TaxTMI 
TaxTMI 
2014 (1) TMI 919
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....d proceedings under section 147 of the Act. 3. Another issue raised is that Ld. Commissioner of Income Tax (A) erred in confirming the disallowance on account of bad debt and advances written off amounting to Rs. 10,118,849/-. 4. Apropos issue of disallowance on account of bad debt and advance written off:- In this case assessment for the year 2003-04 was completed on 22.3.2006 u/s. 143(3) of the I.T. Act. The case was reopened u/s. 147 read with Section 148 of the Act. During the course of assessment, assessee was inter-alia asked to explain as to why the bad debt and advances written off should not be disallowed being capital in nature. Assessee responded as under:- "...During the financial year relevant to the subject assessment year....
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....ion made by the assessee, it is clear that as the bad debt and advances written off are of revenue nature and have been taken into account in computing the income of earlier years, no disallowance of the same be made in computing the taxable income of the assessee." Considering the above, Assessing Officer held that the explanation is not acceptable. He held that the bad debt and advances written off were of capital in nature and hence disallowed and added to the income of the assessee. 5. Upon assessee's appeal Ld. Commissioner of Income Tax (A) deleted the disallowance with regard to amount of Rs. 2,306,379/-.Ld. Commissioner of Income Tax (A) observed that the amount of Rs. 10,118,849/- represented the interest accrued on loans giv....
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.... terms of provisions of section 36(1)(vii) of the I.T. Act. Considering the facts of the case and the legal position on the issue, I am of the view that the Assessing Officer was not justified in making disallowance of Rs. 1,01,18,849/- which represents interest accrued on loans given to M/s Dhillon Kool Drinks and Beverages Limited. I, therefore, uphold order of the Assessing Officer in respect of the addition of Rs. 1,01,18,849/-." 6. Against the above order the assessee is in appeal before us. 7. We have heard the rival contentions in light of the material produced and precedents relied upon. We find that the amount of Rs. 1,01,18,849/- represented interest accrued on loans given to M/s Dhillon Kool Drinks and Beverages Limited. The sa....
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....an the difference between the debt or part and the amount so deducted, the deficiency shall be deductible in the previous year in which the ultimate recovery is made; (iii) any such debt or part of debt may be deducted if it has already been written off as irrecoverable in the accounts of an earlier previous year [(being a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year)], but the [Assessing] Officer had not allowed it to be deducted on the ground that it had not been established to have become a bad debt in that year; (iv) where any such debt or part of debt is written off as irrecoverable in the accounts of the previous year [(being a previous year relevant to the as....
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....ssion following has been mentioned:- "8(a) Nature of business& profession : Manufacture and sale of: 1. Aerated and non aerated beverage products. 2. Exports of traded and own manufactured products. Providing loans to companies involved in the business of manufacture of soft drink beverage." 11. From the above, it is clear that providing the loans to company involved in the business and manufacturing of soft drinks beverages was in the nature of the business of the assessee, hence, the same was incidental to the business of the assessee. The said amount of loan was provided to M/s Dhillon Kool Drinks and Beverages Limited. Thus, it cannot be said that the interest on the loan amount provided by the assessee company was not incidental t....
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.... in the course of business. It is undisputed that the advances became irrecoverable. In such situation, as per the ratio emanating from the decision of the Hon'ble Jurisdictional High Court in the case of Mohanmeakin Ltd. vs. C.I.T. 348 ITR 109, it is not relevant that the amount was claimed as bad debt. As per the Hon'ble High Court decision the amount was deductible as business loss u/s. 37 of the I.T. Act. In this case it was held that claim for deduction of non- recovery of trade advances was allowable on the facts of the case, merely because the bad debt claim was not made out under one particular provision of the Act, but was so made out under another provision of law, assessee cannot be deprived of the benefit of deduction of....