TaxTMI 
TaxTMI 
2021 (2) TMI 573
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....040/- was filed on 30th October, 2001. The original assessment was completed u/s. 143(3) on 6th Feb, 2004 determining total income at Rs. 6,64,10,88/-0 after making various additions including disallowance of bad debt which is contested in the instant appeal of the revenue. Out of total disallowance of bad debit of Rs. 2,64,93,888/-, the ld. CIT(A) has allowed the claim of the assessee company for Rs. 12,52,424/- and upheld the remaining disallowance of Rs. 2,52,41,464/-. The ITAT Ahmedabad vide composite order for assessment year 2001-02 and 2002-03 in ITA No. 35/Ahd/2015, ITA No. 515/Ahd/2005 and ITA No. 1059/Ahd/2016 dated 31st October, 2013 set aside the issue of bad debt to the file of Assessing Officer for fresh adjudication by the Assessing Officer as to whether the ratio laid down in the case laws relied by the assessee is applicable to the facts of the case or not. The bad debt amount was consisted of Rs. 1,15,17,780/- pertaining to bill discounting and an amount of Rs. 1,37,23,684/- pertaining to inter-corporate deposits. Thereafter, during the course of assessment made u/s. 143(3) r.w.s. 254 of the Act, the Assessing Officer stated that the facts of the cases relied u....
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....unting 1,15,17,780 2 Maftatlal Industries Ltd. Intercorporate deposit 83,53,684 3 Precession Fasteners Ltd: Intercorporate deposit 53,70,600 Total 2,52,41,464 3.4. Subsequently, in the first ground of appeal the Hon'ble' ITAT Ahmedabad vide its order in !TA No.35/Ahd/2005, 515/Ahd/2005 dtd. 31.10.2013 has set-aside the appeal of the appellant and the revenue for fresh adjudication with the following observations:- "8. Aggrieved now both the parties are before us. Assessee is in appeal in respect of confirming the disallowance of Rs. 2,52,41,464/-for bad debt written off that were in the nature of bill discounting and inter-corporate deposits while revenue 'is in appeal in respect of bad debt allowed by Ld.CIT(A) of Rs. 12,52,424/- in respect of assessee's business of hire purchase. At the time of hearing learned counsel of the assessee at the outset submitted that issue in respect of claim of assessee of bod debt in respect of its business of hire purchase is now covered in favour of assessee by this Tribunal's decision in the case of assessee for A. Y. 2004-05 therefore L.d. CIT(A) order deserves to be confirme....
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....ious bills which were discounted for were not appearing in the profit and loss account items as on 31.3.2011. 3.6. Further with regard to the bad debts written off in respect of intercorporate deposit it was observed by the AO that the ICD was not the main business of the assessee and hence bad debt written off cannot be allowed as deduction u/s.28 or 26(l)(vii) r.w.s. 37{2)(1) of the I.T. Act. Thus the ratio laid down in the case law relied upon by the appellant i.e. Poysha Oxygen Pvt. Ltd. of Hon'ble Delhi ITAT is found not acceptable over the facts of the case. 3.7. On the other side the appellant has given a written submission which has been reproduced in the preceding paras of this order. Having considered the facts and submission, it is noticed that the appellant has claimed the bad debt written off of Rs. 1,15,17,780/- in respect of the bill discounting business for Overseas Synthetics Ltd. Since the appellant company was a finance company engaged in the business of financing industrial commercial enterprises and other customers by way of hire purchasing, bill discounting, inter corporate deposit etc. The income of the company therefore comprises of hir....
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....nting at Rs. 13,03,356/- in the year under consideration which also included the aforesaid, income of Rs. 10,08,458/-received from Overseas Synthetics Ltd. and hence the appellant has shown the income from bill discounting business as income from operations under the profit and loss account and the same has been offered as business income which has not been doubted by the Assessing Officer. Therefore, the AO's observations and the CIT(A)'s observations in the first round is factually incorrect to this extent. 3.10. Since the income from operations including the bill discounting income has been offered as income from business thus it is apparent that bill discounting was also the one of the business activities of the appellant as per the Memorandum of Association. The relevant clause of the Memorandum of Association is reproduced hereunder:- 14. To make draw, accept, endorse, discount, execute, negotiate, assign and Issue cheques, promissory notes, drafts, bundles, bonds, railway receipts, bills of exchange, bills of lading, warrants, debentures and other negotiable or transferrable instrument." ' 3.11. Even otherwise also no company can undert....
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.... its books of account -money receivable from the client has shown brokerage income in its books of account - Money receivable from the client has to be treated as 'debt' and since it became bad, it was rightly claimed as bad debt. 3.13. On going through the decision of Bombay High Court referred above it has been mentioned that the test is whether the debt or part thereof has been taken into account in computing the income of the assessee. The answer to that test has to be in the affirmative. That being the position the requirement of Section 36(2)(i) are duly fulfilled. In the cited case the brokerage on the value of share transactions by the assessee had been accounted for as income and therefore the payables by the customers of a part of their debt was held to be allowed as bad debt in view of Section 36(2) (i) of the Act. Similarly in the case of Hon'ble Delhi High Court on identical facts as cited in the case of Shreyas S. Morakhia the claim of bad debt was held to be allowable. 3.14. Taking into account the ratio laid down by both the Hon'ble Courts the ratio is found applicable on the facts of the case in the form that the appellant has offe....
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....ven in the year in which the bad debt is written off. Merely the fact that the advance was described by the assessee intercorporate deposit would not be decisive of the question whether it was given in the course of money lending business of the assessee or purpose of income tax proceedings. It is apparent from the very nature of the business of the appellant more particularly having regard to the Memorandum of Association that the inter-corporate deposit is the money lending business only and on which the appellant has charged the interest and offered the same as business income in the preceding years. Even in the year under consideration, the P & L Account the appellant has shown the interest of Rs. 5,91,653/- as intercorporate deposits under the head of 'income from operations as per Schedule 14 to the P & L Account. So the facts of the cited cases are identical and ratio is fully applicable. It has also been noticed that from Mafatlal Industries the appellant has derived the interest income of Rs. 44,11,036/-and from Precisions Fastners the interest income was at Rs. 17,00,248/- in the preceding years. Not only that the appellant has also recovered Rs. 83 lakhs from Mafatla....
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.... & L A/c of the assessee as on 31-03-2000 and 31- 03-2001 were shown. The ld. counsel supported the order of the ld. CIT(A). On the other hand, ld. Departmental Representative has relied upon the order of Assessing Officer. 6. Heard both the sides and perused the material on record. We have gone through the finding of Co-ordinate Bench of the ITAT in the case of the assessee for assessment year 2004-05 as mentioned above. It is noticed that similar issue on identical fact has been adjudicated in favour of the assessee by the Co-ordinate Bench of the ITAT after referring the decision of Mumbai High Court rendered in the case of Shreyas S. Morakhia (2012) 19 taxmann. Commissioner 64 (Mumbai) and the decision of Hon'ble Delhi High Court rendered in the case of Bonanza Portfolio Ltd. (2010) 320 ITR 178 (Delhi). The relevant part of the decision of the Co-ordinate bench as referred supra is reproduced as under:- "5. We have heard the rival submissions, perused the materials available on record, gone through the orders of authorities below and judgments cited by Ld. AR of the assessee. We find that basis of disallowance of bad debt made by Assessing Officer is this that de....