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TMI Blog2022 (7) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure. In our opinion, the assessee has not satisfied the condition laid down in section 36(1)(vii) r.w.s. 36(2) - As per section 36(2) of the Act, deduction shall not be allowed unless such debt or part there of has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of business or banking or money lending which is carried on by the assessee. Being so, in our opinion, the assessee cannot claim the written off investment in the field of capital as bad debt or business expenditure. Accordingly, we find no merit in this argument of the assessee s counsel and the same is rejected and this ground of appeal of assessee is dismissed. Disallowance being the interest paid on borrowing, which were used to make the investment on which income was offered - HELD THAT:- In the present case, the assessee earned interest income - The claim of assessee is that the assessee has incurred an expenditure in the form of interest paid - AO allowed the interest expenditure to the extent of interest income earned by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and the majority share holder of M/s. Lad's Technologies Private Limited literally holding 9999 of equity of the company. The company was incorporated 27th July, 2009 with objects of develop computer software, render computer consultancy service develop and market other related products connected information technology industry. The entire funding for the day to day activities of company was done by Mr. Sallt0S11 S. Lad as the company has miniscule revenue from its operations. In order to sustain the business Mr Santosh S Lad advanced monies from time to time to meet the expenses of the company. The said advance were in the ,nature of investment and was to be converted share capital at the appropriate time by increasing the authorized capital of the company as the company could not generate any revenue from its operations the investment made by Mr. Santosh S. Lad became bad and the Board of Directors of the company decided to%- write off a portion of the advance given by Mr Santosh S Lad as its income which was with the knowledge and consent of the Mr. Santosh S. Lad being the principal share holder . The amount of Rs3,00,00,000/- written off by the company has been taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces as trading loss. Further, he observed that advance made to these two companies were just advance to have to meet their expenses in the field of capital outlay and it is an investment in the hands of the assessee not being a trading advances which cannot be claimed as business loss. Further, he observed that the assessee is not in money lending business and advance to these two companies were not made in the course of money lending business. It has not charged any interest on the advances arising out of these investments. It was not considered while computing the total income of the assessee in any years. In other words, he mean that the assessee not complied with the provisions of section 36(1)(vii) r.w.s. 36(2) of the Act, so as to claim it as bad debts. Against this assessee went in appeal before Ld. CIT(A), who has confirmed the order of AO. Now once again, assessee is in appeal before us. 2.2. Ld. A.R. submitted that the Learned Assessing Officer has erred in disallowing a sum of Rs. 5,55,20,973/- which represents a legitimate write off of investment in companies which has become irrecoverable along with the interest paid on loans taken which were used to make investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsidiary of assessee company, which had suffered loss, therefore, the assessee treated the amount as business loss. The investment was made for the purpose of expansion of business activity of the assessee not with a view to creating capital asset in the form of holding shares. However, in the present case, the facts shows that the assessee made investment for these two companies namely M/s. Lad Technologies Pvt. Ltd. M/s. Connect Films Media Pvt. Ltd. and written off the claim as business loss. In the present case, the present assessee Mr. Santosh S. Lad not in the business that was carried on by two companies are carrying on. In other words, Mr. Santosh S. Lad earning income from share of profit from partnership firm and others and not engaged in the similar business of these two companies are carrying on. Being so, it cannot be said that the assessee made investment for the enhancement of his business activity in global market, which primarily related to the assessee s business. Further, in the present case, investment made in these two companies were made with a view to creating capital asset in the form of holding shares. Being so, the judgement relied by Ld. Counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds of the present assessee, it is an investment, if the same has to be considered as a capital loss not as a trading loss or business loss so as to claim the same as business expenditure. In our opinion, the assessee has not satisfied the condition laid down in section 36(1)(vii) r.w.s. 36(2) of the Act. As per section 36(2) of the Act, deduction shall not be allowed unless such debt or part there of has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of business or banking or money lending which is carried on by the assessee. Being so, in our opinion, the assessee cannot claim the written off investment in the field of capital as bad debt or business expenditure. Accordingly, we find no merit in this argument of the assessee s counsel and the same is rejected and this ground of appeal of assessee is dismissed. 3. Next ground for our consideration is with regard to disallowance of Rs.18,58,444/- being the interest paid on borrowing, which were used to make the investment on which income was offered a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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