TaxTMI 
TaxTMI 
2015 (8) TMI 719
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....venue urges the following questions of law for our consideration:- "(a) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in deleting the disallowance of Rs. 34,82,546/- being the amount written off by the assessee on account of bad intercorporate deposits (ICD) given, by ignoring the fact that the assessee is neither in the business of banking or moneylending de hors the provisions of Sec. 36(1)(vii) of the I. T. Act? (b) Whether on the facts and in the circumstances of the case and in law, the order passed by the Tribunal on the basis of erroneous assumptions, without appraising and evaluating the relevant facts and evidences, and also without applying the correct law as lai....
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....e amount of Rs. 34.82 lakhs being claimed as bad debts was not the income offered to tax either in the relevant Assessment Year or in the earlier Assessment Years. 5. Being aggrieved, the Respondent-Assesseee filed an Appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By the order dated 26th August, 2011, the CIT(A) held that the amount of Rs. 34.82 lakhs sought to be disallowed as bad debts was the balance of the inter corporate deposit and the interest accrued thereon receivable from M/s. GSB Capital Market Ltd. It was held that this amount was lent in the ordinary course of business of money lending and that the amount of Rs. 42.55 lakhs of interest received on the intercorporate deposit was offered to tax. Thus, the claim f....
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....d in the business of lending money. In the above view, it is submitted that the order of the Tribunal calls for no interference. 9. The CIT(A) as well the Tribunal have considered Sections 36(1)(vii) and 36 (2)(i) of the Act which for the purpose of convenience are reproduced hereunder and read thus:- "Section 36: Section (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 (i) to (vi) .... .... .... .... (vii) subject to the provisions of sub-section (2), the amount of any bad debts or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous ye....
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.... of the above provision is not disputed by the Revenue. The hub of the controversy is whether the requirement of Section 36(2)(i) of the Act is satisfied. 11. It is noticed that Section 36(2)(i) of the Act allows deduction on account of satisfaction of any of one of the two conditions as under:- (a) bad debts or part thereof taken into account in computing the income of the assessee for an earlier Assessment Year before such debt or part thereof is written off; or (b) the debt represents money lent in the ordinary course of business of banking or moneylending which is carried on by the assessee. Therefore, even if one of the two conditions of Section 36(2) (i) of the Act is satisfied, then bad debts claimed under Section 36(1)(v....
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....offered for tax. Subsequently, it was found that the principal amount which was to be received from its clients would not be received. The assessee sought to claim as bad debts not only the brokerage amounts not received but the aggregate of principal and brokerage amounts not received in respect of the shares transacted. This Court held that the debt comprises not only the brokerage which was offered to tax but also principal value of shares which was not received. Therefore, even if a part of debt is offered to tax, Section 36(2)(i) of the Act, stands satisfied. The test under the first part of Section 36(2)(i) of the Act is that where the debt or a part thereof has been taken into account for computing the profits for earlier Assessment ....