Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2007 (5) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2007 (5) TMI 352 - AT - Income TaxDisallowance of Bad Debts - Pendency of the recovery proceedings - CIT(A) held that the appellant has not carried out any business activity and income earned out of interest is assessable under the head ‘Income from other sources’ and, therefore bad dept in respect of K.M. Nemani is not allowable u/s 36(1)(vii) - HELD THAT:- In the present case the assessee has entered into number of transactions over the years whereby it has earned interest on loans and advances given in the ordinary course of its activities. Assessment year 1997-98 was only the second year, however this is the 5th year of the engagement of the assessee in the same kind of transactions, hence, having regard to the nature of transactions undertaken by the assessee, it can be held that the assessee is engaged in the business of money lending. We are also of the view that absence of money lending licence is not so crucial for the purpose of Income-tax Act, 1961, if the nature of activity undertaken by the assessee can be decided on the basis of other facts. As stated, the assessee is engaged in granting of loans on regular basis and interest income has also been shown as business income which also reflects the intention of the assessee. We are also of the view that pendency of recovery proceedings cannot come into the way of allowing of bad debts, if other facts clearly establish that there are no chances of any recovery of the money even if a decree in favour of the assessee is pronounced by the Court. The bad debt of Mr. K.M. Nemani stand on the same footing. However, in the absence of details regarding loan transactions with M/s. Videocon Holding (P.) Ltd. the same cannot be allowed. Thus, we are of the view that the decision of the Tribunal in the earlier assessment year is not applicable and assessee’s claim in respect of bad debts of Mr. K.M. Nemani is justified. Accordingly, order of the ld. CIT(A) stands modified and we direct the Assessing Officer to allow the claim of bad debt in respect of this account. Thus ground No. 1 stands partly allowed and ground Nos. 2 and 3 stand accepted. In the result, the appeal filed by the assessee stands partly allowed.
|