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2012 (11) TMI 274 - AT - Income TaxInterest on REC Bonds – Held that:- REC Bonds were purchased by the assessee firm for availing the exemption on capital gain in the earlier years, it is clear that the REC bonds were purchased by the assessee for specific purpose of availing the exemption on capital gain and not as business activity of the assessee. This, being the fact, then the interest earned on the REC bonds cannot partake the character of business income - interest on REC bonds to be treated as income from other sources. Writing back of Sundry Creditors u/s 41(1) – Held that:- Sundry Creditors are related to the business of the assessee and it is not the case of the revenue that the assessee has discontinue the business or close down the business activity - then the income on account of written back of the sundry creditors falls under the head ‘business and profession’ and not as ‘income from other sources’. Electricity expenditure – Held that:- In absence of documentary evidence, expenses were disallowed. Bank charges expenses and staff welfare expenses are allowable as business expenditure against the business income. Therefore, once the amount of sundry creditors is treated as business income consequently the claim of bank charges and staff welfare are allowed. Interest on capital of partners - Once the interest @ 12% p.a on partners capital is allowable, then to the extent of the amount which could not be set off against the business income would be setting off against the income from other heads and carry forward business loss as provided u/s 71 & 72 of the I T Act - accordingly, the Assessing Officer is directed to take appropriate steps in this regard - grounds are partly allowed. Bad Debts – Following the decision of court in case of [T. R. F. LTD. v. Commissioner of Income-tax, 2010 (2) TMI 211 - SUPREME COURT] Held that:- Once the assessee has written off the debt as unrecoverable debts, the same is allowable and there is no need to prove that the debts actually gone bad - In the interest of justice, this issue is set aside to the record of the Assessing Officer for the limited purposes to examine whether the assessee has complied with the conditions as enumerated u/s 36(2) being the amount has already offered as income and then decide the issue - In the result, appeal filed by the assessee is partly allowed.
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