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2014 (11) TMI 675 - AT - Income TaxBed debts disallowed Facts not properly appreciated by CIT(A) - Held that:- Assessee is a NBFC registered with the RBI - so far as the nature of business of the assessee is concerned there cannot be any doubt that money lending is one of its business activities - Only because in regular course of its money lending business it has also advanced loans to sister concerns/related parties, solely on that basis the advances cannot be said to be in the nature of investment, hence, coming in capital field revenue certainly cannot decide to whom the assessee will advance loan in its regular course of business - the AO is not the competent authority to decide that issue - It is for the RBI to take a decision whether the assessee has actually violated any guidelines or not - the loans advanced by the assessee could not have been termed as investments - CIT(A) has also not properly appreciated the facts but he has simply got swayed away by the observations of the AO that 91% of the loan was to related parties/sister concerns - There is no restriction in advancing loan to sister concerns it cannot be made a factor to conclude that loans advanced to sister concern by itself make them investments. Another important aspect which cannot be ignored is, in respect of two of the creditors i.e. M/s Elgen(India) Ltd and G. Viswanath Rao, the amounts recovered in subsequent assessment year out of the amounts claimed as bad debts written off have been offered as income in the respective assessment years by the assessee - the disallowance of the amount would amount to double addition - in case of loan advanced to Prathima Industries Ltd., has been treated as income at the hands of the said party and which stands confirmed by the CIT(A) - it cannot be treated as investment made by the assessee and again added at his hands - advances made by the assessee are in regular course of its business as NBFC, they have to be treated as revenue in nature - once the advances made are held to be of revenue nature, then, the other consequence of claim of deduction u/s 36(1)(vii) would automatically follow if the assessee actually has written them off in its books of account as bad debt the order of the CIT(A) is to be set aside Decided in favour of assessee.
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