TaxTMI 
TaxTMI 
2017 (2) TMI 223
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....ing management and financial Consultancy. The Assessing Officer noted that assessee had, inter-alia, claimed a write off of Rs. 50,00,000/- as bad debt, which represented a sum of Inter Corporate Deposit (ICD) advance to one M/s. Baroda Rayon Corporation Ltd., ( in short " BRCL") in the earlier years. It was noticed that assessee had entered into an agreement with BRCL in November, 2004, a copy of which has also been placed in the Paper Book filed before me at pages 61 to 60. In terms of the said agreement, assessee was to provide specialized management and financial support services to the BRCL. In terms of the agreement, it was also provided that the assessee and its associates would also provide financial support to the BRCL in order to achieve restructuring and revival of BRCL. Further, assessee was also entitled to receive certain consultancy fee, which had been offered to tax over the years. During the year under consideration, it was noticed that assessee had written-off certain amount of outstanding consultancy fee as also the ICD of Rs. 50,00,000/- advanced in the earlier years. In so far the write-off of the irrecoverable consultancy fees is concerned, there is no dispute....
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....s to provide financial as well as managerial assistance for rehabilitation of BRC. In any case, advancing of funds was one of the objects of the appellant. To this extent, reliance of the AO on the decision in the case of CIT v. Epsilon Advisors Primate Limited (supra) is misplaced. Sixthly, the appellant has relied on the decision in the case of Wendt(India) Limited v. JCIT(supra). Noting that the ICD advanced by the assessee in that case had been partly recovered, the cheques for the balance amount having bounced and the assessee having secured non-bailable warrants against the Directors of the defaulter company, it was held by the Hon'ble Tribunal that the bad debts written off in the books shall be allowed as a deduction. In the appellant's case, the irrecoverability of the ICD stands demonstrated by the delisting BRC and its approaching the BIFR. Seventhly, there is no doubt that the money advanced by way of the said ICD had actually passed through the P&L a/c of the appellant earlier. Here, the AO has taken an exceedingly narrow interpretation of this proposition. The ICD itself can obviously not be part of the P&L a/c. What is adequately demonstrated by the AR is that the mo....
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....s of money lending, but as per the assessee financing of BRCL was also part of the understanding between assessee and BRCL, whereby assessee was to provide specialized management advisory services including raising of finance for the turnaround of BRCL. Further, it has been pointed out that the interest on such ICDs in the past years have been assessed to tax and that in view of the judgment of the Hon'ble Bombay High Court in the cases of CIT v.Shreyas S.Morarkhia, 19 taxmann.com 64(Bom) and CIT vs. Pudumjee Pulp & Paper Mills Ltd.,343 ITR 285(Bom), the test laid down in section 36(2)(i) of the Act was also satisfied. In sum-and-substance, the Ld. Representative for the assessee has relied upon the order of the CIT(A) in support of the case of the assessee. 7. I have carefully considered the rival submissions. The respondent assessee is engaged in the business of management and financial consultancy services. In terms of such business, assessee entered into an agreement with the BRCL on 01/11/2004, whereby assessee-company was mandated to work with the promoters and management of BRCL towards implementation of a comprehensive restructuring programme to achieve the turnaroun....
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....o be a money lender whereas the CIT(A) is quite clear in observing that the assessee is " no- money lender" but according to him the debt in question is inextricably linked to the consultancy agreement between assessee and BRCL, whereby assessee was to provide financial as well as managerial assistance for the rehabilitation of the BRCL; and there is also no denying the fact that advancing of funds is, in any case, one of the objects of the assessee company; under this situation the CIT(A) concluded that the advancing of ICD was a part of assessee's business. In my view, the CIT(A) made no mistake in holding that advancing of the ICD to BRC was a part of the business of the assessee. 7.2 Now coming to the objection as to whether such a debt satisfies the condition prescribed in section 36(2)(i) of the Act. As per section 36(2)(i) it is prescribed that no deduction shall be allowed for the bad debt unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written of or of an earlier previous year or represents money lent in the ordinary course of business of banking....