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TMI Blog2021 (12) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... see for disallowance of the above loss is not justified. Merely because the borrower is a related party and in which the partners of the assessee firm are interest, cannot be the reason for disallowance of the above loss. As the assessee has satisfied all the conditions of section 36(1)(vii) read with section 36(2) of the Act, the claim of the assessee is allowable. In the result, we reverse the orders of the lower authorities and direct the assessing officer to delete the above disallowance. Erroneous set off of business loss against the capital gains rather than against the business income of the year - As per the assessment order, the long term capital gain of the assessee is ₹ 5,48,65,125/-. However, as per the income-tax computation form, the learned assessing officer has taken long term capital gain of ₹ 4,56,01,325/- . Thus, the total income remains same at ₹ 6,56,01,325/- but the figure of the long term capital gain has been changed by the assessing officer in the income-tax computation form. Thus, we direct the learned assessing officer to correctly compute the income-tax computation by taking the long term capital gain at ₹ 5,48,65,125/- only. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in granting of the above loan. Looking to the transaction with the borrower, assessing officer noted that assessee has not received any interest on loan except on 07/03/2003 when the interest of ₹ 3,65,449/- was received. Thereafter From financial year 2002-03, assessee is merely passing an entry for accrual of the interest and subsequently writing it off till 2006-07 and thereafter, no interest income provision was made. The assessing officer further noted that the basic condition of the allowability of bad debt is that the sum should have been credited in the books of account of the assessee in earlier years. In view of this, he disallowed a sum of ₹ 2 crores and assessed total income of the assessee at ₹ 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 repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above facts, he submitted that the disallowance confirmed by the learned CIT(A) deserves to be deleted. 10 The learned authorised representative referred to paragraph 4.4 of the order of the learned assessing officer and relied upon that. He further referred to the statement of the partner of the assessee firm wherein it has conclusively proved that the main source of income of the assessee is rental income and interest income is merely from fixed deposits. He further referred to question No.10 where the partner has categorically replied that to earn interest income by giving loans to others is not business of the assessee firm. In view of this, he submitted that the assessee is not engaged in the business of financing and, therefore, the loss or bad debt cannot be allowed to the assessee. Assessee has written off loan given to a sick company, which is a related party and advancing loan to such a borrower does not show any business exigency. Accordingly, he supported orders of the lower authorities. 11 The learned authorised representative, in rejoinder submitted that the statement of the partner was with respect to assessment year 2014-15 where there is no business income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 2004 was ₹ 4,56,75,000/-. The borrower repaid ₹ 1,54,00,000/- for the year ended on 31/03/2005. Further, for the year ended on 31/03/2011, there is a repayment of ₹ 80 lakhs and on 31/03/2012 such repayment was ₹ 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 financiers and financed Universal Ferro and Allied Chemicals Ltd and outstanding loan amount of ₹ 2 crores have been written off in the books of account of the assessee on 13 September 2013. The assessee as business i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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