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2019 (1) TMI 752 - AT - Income TaxLoss on foreclosure of loans - Whether equivalent to write off of an asset which is capital in nature and not allowable u/s. 37(1) since it is not a Revenue write off? - Held that:- As decided in assessee's own case [2015 (11) TMI 1670 - ITAT DELHI] admittedly the assessee is a non banking fiancé company and engaged in the business of money lending and therefore the amount of debt represents the money lent in the ordinary course of business of money lending. Further according to section 36(1)(vii) of the act any bad debt or part of the bad debt if written off in the books of accounts as irrecoverable, same shall be allowed to the assessee as deduction. It is admittedly written off in the book of accounts of the assessee as “loss on foreclosure of loan assets”. Thus the assessee satisfies all the conditions of allowabaility of this sum as deduction u/s 36(1) (vii) rws 36(2). As the sum is written off in the books of accounts by writing of the loan amount of the borrower on negotiation cannot be called a future or probable loss but ascertained and accrued loss in the business of financing. In case of CIT V CITI CORP Maruti Finance Limited [2010 (11) TMI 802 - Delhi High Court] has held that even loss on repossessed vehicle sold is also allowable to the assessee u/s 36(1) r.w.s 36 (2) of the act. Honourable Delhi High court also held that such deduction was also covered in favour of the assessee. - Decided in favour of assessee. Write off of recoverable - Held that:- In order to claim the aforesaid amount either as loss u/s. 28, or as bad debt u/s. 36(1)(vii) read with section 36(2), the onus was on the assessee to produce the party-wise details alongwith their complete addresses, PANs, TANs so as to enable the Assessing Officer to make verification as to the correct nature of amount claimed by the assessee. It is also made clear that once the assessee proceeds to set off the receivables (TDS) from the total tax liability, the nature of such receivables no more remains in the nature of bad debts/receivables. On perusal of year-wise details of irrecoverable TDS, we find that such irrecoverable receivables are shown to have been pending since assessment years 1997-98 to 2007-08, but the assessee has not been able to furnish Form 16A from the parties who deducted TDS nor could he prove that any efforts were made by the assessee to recover the impugned of TDS amount so as to claim its credit. The amount of TDS has to be deposited in the government treasury by the deductors on behalf of the deductee for which the Income-tax law provides procedure to furnish TDS certificate by the deductee for claiming its credit, which the assessee failed to do here. Once the TDS was deducted by the deductors and the assessee was not in possession of TDS certificates, he should have made a request to verify the same from the parties who deducted the TDS, but the assessee has also failed to do so as he did not furnish even the details of the deductors before the Assessing Officer. In these peculiar facts of the case on hand, the decision relied by the assessee are not found applicable due to disparity of facts. We accordingly, conclude that the ld. CIT(A) was not justified in giving relief to the assessee u/s. 37. Accordingly, ground No. 2 of appeal deserves to be allowed. Bad debts written off - Held that:- Legal position that emerges is that in the case of a NBFC so long as the debt represents money lent in the ordinary course of money lending business; interest has been consistently assessed as income from money lending business; the debt has been written off as bad debts by the Appellant in its books of accounts, the claim of the appellant should be allowed as deduction under section 36(1)(vii) read with section 36(2). Accordingly, the addition made is deleted and the grounds of appeal is allowed.
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