TMI Blog2011 (8) TMI 1213X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries Ltd. It is also noted by the A.O. that the assessee has stated that a suit in the jurisdictional court has been filed under the Negotiable Instruments Act 1981 for the recovery of the principal loan with interest. The A.O. was of the opinion that since the assessee has filed a suit in the jurisdictional court, it cannot be said that the amount is irrecoverable. The A.O. also noted that the matter is pending with the court and there is every possibility of recovery of the amount in question. After hearing the assessee, the A.O. held that in view of this fact that the assessee has filed criminal case against the defaulter company i.e. M/s. VHEL industries Ltd., the assessee still hopes to recover the money and hence, it cannot be said that this money has become irrecoverable. The A.O. held that the debt in the present case has not become irrecoverable. The 2nd allegation of the A.O. is that in the course of assessment proceeding, the assessee was asked as to whether the assessee is in the business of money lending/NBFC and if so, he asked the assessee to furnish necessary supporting documents. In reply, it was submitted by the assessee before the A.O. that the assessee is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it was held by the tribunal in two cases and by the Hon ble Delhi High Court in the case of Tulip Star Hotels (supra) that when the amount in question was given by way of ICD, it is to be treated as debt and such debt having become bad, it qualifies for deduction u/s 36(1)(vii) of the Act. It was also held that provisions of clause (i) of Section 36(2) do not come in the way of the assessee since the money was lent in the ordinary course of money lending carried out by the assessee. Our attention was drawn to this finding of the tribunal in the case of Poysha Oxygen (P) Ltd. (supra) in para 19 of the judgement that if the interest for the money lent was assessed as business income in the earlier year or even in the year in which the bad debt is written off, conditions stipulated in Section 36(2)(i) is satisfied. It is pointed out by the Ld. A.R. that in the present case also, the interest income pertaining to this ICD has been assessed as business income. He drawn our attention to the copy of the assessment order passed by the A.O. u/s143(3) in assessment year 1996-97 i.e. 1st year in which the amount in question was lent by the assessee. It is submitted that the copy of this as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rse of business, the loss arising therefrom cannot be anything else but such loss is in the usual course of business. It is submitted that as per this judgment also, when the money is lent by the assessee by way of ICD, there is no further requirement that the assessee must be doing money lending business. To bring home this position that the money lent by the assessee company is in the form of ICD and the same was actually written off, he drawn our attention to the audited balance sheet of the assessee company for the year ended 31.03.2005, copy of which was submitted before us. It is submitted that it can be seen in the P L account for the present year that an amount of ₹ 65 lacs was debited on account of extra ordinary item. He has drawn our attention to page 16 of the balance sheet being Schedule 8 where it is shown that the amount outstanding as on 3.103.2004 as ICD was ₹ 65 lacs which has been reduced to Rs. nil as on 31.03.2005. It is submitted that these facts show that the amount in question was advanced by the assessee by way of ICD and the same was actually written off in the present year. 8. As against this, the Ld. D.R. of the revenue supported the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney lent is being assessed as business income in any earlier year or even in the year in which the bad debt is written off, the requirement of Section 36(2)(i) is satisfied. While holding so, the tribunal has followed the judgement of Hon'ble High Court of Madras rendered in the case of CIT Vs City Motor Service Ltd. 61 ITR 418. The relevant para of this decision is para 19, which is reproduced below: 19. The learned AM has stated in paragraph 19 of the order that Admittedly the amount of bad debt claimed by the assessee has not been taken into account in computing the income of the assessee in any of the previous year . The observations which follow indicate that the learned AM took the above view because in his opinion the amount of ₹ 1 crore advanced to FMLC did not represent money lent in the ordinary course of the business as money-lender. This point has already been discussed by me and I have held that the amountrepresented money-lending advance. In the case of money-lending advance, the only way in which the conditions stipulated. in section 36(2)(i) of the Act, namely,-that then debt should have been taker) into account in computing the income of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee made advances to Sungo Limited, which was dealing in shares, it was within the power of the assessee-company and it could well be described as in the course of carrying on its business. When monies are so advanced as incidental to and in the course of its business, often the advances would constitute a debt which, when realized, would go to swell the profits of the business. Actually, in this case the advances did go to swell the business profits of the assessee. Thus, there is authority for the proposition that where monies are lent in the ordinary course of the business, the condition stipulated in section 36(2)(i) is satisfied if the interest from the monies lent was assessed as business income in the earlier years or even in the year in which the bad debt is written off. What has been laid down in the judgment of the Madras High Court has found- expression in section 36(2)(i). It is not worthy that the present section uses the same language which the judgment uses at pages 421-422 of the report, as can be seen from the sentence (in the judgment): It is no doubt true that the amount lent as principal will not by itself swell the -profits and what, is meant is that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In the light of these facts, I am unable to agree with the learned AM when he says that the bad debt claimed by the assessee has not been taken into account in computing the assessee's income in any of the earlier previous years or in the impugned year. 11. From the above para of this tribunal decision, it is seen that it was held by the tribunal in that case that the conditions stipulated in Section 36(2)(i) is satisfied if interest for money lent was assessed as business income in the earlier year or even in the year in which the bad debt is written off. In the present case, the interest income for the money lent was assessed by the A.O. in assessment year 1996-97 under the head income form business as per the copy of the assessment order for that year passed by the A.O. u/s143(3). In the present year also, the interest income on this money lent by the A.O. was added in the income of the assessee under the head income form business although such addition was deleted by the Ld. CIT(A) on this basis that if the money is ultimately realized by the assessee, it will be added in the income of the present year. Hence, as per the department, the interest income on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he matter in appeal before Ld. CIT(A). It is held by the Ld. CIT(A) that as per the amendment in Section 145A w.e.f. 1.8.1999, while valuing the closing stock of inventory, adjustment has to be made with regard to tax, duty, cess fee actually paid or incurred by the assessee. He held that the amount of actual excise duty paid during the year is allowable expenditure in terms of Section 43B of the Income tax Act, 1961. He confirmed the addition made by the A.O. on this account but directed the A.O. to verify as to whether the assessee has made payment of excise duty before filing the return of income and if so, to allow deduction to that extent u/s 43B. Now, the assessee is in further appeal before us. 14. It is submitted by the Ld. A.R. that excise duty with regard to closing stock of raw material and packing material is not required to be paid afterwards but it is required to be paid at the time of purchase itself. It is submitted that hence, the direction of Ld. CIT(A) should be modified and the A.O. should be directed to verify as to whether any excise duty was paid by the assessee at the time of purchase of raw material and stores and the addition can be made on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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