TaxTMI 
TaxTMI 
My company is an nbfc.during the previous financial years it gave loan to illiterate customers based ustomers of kyc and signature,later it was found that article given as security in fact was stolen.and customers themselves were not knowing that they were taking loan.pawn brokers in actuals were taking the loan.now it officer siting third party fraud and there by disallowing the same.kindly help with case law
Section 36 Bad debt allowability
08 Nov 2016 
1 Reply 
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Bad debt allowability may be denied when loans arise from third party fraud unless criminal complaint and corroborative evidence exist.
The core issue is whether bad debts are allowable under Section 36 when loans to illiterate borrowers were effected by intermediaries and secured by stolen articles, with the tax officer treating the advances as resulting from third party fraud; the reply stresses lodging a criminal complaint and producing corroborative records (FIR, investigation reports, KYC and lending documentation, and recovery efforts) to discharge the evidentiary burden and support claim of genuineness of the debt. (AI Summary)
The core issue is whether bad debts are allowable under Section 36 when loans to illiterate borrowers were effected by intermediaries and secured by stolen articles, with the tax officer treating the advances as resulting from third party fraud; the reply stresses lodging a criminal complaint and producing corroborative records (FIR, investigation reports, KYC and lending documentation, and recovery efforts) to discharge the evidentiary burden and support claim of genuineness of the debt. (AI Summary)