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2015 (10) TMI 806 - ITAT PUNEBad debts claimed by assessee as business loss - CIT(A) treating the bad debts as business loss u/s 28 - whether the block assessment has been completed by applying deeming provisions and despite agreeing that conditions laid down u/s 36(1) (vii) are not satisfied? - assessee is the Karta of the HUF - assessee before the Tribunal had challenged the order of the CIT(A) restricting the bad debts to ₹ 25,26,000/- as against the claim of ₹ 1,46,54,468/- - Held that:- It is undisputed fact that both the authorities below have admitted that appellant was carrying on the money lending business. But both the authorities failed to interpret the provisions of S. 36(1)(vii) r/w S. 36(2) in its proper perspective when it comes to the money lending business. The interpretation of the provision contained in CI. (i) of sub. S. (2) of S. 36 and second part of this clause starting from "or represents money lent in the ordinary course of business of banking or money lending which is carried on by the assessee" leads to only conclusion that it deals with different types of activities not at all related to those with the first part of business activities. In other words the submission is that in the case of advances/ loans made by any concern doing business of banking or money lending it was not obligatory that such advances/loans or part thereof should be shown to have become irrecoverable and consequently written off in the accounts of the assessee in the previous year. The money lent as part of money lending business being stock-in-trade automatically comes into revenue account. In other words it need not be taken into account in computing the income as required in the first limb in relation to money lending business to prove that it is on revenue account. As per second limb it should be found out in relation to money lending business that debt is advanced in the ordinary course of money lending business. If this debt is not advanced in the ordinary course of business, it would not qualify for deduction as bad debt. The only condition laid down in second part of Sub. S. (2) of S. 36 of the Act is that the amount should be advanced in the ordinary course of business which by itself proves its revenue nature and no further conditions are required to be satisfied which are only applicable with regard to debts qualifying as bad debts in the first part of sub. S. (2). Revenue authorities were not justified in restricting the claim of bad debts/business loss to ₹ 25,26,000/- as against claim of assessee for ₹ 1,46,54,468/-, because debt in question having been undisputedly advanced in assessee’s ordinary course of money lending business, so this part of claim of bad debt of ₹ 1,46,54,468/- is allowable u/s.36(1)(vii) read with second limb of sub-section 2 of section 36 of the Act. The Assessing Officer is directed accordingly - Decided in favour of assessee.
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