TaxTMI 
TaxTMI 
2025 (7) TMI 947
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....ere integral part of the appellant's business activity and the amount written off during the year under account constituted loss incurred during the course of business allowable u/s.28 of the Act. 4. Any other ground of appeal that may be pleaded with the prior approval by the Hon'ble Tribunal during the course of appellate proceedings. 5. The appellant craves leave to add to, amend or modify the above grounds of appeal either before or at the time of hearing of the appeal, if considered necessary. 3. The assessee has also filed a modified ground No.3 as well as an additional ground of appeal as alternate plea as under: 3. The learned Commissioner of Income-tax (Appeals) ought to have appreciated that the amounts advanced by the appellant to producers of movies were integral part of the appellant's business activity and the amount written off during the year under account constituted loss incurred during the course of business allowable u/s.28 or Sec.37 of the Act. ADDITIONAL GROUNDS OF APPEAL. 1. Alternatively, the learned Commissioner of Income-tax. (Appeals) ought to have appreciated that the amounts advanced by the appellant....
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....he A.Y 2016-17, the Assessing Officer allowed the claim of written off of the advances and interest there upon amounting to Rs. 94,87,067/- while passing the assessment order u/s 143(3) of the Act placed at page No.53 of the paper book. He has relied upon the following decisions: i) Hon'ble Madras High Court in the case of Ashok Leyland Ltd vs. ACIT (2022) 141 taxmann.com 171 (Mad.) ii) ITAT Mumbai Special Bench in the case of Dy. CIT vs. Shreyas S. Morakhia (2010) 40 SOT 4232 (Mum SB) iii) Hon'ble High Court of Bombay in the case of CIT vs. Shreyas Morakhia (2012) 19 taxmann.com 64 (Bom.) iv) Bangalore Bench of the Tribunal in the case of Pranava Electronics (P) Ltd vs. Dy. CIT (2022) 40 Taxmann.com 9 (Bang.Trib.) 6. On the other hand, the learned DR has submitted that the Assessing Officer has rightly disallowed the claim of the assessee when the conditions provided u/s 36(2)(i) are not satisfied. No deduction on account of bad debts written off shall be allowed unless such debts have been taken into account while computing the total income of any previous year. In the present case, the assessee is not in the business of finance and ....
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....ed income: 1. Income Returned Rs. 27,87,35,960 2. Add: Advance written off Rs. 1,60,26,000 3. Add: Expenses related penal in nature Rs. 52,197 Rs. 29,48,14,157 Income assessed u/s 143(3) of the Act, computation sheet along with Demand notice u/s 156. Penalty proceedings u/s 270A of the Act for under reporting of income separately initiated. 8. Thus, the Assessing Officer has given the reasons for disallowing the claim of the assessee as the conditions provided u/s 36(2) are not satisfied being the advances were not taken into account as income of the assessee in the previous year. 9. In appeal, the learned CIT(A) has confirmed the disallowances made by the Assessing Officer while giving a similar reasoning in para No.6.4 to 6.10 as under: 6.4 This written submission is contrary to the submissions made before the AO. Before the AO, the appellant claimed the entire sum as Bad Debts written off as this sum was due for more than three years. In the written submission filed during the course of appeal, it is stated that this amount includes Principal amount of Rs. 1,00,00,000/- and Interest portion of Rs. 60,26,00....
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....be delivered to them at the address as per our records and our efforts to deliver the confirmation letters did not materialize in the above two cases. Copies of their accounts in our financial ledger duly showing write off are enclosed for your kind perusal. 3. Permanent Account Number (PAN) of the parties is furnished below: 3.1 AA Arts: PAN: AGWPK8115C 3.2 Raja Rajeswari Pictures: PAN: AANCS7920D Present Address of the parties is not available as explained above. 4. (i) It is prayed that the Interest amount of Rs. 36,00,000/- charged to the producer M/s AA Arts and Rs. 44,43,615/- to M/s Raja Rajeswari pictures has already been offered as income in the relevant years as stated herein above. As the income offered already could not be recovered from the parties, the entire amount is written off and charged to profit and loss account as bad debts written off as permitted under Section 36 / Section 37 since the entire amount was written off as irrecoverable. (ii) It is also prayed that the advance of Rs. 1,00,00,000/- given to M/s Raja Rajeswari Pictures in the financial year 2013-14 was written off as irrecoverable in the financi....
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....ompany units. They are not engaged in the business of money lending to claim any deduction of Advance write off. It is for this reason, the AO rightly disallowed this amount debited wrongly into the P&L account. 6.7 In order to claim any Bad Debt write off, the appellant has to fulfill the provisions of Section 36(1)(vii) r.w.s. 36(2) of the IT Act. Prima-facie, such Bad Debt, if any, should have been taken into computation of Total Income in any of the previous assessment years. In the present case, the amount debited to P&L account was Advances written off. 6.8 In this connection, the decision of the Hon'ble Madras High Court in the case of Ashok Leyland Ltd. Vs. ACIT [2022] 141 taxmann.com 171 is directly applicable wherein it is held that Advances written off cannot be claimed as business loss u/s 28 of the IT Act. Hon'ble High Court held that Advance given was a capital expenditure and the Advance written off was a capital loss. 6.9 Hence, this claim of Advance written off debited to P&L account is not allowable either u/s 36 or 37 or 28 of the IT Act. When the AO disallowed the sum, the appellant claimed that Rs. 1,60,25,816/- includes Advan....
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....s business income in the preceding years so as to consider the transaction of the loan and advances as directly connected with the business activities of the assessee. Accordingly, in the facts and circumstances of the case, we are of the considered opinion that the matter requires a proper verification and examination of the relevant facts regarding the nature of the loan given by the assessee as well as the interest, if any, offered by the assessee to tax as business income of the assessee. Hence, the matter is remanded to the record of the Assessing Officer for fresh adjudication after examination of the relevant record to be produced by the assessee in support of the claim that the loan and advances given by the assessee are in the normal course of the business of the assessee, the Assessing Officer shall decide the issue as per law. 12. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the Open Court on 07th May, 2025. ============= Document 1 (58 GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 16(2),HYDERABAD To USHAKIRON MOVIES PRIVATE L....