes partly the principal amount of the inter-corporate deposits and partly the interest which is unpaid on the principal debt. The Assessing Officer's contention that amount of ₹ 34.82 lakhs was not offered to tax earlier and, therefore, deduction under Section 36(2)(i) of the Act is not available, is no longer re-integra. This very issue came up for consideration before this Court in Shreyas S. Morakhia (supra) wherein the assessee was a stock broker and engaged in the business of sale and purchase of shares. The brokerage payable by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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