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TMI Blog2010 (4) TMI 1228X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the ld CIT (A) erred in allowing the assessee s claim of bad debt of ₹ 242.08 lakhs mentioned above, without appreciating the decision of the Hon ble Madras High Court in the case of South India Surgical Co. 287 ITR 62,wherein, it was held that mere unilateral write off of debt is not sufficient and the assessee has to prove that the debt indeed became bad debt. 2. The assessee company, in the relevant assessment year, was engaged in the business of money changing, money transfer, loans investments, back office operation consultancy. The assessee had filed its return of income declaring total loss at ₹ 7,07,41,114/-. The turnover of the assessee comprised of Forex and remittances of ₹ 1641.59 lakhs, fee based income of ₹ 49.93 lacs and other income of ₹ 605.33 lakhs. The Assessing Officer noticed that the assessee had, inter alia, claimed write off of bad debts of ₹ 1,82,05,330/-. He also noticed that the assessee had set off of NPA written off amounting to ₹ 4,76,14,931/-. He required the assessee to furnish the partywise and year-wise details of the bad debts claim of ₹ 4.76crores. The assessee submitted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99-00 00-01 01-02 Total turnover 1896.62 1884.93 2229.07 1792.23 1425.09 1600.88 Leasing 512.85 353.82 526.42 292.95 193.48 8.41 Hire purchase 456.16 222.01 89.21 23.07 - - From the above, he concluded that the assessee was not engaged in the money lending business and the nature of trade was that of hire purchase and leasing, which was completely different and distinct from the business of money lending or banking business. He, accordingly, reworked the assessee s claim and allowed the bad debts to the extent of ₹ 2,34,05,948/- detailed as below:- Income offered in earlier years As per Annexure A to this order ₹ 9,16,18,551 Less: Income reversed ₹ 2,86,64,737 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive, he further referred to the decision of ITAT (SB) in the case of Gujrat Gas Financial Service (supra) and pointed out that since income from money lending activity was less than 50%, it was held that principal activity of the assessee was not money lending. He referred to page 4 of the assessment order to demonstrate that the income from leasing and hire purchase was never more than 50% and in the year under consideration, the assessee was not even engaged in the said activity. The income from these two activities was very minuscule as compared to turnover of the assessee. Thus, in sum and substance, he submitted that mere classification of the assessee as loan company in view of the RBI Guidelines is not sufficient to hold that assessee is engaged in the business of money lending. . The assessee should have been engaged in the business of money lending to get the benefit of section 36(1)(vii). The hire purchase, in any case, is not a business of money lending. In the alternative, he submitted that since even if the hire purchase activity amounts to money lending, still the principal business was not of hire purchase activity, therefore, in any view of the matter, the ingredie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities. Thus, all fund based activities carried out by NBFC for earning interest income are to be considered as part of money lending activities. Therefore, in our opinion, this case is applicable to the facts of the case. 8. Ld D.R. has further relied on the decision of the ITAT (SB) in the case of Gujrat Gas Financial Service (supra), wherein, it was, inter alia, held that inter corporate deposit was not treated as loans and advances and, therefore, the decision in the case of Tulip Star Hotels (supra) stands overruled. The said decision has been rendered with reference to Interest Tax Act and the definition of Finance company was considered in Section 2(5B) of the Interest Tax Act. In that context, the principal business of the company was determined with reference to income derived from leasing business. This decision, in our opinion, is not applicable to the facts of the case. 9. In the present case, we have to examine the issue in the light of the fact that the assessee is a non banking finance company. The composition of income cannot be a deciding factory in such circumstances. Under the provisions of Section 36(1)(vii), the only requirement is that the amount wr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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