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2018 (4) TMI 1262 - AT - Income TaxDisallowance of write off of outstanding loan and interest - whether CIT(A) was justified in upholding the treatment of interest income earned during the year as income from other sources instead of business income? - Held that:- It is prerogative of the assessee to charge or not to be charge interest on certain loans. Anyway in case if the revenue alleges that the interest from loan given to certain parties were not for the purpose of business of the assessee, then the law provides alternative remedy of proceeding against the assessee u/s 36(1)(iii) by resorting to disallowance of interest. Admittedly it is not done so in the instant case. This action of the ld. AO itself goes to prove that he accepted the lending activity as part of the business of the assessee, wherein the interest paid has been allowed as business expenditure by the AO. AO all along had been treating the business income only under the head income from business but strangely for the year under appeal, had classified the same as income from other sources. Since, we have already held that the lending activity has been carried out by the assessee only as part and parcel of its normal course of its business, the interest income offered thereon should be assessed only under the head income from business. Write off of bad debt would be squarely allowable as deduction u/s 36(1)(vii) read with Section 36(2) and the ld. AO is directed accordingly to grant the same. The interest income accrued on loans need to be taxed only under the head income from business and not income from other sources. - Decided in favour of assessee.
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