Tribunal allows appeal for bad debts: interest income part of debt, assessee prevails.

The Tribunal allowed the appeal of the assessee, a limited company engaged in leasing and hire purchase activities, against the order of the CIT(A) disallowing bad debts for the assessment year 2004-05. The Tribunal held that the disallowance based on the interest portion only was incorrect, allowing the deduction for bad debts as the interest income was part of the debt. Relying on judgments from the Bombay High Court and Delhi High Court, the Tribunal reversed the disallowance of the bad debts, ultimately ruling in favor of the assessee.

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Issues involved: Appeal against order of CIT(A) regarding disallowance of bad debts for assessment year 2004-05.

Grounds of appeal: 1. Challenge to CIT(A)'s order. 2. Disallowance of bad debts. 3. Alternate plea for deduction u/s. 28.

Facts: Assessee is a limited company engaged in leasing, hire purchase, and other activities. AO disallowed principal portion of bad debt in scrutiny assessment u/s. 143(3). CIT(A) upheld AO's decision.

Arguments: Assessee relied on judgments of Bombay High Court and Co-ordinate Bench. Revenue supported lower authorities' orders.

Decision: Tribunal found disallowance based on interest portion only was incorrect. Citing Bombay High Court and Delhi High Court judgments, Tribunal allowed deduction for bad debts as interest income was part of debt and offered to tax. Disallowed part of bad debt was deleted. Assessee's appeal was allowed.

Conclusion: Disallowance of bad debts was reversed by the Tribunal based on the treatment of interest income as part of debt. The appeal was allowed in favor of the assessee.

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