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2012 (7) TMI 20 - HC - Income TaxBad debts - advance given to sister concern - dis-allowance on ground that advance has been given to sister concern to tide over its financial situation, and cannot be treated as bad debt when the assessee is not carrying on money lending business or having lent this amount in the course of business activity of the assessee - Held that:- Purpose for which the amount was given, the nature of the lending, nature of the activity carried on by the assessee, which constitutes business activity of the assessee, are all factors which are to be considered in determining as to whether an amount given by the assessee is one which qualifies as a 'debt'. A debt may be because of any service provided by the assessee to its customers for which an amount or fees is payable but not so paid or a price payable for any of the goods supplied but not paid by the customer or an amount actually lent out by the assessee as part of the business activity of the assessee and to qualify for deduction u/s 36(1)(vii), it is such debt which has become irrecoverable for various reasons. In present case, mere fact that the assessee had made some inter-corporate deposits and the assessee earned income by way of interest in itself is not a circumstance to conclude that it was carrying on money lending activity as part of its business activity. The assessee's main business activity was only in providing services in telecommunication technology and not in money lending activity. Therefore, interest-free amount of Rs. 5.34 crore advanced to its sister concern cannot qualify as bad debt u/s 36(1)(vii) - Decided in favor of Revenue.
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