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2017 (11) TMI 1747 - AT - Income TaxDisallowance on account of bad debt u/s 36(1)(vii) - Held that:- As noticed that assessee has given advances to its sister concerns viz Shah Engineers & M/s. Tetra Tract. The assessee has charged interest of ₹ 32,04,890/- and ₹ 21,83,870/- respectively for the financial year 2001-2002 to 2002-2004. The interest income was reflected in the books of account of the assessee in the aforesaid years. The assessee had received interest of ₹ 26,37,064/- out of the outstanding interest of ₹ 32,04,890/-from its sister concern M/s. Shah Engineers and interest of ₹ 7,53,704/- out of the outstanding interest of ₹ 21,83,870/- from the other sister concern M/s. Tetra Tract. The assesse had included the above interest received of Rs. ( 26,37,064+ 7,53,704) in the amount claimed as bad debt. The Ld. CIT (A) has restricted the quantum of bad debt to the extent the debt on account of interest income remains unrecovered . Therefore, the total unrecoverable interest income from the above of Rs. (5,67,826 + 14,30,166) ₹ 19,97,992/-) and the amount of ₹ 13,02,182/- on account of customer balances was allowed as bad debt by the ld. CIT(A) - no reason to decline with the detailed findings of the Ld. CIT(A) - decided against revenue Disallowance on account of interest on loans to Associate Concern - Held that:- In assessment year and subsequent years, assessee has stopped charging interest and accounting it in the income on accrual basis. This is not a sound accounting policy as at outset it should have been recognized the same as income on accrual basis and thereafter would have given the deduction of claim of bad debt which the assessee failed in these years. Further, when we visualize this situation as a whole traveling from three assessment years, then, it is observed that interest income was recognized on accrual basis and thereafter claimed as a bad debt of its non-realization, this has been allowed by ld. CIT(A). If we remit the issue to the file to assessing officer in subsequent years by holding that income is to be recognized on accrual basis and thereafter, it is to be claimed as bad debt whether allowable or not, then, to our mind, it will be an academic and futile exercise because in reality assessee has not received any interest income from its sister concern. It is to be recognized that in all the aforesaid three years the income from interest on accrual basis remained unrecoverable which was allowed as a bad debt. Thus, in order to avoid multiplicity of the proceedings, we allow the appeal of the assessee Disallowance on account of general expenses on estimated basis - Held that:- Referring to claim of the assessee that all the transactions were duly supported by documentary evidences. In view of above and after considering that the ld. assessing officer has verified the entire books of accounts, bills, vouchers etc. and not pointed out any discrepancy in unaccounted sale, expenditure etc. Therefore, we restrict the disallowance out of general expenses to ₹ 10,000/- only. In the result the appeal of the assessee is partly allowed on this issue.
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