2009 (10) TMI 33

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....aim deduction for bad debts of Rs.38,20,417/- in respect of the money lending business which was closed down during the accounting year relevant to the assessment year in 1998-99, without following the ratio of the decision of the Supreme Court in the case of Commissioner of Income Tax vs. Gemini Cashew Sales Corporation (65 ITR 645) and contrary to the provisions of Section 36(2)(i) of the Income Tax Act?" 2. The issue relates to the assessee's claim in writing off of a sum of Rs.38,20,417/- as bad debts in the assessment year 1998-99. The claim for such deduction was made based on the provision contained in Section 36 of the Income-tax Act. The Assessing Authority as well as the Commissioner of Income-tax (Appeals) by making a referenc....

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....n the earlier years. We further find that when an assessee is having a composite business then such bad debt has to be allowed. In this regard, the decision of the Hon'ble Jurisdictional High Court in the case of TS Srinivasa Iyer (supra) are reproduced below:- "Held, that the facts on record showed that the assessee was doing a composite and integrated business in films. The entire business was under one common management and there was interlacing, interlocking and unity of control among the various lines of business. Even after certain assets were transferred to the minor Hindu undivided family in the partition arrangement, the assessee was doing business in films. Simply because one line of business was closed or that part of the busi....

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....t. 3. We are in full agreement with the reasoning of the Tribunal. In our opinion, for disentitling an assessee for a deduction by way of bad debt as stipulated under Section 36(2)(i) of the Act, it will have to be shown that such claim was not taken into account in computing the income of the assessee of the previous year or on an earlier previous year, in which the amount of such bad debt was written off. That is not the case of the revenue. Therefore, merely because the money lending business was subsequently discontinued, that is in the subsequent accounting year relating to the relevant assessment year, it cannot be held that the assessee was disentitled to claim such a deduction though such claim as bad debt was, as a matter of fac....