TMI Blog2009 (2) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act since the said sum had not been taken into account in computing the income of the earlier years and hence the conditions prescribed under section 36(2) of the Act were not fulfilled ; the said loss, however, could be treated as business loss since it was occasioned in the course of business carried on by the assessee Disallowance of bank interest - Tribunal having returned findings of fact, that the loan given to bodies corporate had not been diverted for "non-business" purposes, as also that, the loan had continued from earlier years ; the interest on bank loan ought to be allowed to the assessee as a deduction as there was no perceptible change in circumstances - No substantial question of law - appeal dismissed - 777/08 - - - D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was not on account of activities in the nature of real estate business. Thus, income derived by the assessee was liable to tax under "Income from other sources" ; (ii) the assessee's claim in the sum of Rs. 4 lakhs on account of bad debts cannot be allowed. This claim of the assessee arose on account of the assessee having advanced Rs. 2.55 crores (approximately) under an agree-ment, to one Sh. Ved Chaudhary for purchase of land. Due to a dispute the agreement for purchase of land could not fructify. The assessee sought refund of Rs. 2.55 crores paid to Sh. Ved Chaudhary ; whereupon the assessee received a sum of Rs. 2.51 crores. The assessee claimed the short-fall of Rs. 4 lakhs as a bad debt. The Assessing Officer disallowed it on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1998-99 and the fact that since then it continued to be shown by the assessee as stock-in-trade, then, merely by virtue of the fact that in the interregnum (i.e., the assessment year 1998-99 and the assess-ment year under consideration) there had been no profit or gain shown by the assessee it could not be assumed that the assessee had given up its business of real estate. The Tribunal observed that it was the intention of the assessee which would matter and not the opinion of the Assessing Officer. The Tribunal also pointedly noted that a perusal of the assessment order would show that while computing the total income, the assessee's income is assessed under the head "Profits of business" and that though the head is not m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sals. Explanation 2 to section 41(1) of the Act, according to the Tribunal, would be applicable only if the assessee was a "successor in business" of ATPL. 9. In respect of the last issue the Tribunal observed that since the interest disallowed pertained to an amount which was borrowed in the earlier year it could not have been disallowed for two reasons : first, the interest on the said amount had been allowed by the Revenue in the earlier years. Secondly, there was no finding that interest bearing funds had been diverted for non-business purposes. The Tribunal was of the view that since the loan had continued from the earlier years in which it had been held that it was used for business purposes, in the absence of any change in the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383. 12. The third issue relating to addition of an unclaimed sum of Rs.1,01,47,264 shown as payable to one M/s. R. P. Malhan and Co. under section 41(1) of the Act, in our view, was correctly decided by the Tribunal. The assessee had not claimed the said sum as an expenditure in the earlier years, as rightly observed by the Tribunal, the provisions of section 41(1) were not applicable. The Tribunal's view that the provisions of Explanation 2 to section 41(1) of the Act would not be applicable pursuant to its finding that the assessee was not a successor in business of ATPL is correct. 13. With respect to the last issue pertaining to disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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