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TMI Blog2021 (2) TMI 188X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of this liability - HELD THAT:- We are in agreement with the view taken by the Tribunal that The moment debts have been written off in the books, it is to be allowed without expecting the assessee to demonstrate whether debts have actually become bad or not. A reliance can be made to the decision of TRF Ltd. [ 2010 (2) TMI 211 - SUPREME COURT] . It is altogether irrelevant, whether QFL actually paid tax or not. If a liability has ceased, then it will be added back in the taxable income of the QFL. Now, if that concern was suffering huge loss, then that cannot be the reason to disallow claim of the assessee. If this type of logic is being accepted, then every business organization was required to show profit only. This is a misplaced notion at the end of the ld. CIT(A) for rejecting the claim of the assessee. We allow this ground of appeal, and delete disallowance of bad debts. None of the three questions as proposed could be termed as the substantial questions of law for the purpose of Section 260A of the Act, 1961. - R/TAX APPEAL NO. 302 of 2020 With R/TAX APPEAL NO. 311 of 2020 - - - Dated:- 21-1-2021 - HONOURABLE MR. JUSTICE J.B. PARDIWALA AND HONOURABLE MR. JUSTICE I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue, are no longer res integra in view of the decision in the case of Deputy Commissioner of Income Tax vs. Vasco Sales Marketing Corporation, reported in 66 taxmann.com 366. This judgement refers to and rely upon the Supreme Court decision in the case of S.A. Builder Ltd. vs. Commissioner of Income Tax (A), Chandigarh, reported in 288 ITR 1. In view of the settled position of law, the disallowance under Section 14A would not be permissible. We do not find that the Tribunal has committed any error. 7. In view of the aforesaid conclusion, the second question would become academic in nature. 8. We now come to the third question as proposed by the Revenue. 9. Mr. Patel, the learned senior standing counsel appearing for the Revenue pressed hard to admit this appeal so far as the question No.3, i.e, the 2(C) is concerned. According to Mr. Patel, the ITAT could be said to have committed an error in law and also on facts in not upholding the disallowance of bad debt claim of ₹ 1,71,90,900/- made by the Assessing Officer and confirmed by the Commissioner of Income Tax (A). According to Mr. Patel, the Tribunal failed to appreciate an important question of fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration although it has advanced further loan, but has not charged any interest . Instead of charging interest, it has claimed bad debts of ₹ 170.91 lacs on the ground that the same was part of unpaid interest of earlier years. Although the bad debts are allowable at the time of written off as per the provisions of section 36(1)(vii) r.w.s. 36(2) and the ratio laid down by Hon'ble Supreme Court in the case of TRF Limited, 230 CTR 14, but in the case of appellant, the same cannot be allowed because the transactions of loan and interest get merged and hence it cannot be said that the appellant has written off only the interest and not the principal amount. Moreover, it is not a prudent transaction particularly when the appellant has advanced a sum of ₹ 306.32 lacs during the year under consideration and written off the sum of ₹ 170.91. There is another angle of this transaction that the appellant has claimed that the bad debts written off was shown as income u/s.41(1) in the case of Quick Flight Ltd., but on perusal of the records of Quick Flight Ltd., it is noticed that no taxes thereon are paid because of heavy losses in the case of Quick Flig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the books of accounts at ₹ 170.91 lakhs has been written off during the year under consideration as irrecoverable. The stand of the assessee was rejected by the ld. Revenue authorities on the ground that since it has advanced fresh loans during the year, therefore, it cannot be said that recovery of interest has become bad. The second reason given by the ld. CIT(A) is that though the liability of QFL were ceased qua the payment of interest expenditure, but actually that concern did not suffer tax on cessation of these liability, because that concern was showing huge loss. In other words, according to the ld. CIT(A) taxes in actuality were not paid by the QFL on cessation of this liability. 20. With the assistance of the ld. representatives, we have gone through the record carefully. While allowing the claim of the assessee that no interest income ought to be assumed on such advances, and notional interest income is not assessable in the hands of the assessee, or in other words, interest expenses incurred by the assessee on the borrowed funds could not be ITA No.675, 688 / Ahd /2016 ITA No.622 and 623/Ahd/2018 15 disallowed to the extent the assessee failed to recover i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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