TMI Blog2001 (4) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for referring this question to us for answer by the Income-tax Appellate Tribunal, Indore Bench, arose because such question arose out of I. T. A. No. 759/Ind of 1985. The assessee happened to be a registered firm carrying on the business under the style Binodiram Balchand and Co., Indore . It carried on the business of money-lending. It was having another sister concern under the style Vinod Steel Limited . The partners of the assessee-firm were the directors and shareholders in the said company. The assessee had advanced certain loans and had debited interest to their accounts. These amounts of interest has been shown as income and taxed. It appears that the said sister company started running into financial difficulties and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo years are concerned, the Inspecting Assistant Commissioner gave a finding that these were not advances in the course of the business of money-lending and, therefore, cannot be claimed as bad debt . Dissatisfied with the order of the Assessing Officer, the assessee carried the matter before the Commissioner of Income-tax (Appeals), but the Commissioner of Income-tax (Appeals) upheld the order of the Assessing Officer. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the assessee carried the matter before the Income-tax Appellate Tribunal. After giving thoughtful consideration to the submissions of the parties, the Income-tax Appellate Tribunal upheld the findings of the Commissioner of Income-tax (Appeals) after rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the sister concern was having the directors who were the partners in the assessee-firm and, therefore, their act of advancing the loan to such sister concern allowing it to stand up from financial ditch was legitimate and these deductions of the said amount as bad debt was permissible in law. Shri Pankaj Bagadiya pointed out that for some years the said loan which was advanced to the sister concern, Vinod Steel Limited, was to be recovered, but, as the said sister concern fell in financial ditch again financial help was given to the said sister concern but even then, the said concern could not come up and was subjected to a litigation in the nature of a suit being filed against it by the Union Bank of India. Shri Baga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther loan was advanced to the tune of ₹ 60,000 in respect of distribution, exploitation and exhibition of a picture called Shabab and charged a sum of ₹ 1,750 by way of interest on the initial advance of ₹ 40,000 and, thereafter, did not charge interest on the said sum of ₹ 40,000 or on the further advance could not get the advantage of deduction as bad debt . In that matter since admittedly the picture was not released by the firm within the stipulated time, but was released thereafter, on and from April 4, 1954, there was a contract of loan between the appellant and the firm in terms of clause 7 of the agreement the principal amount became repayable from the date to the appellant with interest at 9 per cent. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee for that previous year. Keeping in view the normal experience of commercial transaction and the way which the commercial community in common observes and transacts, the incidence can be pointed out further (i) a loan can be advanced by an individual to another either with interest or without interest or with a token interest ; (ii) the loan can be advanced by a person to his near relatives without interest or at a reduced rate of interest ; (iii) the loan can be advanced by a main concern to its subsidiary concern with interest or at a reduced rate of interest ; (iv) the loan can be advanced by the main concern to its sister concern with reduced rate of interest with permission to pay it at particular rests. The crit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to conceal the taxable income and go for evasion of payment of tax. But it is necessary to sound a caution of alarm to the assessing authority that such scrutiny should not be biased and with the presumption of dishonesty towards the assessee. The assessee should not be put to the dock of the accused right from the beginning of the scrutiny. The scrutiny should be with a dispassionate attitude. In the present case the Assessing Officer has elaborately discussed the salient features in his order which depicts dispassionate impartial scrutiny and has rightly come to the conclusion that the assessee-firm was entitled to have deduction of a sum of ₹ 71,007 only, and not a sum of ₹ 1,27,856. The Commissioner of Income-tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X
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