TMI Blog2012 (9) TMI 448X X X X Extracts X X X X X X X X Extracts X X X X ..... and the amounts being written off as bad debts was the money lent in the ordinary course of its business. In terms of Section 36(1)(vii) the assessee is entitled to claim deduction of an amount of debt or part thereof written off as irrevocable in the year in which business claims that a particular debt is not recoverable. In this case, the respondent-assessee in the assessment year 2003-04 had taken a business decision that the amount of Rs.178/- crores had become bad and had to be written off as bad debt. This decision has to be of the business alone. However, this bad debt is allowable under Section 36(1)(vii) subject to satisfaction of Section 36(2)(i). In this case admittedly the respondent-assessee satisfies the same. The debt which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contrary contained in the Income Tax Act, 1961 or in any enactment for the time being in force relating to income tax or any other tax on income, profits or gains, the Small Industries Bank shall not be liable to pay income tax or any other tax in respect of - (a) any income, profit or gains accruing or arising to the Small Industries Development Assistance Fund or any amount received in that Fund; and (b) any income, profit or gains derived or any amount received by the Small Industrial Bank The aforesaid exemption as provided under Section 50 of the SIDBI Act was withdrawn from 1/4/2002 by virtue of Finance Act, 2001. 4) For the assessment year 2003-04 the respondent assessee filed its return of income declaring a total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005 of the Assessing Officer was upheld. 7) In second appeal, the Tribunal by its order dated 15/7/2003 allowed the respondent assessee's appeal. The tribunal held that the respondent is in the business of banking for SSI units. Consequently, the bad debts claimed are allowable under Section 36(1)(vii) of the Act as it satisfies the second part of the proviso to Section 36(2) of the Act. Therefore the deduction of Rs.178/- crores as bad debts was allowed as a deduction under Section 36(1)(vii)of the Act. 8) For better appreciation of the controversy we extract the relevant portion of Section 36 of the Act which reads as under: 36. Other deductions. (1) The deductions provided for in the following clauses shall be allowed in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile computing its income in the previous year or earlier previous year. In view of the above, he submits that the impugned order is bad and the question as framed should be entertained as it is a substantial question of law. 10) On the other hand Mr. Mistri, Senior Counsel for the respondent-assessee submits as under. a) The issue of Section 14A of the Act being applicable was never raised before the authorities under the Act. In any event, Section 14A of the Act would have no application as it would only apply in respect of expenditure incurrred in relation to income which does not form part of the total income under the Act. In this case, the expenditure of bad debts is in relation to the income for the assessment year 2003-04 and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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