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of <h1>Tribunal allows bad debt write-off & taxes interest income as business income.</h1> <h3>Zen Industrial Services Ltd. Versus DCIT, Circle-5 (1), Kolkata</h3> Zen Industrial Services Ltd. Versus DCIT, Circle-5 (1), Kolkata - TMI Issues:1. Disallowance of write off of outstanding loan and interest2. Treatment of interest income as income from other sourcesIssue 1: Disallowance of Write Off of Outstanding Loan and Interest:The appeal arose from the Commissioner of Income Tax(Appeals)'s order against the Assessing Officer's decision under section 143(3) of the Income Tax Act, 1961. The main issue was whether the disallowance of write off of outstanding loan and interest amounting to Rs. 56,94,685 was justified. The assessee, a limited company, argued that it was engaged in money lending business and had written off the bad debt as deduction under section 36(1)(vii) of the Act. The Assessing Officer contended that the debt was not proven to be bad and that the loan given was not incidental to the business. However, the Tribunal found that the assessee had engaged in money lending activities using both own and borrowed funds. The Tribunal held that the conditions of section 36(1)(vii) were met, and the write off was allowable as a bad debt deduction. The Tribunal also noted that interest income from loans should be assessed under the head income from business.Issue 2: Treatment of Interest Income as Income from Other Sources:The second issue was the treatment of interest income earned during the year as income from other sources instead of business income. The Tribunal found that the assessee had consistently offered interest income under the head income from business and had complied with the provisions of section 36(2). The Tribunal held that the interest income accrued on loans should be taxed only under the head income from business. Therefore, the grounds raised by the assessee were allowed, and the appeal was granted in favor of the assessee.In conclusion, the Tribunal ruled in favor of the assessee, allowing the write off of bad debt and directing the Assessing Officer to grant the same. The Tribunal also held that the interest income accrued on loans should be taxed under the head income from business.
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