9911796707
TMI Blog2021 (12) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... ness loss. Another issue is with respect to computation of tax payable by assessee. 02 The facts of the case show that assessee is a partnership firm earning income from business and capital gain. It filed its return of income on 19/11/2014 at Rs. 4,56,01,330/-. 03 During the course of assessment proceedings, ld AO noted that assessee has written off an amount of Rs. 2 crores given as loan to Universal Ferro and Allied Chemicals Ltd (UFACL). Assessee claimed it as a business loss. The learned assessing officer questioned assessee on its allowability. 04 The assessee submitted that assessee gave an unsecured loan to above company, which is one of family owned group of companies. Assessee also submitted that the borrower became sick in 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of account of the assessee in earlier years. In view of this, he disallowed a sum of Rs. 2 crores and assessed total income of the assessee at Rs. 656,01,320/- vide order dated 28/12/2016 passed under section 143(3) of the Act. 06 Assessee aggrieved with the order of the learned AO, preferred appeal before the CIT(A), who confirmed the disallowance holding that same is neither allowable under section 37(1) or under section 36(1)(vii) or under section 36(2). Accordingly, the appeal of the assessee was dismissed. 07 Assessee, aggrieved with that has preferred this appeal before us. The learned representative submitted one paper book submitting various documents and other paper book relying on several judicial precedents. The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier taken into the income of the assessee. Therefore, he submitted that according to him, the above sum is allowable as a bad debt to the assessee. 08 He further referred to the judicial precedent on this issue to show that the a. Write off an Amount, which has become bad, is allowable as a bad debt to a concern, which is engaged in the business of advancing of loans. b. Where the money is advanced to a group company, the test of business expediency is satisfied. c. Merely because the borrower is a related party, the loss written off cannot be disallowed. d. if the interest income is assessed as business income in past, revenue cannot deny the write off of the loan in a subsequent year when it becomes bad. 09 In view of the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He also stated that even otherwise, if there are certain discrepancies in the statement of the partner, the facts brought out before the assessing officer and the past history of the assessment cannot be ignored. Accordingly, he submitted that the assessee should be allowed the claim of business loss during the year. 12 We have carefully considered the rival contentions and perused the orders of the lower authorities. The only issue in this ground of appeal is whether the assessee is entitled to deduction of Rs. 2 crores written off in the books of account as bad debt or not. The assessee is a partnership firm formed with effect from 01/06/1974 as per deed of partnership. The preamble of the deed also shows that the party of the fourth pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was Rs. 22,75,000/-. Thus, as on 31/03/2012 R. 2 crores were outstanding to the debit of the borrower in the books of account of the assessee. This amount was written off on 30th September, 2013 and claimed as a deduction as bad debt. In earlier years also, there was a write off the interest from August 2004 to June 2005, which was claimed as bad debts written off. According to the provisions of section 36(2) of the Act, if the debt written off represents money lent in the ordinary course of business of banking or money lending business carried on by the assessee is allowable as deduction in terms of provisions of section 36(1)(vii) of the Act. It is an uncontroverted fact that assessee is a partnership firm engaged in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee for assessment year 2014-15, the facts are stated correctly. However, the partner was fully aware about the loan given and the amount repaid by the borrower. This is demonstrated from answers to questions No.14 to 25. Therefore, in view of the overwhelming evidences, such as ledger account of the borrower showing advances of Rs. 10 crores, proof of earning interest income, repayment of sum , outstanding remaining of Rs. 2 Crores, such sum being written off in the books of accounts, object of the partnership deed and past assessment records of the assessee, merely using the statement of the partner against the assessee for disallowance of the above loss is not justified. Merely because the borrower is a related party and in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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