TaxTMI 
TaxTMI 
2025 (7) TMI 454
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.... addition to bank interest, FDRs, interest on unsecured loans was shown against which, the appellant claimed Rs. 10,50,000/- as "amount written off unrealizable". The appellant filed its return of income for the Assessment Year 2004-05 on 26.10.2004 showing income of Rs. 1,70,99,800/-. Subsequently the case was selected for scrutiny. Notice under Section 142(2) dated 02.08.2005 was issued and served upon the appellant regarding the aforesaid write off of Rs. 10,50,000/- on 10.08.2005. Subsequently, notices under Section 143(2) and 142(1) dated 03.08.2006 along with detailed questionnaire were issued and served upon the appellant on 07.08.2006. Appellant filed its reply dated 28.11.2006. After considering the reply, Assistant Commissioner of Income Tax, Circle-I, Ludhiana, vide order dated 29.12.2006, disallowed the return of unrealized amount of Rs. 10,50,000/- and added back the same to the income of the appellant and penalty proceedings under Section 271 (1)(c) of the IT Act were initiated for furnishing inaccurate particulars of account. The appellant filed appeal against order dated 29.12.2006 before the Commissioner of Income Tax (Appeals)-II, Ludhiana, who vide its order date....
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....so made under Section 41(1) of the Act? 7. Before proceeding further, it would be apposite to reproduce the relevant provisions of the IT Act and relevant portion of order dated 13.07.2012 passed by the learned Tribunal, which are reproduced as under:- Relevant provisions of the IT Act "36. Other deductions.-(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) the amount of any premium paid in respect of insurance against risk of damage or destruction of stocks or stores used for the purposes of the business or profession; (ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not been paid as bonus or commission; (iii) the amount of the interest paid in respect of capital borrowed for the purposes of the business or profession; (iv) xxxxxxxxx (v) xxxxxxxxx (vi) xxxxxxxxx (vii) subject to the provisions of sub-section (2), the amount of [any bad debt or part thereof which i....
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.... c) M/s Swaran Fastners Rs. 3 lacs d) M/s Yuvraj Motors Rs. 1.50 lacs 7. The above said amounts due from the parties were claimed to be written off in the books of account maintained by the assessee. The assessee has furnished copies of account of the respective parties during the financial year 2003-04 in the books of account of sole proprietary concern of the assessee at page 35 of the Paper Book. The loan of Rs.3 lacs was advanced to M/s. Kaka Agro Oil Pvt. Ltd. on 25.5.2001 and the assessee claims to have received interest upto August, 2002 and no interest was received thereafter. Similarly, the sum of Rs.3 lacs was advanced to M/s. Swaran Fastners on 24.11.1997 and no interest has been received after March, 1999. Further sum of Rs.3 lacs was advanced to M/s. Jaldhara General Industries on 26.3.1997 and interest was received upto September, 1998 and no interest thereafter. A sum of Rs. 2 lacs was advanced to M/s Yuvraj Motors on 23.6.1997, out of which sum of Rs. 50,000/- was received back on 6.6.2001 and the interest was received upto March, 2001. The assessee has placed copies of the accounts of the respective parties at pages 36 to 46 of the Paper Boo....
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....scribed under Section 57(iii) of the Act are allowable thus any expenditure incurred by the assessee for earning the income is allowable as a deduction under Section 57(iii) of the Act. Any expenditure in the nature of capital expenditure is not to be allowed as a deduction as prescribed under Section 57(iii) of the Act. Coming to the claim of assessee wherein it had treated the amounts advanced as loan but not realized by it, as a deduction, we find no merit in the said claim in view of the provisions of Section 57(iii) of the Act. The alternate plea of the assessee was that the said expenditure is allowable in the hands of the assessee in view of Section 36(2)(i) of the Act i.e. bad debts. The said claim of the assessee is not maintainable as firstly the said amount is to be offered as income from business and deduction is to be allowed of an amount written off which has been taken into account in computing the income of the assessee of the previous year in which the said amount has been so written off or in any of the previous year/s. Admittedly, the assessee has only shown the interest income arising on the advances made by it as its income and the capital advanced by the asses....
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.... was receiving "interest income" on such loans given. The IT Act clearly mentions that bad debt can represent money lent in the ordinary course of business of the banking or money lending. Admittedly, the appellant is not in the business of money lending. Though, in the reply filed before the Assessing Officer, the appellant submitted that it had been into money lending business for a long time, whereas, this seems to be a sudden claim by stating that it is engaged in money lending business. Since in its Auditor's Report in Form 3CD, the appellant clearly mentioned that it is engaged in "Manufacturing of Electric Stablizers and Rectifiers". There is no mention of money lending business in the Assessment Year 2004-05 or in any of the previous years. 11. Further, the appellant himself has shown the interest as "income from other sources" in the computation of income. Had the appellant been in the business of money lending, this income would have been reflected as "business income". As per books of accounts, which were produced before the Assessing Officer, the same reveals that no separate books of accounts for the business of money lending were being maintained, whereas, certain ....