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2022 (7) TMI 532 - AT - Income TaxLoss sustained in respect of the amounts advanced by the appellant to 2 companies - Loss written back by the said companies and offered as income as amounts no longer payable to the appellant and the same constituted a legitimate loss incidental to business carried on by the appellant under - assessee is in his profit & loss account claimed expenses in the nature of “investment in companies written off” - HELD THAT:- The write off cannot be added in the hands of assessee. This argument of assessee is totally misconceived. We have to see how the investment has been treated in the hands of assessee not in the hands of recipient of the advances. In the hands of assessee, this advance amount has been treated as a capital investment and it is not in trading asset in nature, so as to claim the written off as business expenditure. In the hands of the present assessee, it is an investment, if the same has to be considered as a capital loss not as a trading loss or business loss so as to claim the same as business expenditure. In our opinion, the assessee has not satisfied the condition laid down in section 36(1)(vii) r.w.s. 36(2) - As per section 36(2) of the Act, deduction shall not be allowed unless such debt or part there of has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of business or banking or money lending which is carried on by the assessee. Being so, in our opinion, the assessee cannot claim the written off investment in the field of capital as bad debt or business expenditure. Accordingly, we find no merit in this argument of the assessee’s counsel and the same is rejected and this ground of appeal of assessee is dismissed. Disallowance being the interest paid on borrowing, which were used to make the investment on which income was offered - HELD THAT:- In the present case, the assessee earned interest income - The claim of assessee is that the assessee has incurred an expenditure in the form of interest paid - AO allowed the interest expenditure to the extent of interest income earned by the assessee - The contention of the assessee is that assessee has actually incurred an interest expenditure for which the assessee not given any details, so as to enable the lower authorities to examine the claim of the assessee even the allowability of interest expenditure to earn the same amount of income is very exorbitant. Since the department is not in appeal before us on this issue, we are not commenting anything on this. However, in our opinion, the AO is very liberal in allowing the interest expenditure to earn interest income - Hence, we do not find any merit in the claim of the assessee on this issue and the same is rejected. This ground of the assessee is dismissed.
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