TaxTMI 
TaxTMI 
2020 (10) TMI 359
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....mstances of the case. 3. We have heard the ld. DR and perused the materials available on record. We find that assessee had filed its return of income for the A.Y.2014-15 on 27/11/2014 declaring total income of Rs. 14,13,40,880/-. During the course of assessment proceedings, the ld. AO observed that assessee had debited a sum of Rs. 5,17,76,297/- under the head exceptional expenses in its profit and loss account. The ld. AO observed from the Note No.25.7 to the audited financial statements that assessee had given inter-corporate deposit (ICD) amounting to Rs. 6 Crores in the year 2010 to M/s. Trusted Aerospace Engineering Ltd. The assessee was able to recover only a sum of Rs. 3,25,00,000/- out of the said advance. The said ICD carried an interest rate of 12% per annum and the assessee had duly offered to tax the interest income on such ICD under the head "income from business" as under:- A.Y. Amount 2010-11 Rs. 85,80,822/- 2011-12 Rs. 84,85,200/- 2012-13 Rs. 72,10,274/- 3.1. We find that the aforesaid interest income had been duly assessed by the ld. AO under the head "income from business" in those respective assessment years. We find that the assesse....
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....l 2010, the Company has sanctioned inter-corporate deposit (ICD) of Rs. 6,00,00,000/- with an interest rate of 12% per annum to a well known company Trusted Aerospace Engineering Ltd., (borrower) having the registered office in Madras in the ordinary course of business. As per the agreed terms between the Company and the Borrower, inter alia, the said ICD was repayable in 6 months. b) As per the repayment terms, the borrower had deposited two post dated cheques dated October 26, 2010 of Rs. 6,00,00,000 (towards principal amount) and Rs. 32,40,000 (Net of TDS towards interest amount) respectively but, on due date in month October-2010, the said cheques were dishonored by the banker of the borrower with remark " insufficient funds". c) Upon intimation of the same to the Borrower, the Company allowed to issue fresh cheques dated November 22, 2010 in lieu of dishonored cheques. Accordingly, the borrower issued two cheques of Rs. 3,00,00,000 each towards principal and Rs. 47,25,000 (net of TDS) towards interest. However these cheques were dishonored for the same reason i.e "Funds Insufficient". d) As the borrower failed on two occasions to honor the cheques, t....
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....matter as disposed. k) Due to nonpayment of the dues, the assessee tried its best to realize the ICD (both principal & interest portion) and filed legal case from time to time as referred above against the borrower, but when it become apparent that no more realization can be received out of pending principal & interest, the Company has written-off the amount from the books amounting to Rs. 5,17,76,297/-. 3.2. The assessee also submitted before the lower authorities that granting ICDs to inter-corporate is very much permissible in its Memorandum of Association and is also governed by the provisions of Section 372A of the Companies Act, 1956 which prescribes the limit within which the inter-corporate deposits could be made by one corporate to another corporate. Hence, it was argued that the act of placing ICD in another corporate was done in the ordinary course of business of the assessee and that any loss arising to the assessee due to non-recovery of principal or interest portion thereof would obviously tantamount to business loss incurred by the assessee which would be squarely allowable as deduction. It was also submitted before the lower authorities that since the lo....
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....sion of the Hon'ble Jurisdictional High Court in the case of CIT vs. Pudumjee Pulp & Paper Mill Ltd., reported in 63 Taxmann.com 283 dated 05/08/2015 wherein under similar facts and circumstances, the Hon'ble Bombay High Court had allowed the claim of write off of ICD as the business loss. While rendering this decision, the Hon'ble Bombay High Court also placed reliance on yet another decision of the Hon'ble Bombay High Court in the case of CIT vs. Shreyas S Morakhia reported in 342 ITR 285(Bom). The relevant operative portion of the decision of the Hon'ble Bombay High Court in the case of Pudumjee Pulp & Paper Mill Ltd is reproduced hereunder:- "10. So far as Section 36(1)(vii) of the Act is concerned, it is a settled position in law that after 1st April, 1989, it is not necessary that the debt itself must be proved to be irrecoverable. The only requirement is that the amounts claimed as bad debts should be written off as irrecoverable in the account of the Assessee (see TRF Ltd. v. CIT [2010] 323 ITR 397/190 Taxman 391 (SC). The satisfaction 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....