2021 (12) TMI 1446 - HC - Income Tax

Levy of Interest u/s 234D - HELD THAT - As decided in judgment dated 19.03.2019 2019 (5) TMI 112 - MADRAS HIGH COURT though computation of interest will depend upon the appeal effect order to be passed the quantum of net payment is to be determined accordingly after allowing weighted deduction under Section 35 (2AB) of the Act as indicated above. The provisions of Section 234D have been held applicable for Assessment Year 2003-2004 in question in terms of the decision this Court in the case of Fisher Sanmar Ltd. 2014 (4) TMI 236 - MADRAS HIGH COURT Accordingly Questions are answered in favour of the Revenue and against the Assessee. Disallowance of bad debts as conditions laid down in Section 36(1)(vii) r.w.s. 36(2) not satisfied - debts have been taken over from the sister concerns - Tribunal allowed the claim - HELD THAT - Substantial question of law involved in this appeal has already been considered and decided in favour of the assessee by judgment 2019 (1) TMI 2017 - MADRAS HIGH COURT as held tribunal has taken note of the position that the Memorandum and Articles of Association permitted the assessee to carry on the business of money lending and the transactions in question have been held to be in the realm of business activity. Decided in favour of assessee.

Summary

Issues:
1. Challenge to order dated 14.03.2008 by Income Tax Appellate Tribunal
2. Substantial questions of law regarding interest under Section 234-D and disallowance of bad debts

Analysis:
1. The tax case appeals were filed by the Revenue challenging the order passed by the Income Tax Appellate Tribunal related to assessment years 2001-02, 2002-03, and 2003-04. The High Court admitted the appeals based on substantial questions of law, including the deletion of interest under Section 234-D of the Income Tax Act and the disallowance of bad debts amounting to Rs.30,20,000. The Court referred to a previous judgment regarding the levy of interest under Section 234-D and concluded in favor of the Revenue based on the applicability of the said section even for assessments prior to the amendment date.

2. The second substantial question of law pertained to the disallowance of bad debts under section 36(1)(vii) of the Income Tax Act. The assessee had taken over debts from another entity and claimed certain amounts as bad debts. The Assessing Officer disallowed the claim, stating that the debts were taken over voluntarily and were known to be irrecoverable. However, the Commissioner of Income Tax (Appeals) allowed the claim, considering the nature of the transactions as part of the business activity. The Tribunal also upheld the claim, noting that the transactions were within the realm of business activity as permitted by the Memorandum and Articles of Association. The Court upheld the Tribunal's decision, ruling in favor of the assessee against the Revenue.

In conclusion, the High Court partially allowed the Revenue's appeals based on the judgments and analysis provided for both substantial questions of law.