AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (7) TMI 775
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.... be allowed if the assessee is in money lending business as observed by the Hon'ble Apex Court in the case of A.V. Thomas & Co. Ltd. Vs. CIT 48 ITR 67. 3. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the AO be restored." 2. As regards ground No. 1 regarding corporate film making charges amounting to Rs. 1,25,000/-, it is observed that the assesse incurred Rs. 1,25,000/- as corporate filmmaking charges and claimed the same as sales promotion expenses. The AO was of the opinion that corporate filmmaking charges would give benefit of enduring nature to the assessee company in terms of enhances sales. Hence, the AO disallowed the said expenditure of Rs. 1,25,000/- as capital in nature. Aggrieved the assessee carried the matter in appeal before the CIT(A). Before the CIT(A), the assessee submitted that the corporate filmmaking charges incurred were allowable as deduction u/s 37(1) of the Act. He further submitted that the section speaks of expenditure which were not covered by the provisions of section 30 to 36 of the Act and refers to any expenditure of revenue nature incurred for the purposes of business. After considering the submissions....
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....1 and another case of M/s Abdul Kadar, 41 ITR 545. The AO noted that in the above mentioned cases, the Hon'ble Supreme Court held that the bad debts can be allowed only if such debt is passed through trading account of profit & loss account of the assessee company. A debt can be allowed as bad debt only if it would have gone into annual accounts as trading debt of the business. If there is bad debt on account of loans and advances given for the purpose of investment or otherwise, then, such debt is not treated as trading debt and therefore, not allowable as deduction u/s 36 of the Act as bad debt. The AO further noted that section 36(1)(vii) that governs the allowability of bad debt is subject to the provision of section 36(2), which provides that the deduction shall not be allowed unless the debt had been taken into account in computing the income of the assessee. The AO observed that in view of the above clear cut legal ratio the amounts of Rs. 48,00,000/- & Rs. 8,60,274/- cannot be allowed to the assessee. The amount of Rs. 48 lacs which is admittedly a inter-corporate deposit can at best be defined as a capital loss. Capital losses of such nature can only be allowed if the asse....
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....h irrecoverable advances were then finally written off. In respect of interest on inter corporate deposits, the assessee argued that it placed certain inter corporate deposits with Alpic finance Ltd. And M/s Son Earth Ltd and had accordingly accounted and accrued interest receivable on such deposits up to the year 31st March 2002 in the books of company. Such interest was credited to the profit and loss account of the relevant year and accordingly taxed. Such interest had consistently been assessed as business income. Alplic Finance went into liquidation and stopped paying interest. Similarly, due to financial difficulties M/s Sun Earth Ltd did not pay interest. In the light of non-payment of interest by these companies and with no hope of recovery, the directors of the company decided to write off the interest accrued in the books. The said amount of interest since already taxed in earlier years was claimed as deduction u/ 36(1)(vii) of the Act. In respect of inter corporate deposit of Rs. 48,00,000/- placed with M/s Alpic Finance Ltd., the assessee argued that the Bombay High Court had ordered liquidation of the said company in August 2002 in response to a winding up petition fil....
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....im was correct claiming same as irrecoverable advances as business loss. 4.3(c) In respect of irrecoverable accrued interest of Rs. 8,60,274/- on inter corporate deposits placed with M/s Alpic Finance Ltd. and M/s Sun Earth Ltd., the same were also allowable to the appellant as bad debt for the reasons that the same were offered as income in the preceding years, the same were written off in the books of accounts during the year under consideration and the appellant had filed sufficient evidences of their becoming bad. The issue is now covered by the decision of the Hon'ble Bombay High court in the case of Director of Income Tax Vs. Oman International Bank, 313 ITR 128 (Bom.), wherein it was held that to treat the debt as a bad had to be a commercial or business decision of the assessee based on the relevant material in the possession of the assessee. Once the assesse records the debt as bad in his books of account that would prima facie establish that it was a bad debt unless the AO for good reasons hold otherwise. The writing off in the accounts, no doubt has to be bona fide. Once that be the case, the assessee will not be called upon to discharge any further burden. After the am....