TMI Blog2004 (8) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... against loss of ₹ 97,209 in terms of explanation to section 115JA(2) of the Act and charging tax on ₹ 2,51,669. 4. initiating action under section 271(1)(c) of the Act; and 5. charging interest in violation of Apex Court orders in Ranchi Club Ltd. are grossly erroneous, palpably unjust and totally illegal and must all be quashed . 3. At the time of hearing of the appeal, ground No. 4 was not pressed, hence the same is dismissed. 4. The first ground is with regard to the claim of the assessee for bad debt amounting to ₹ 7,48,819. The brief background is that the assessee is a limited company incorporated under the provisions of the Companies Act, 1956 and is, inter alia, engaged in the business of financing, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer noted that the assessee had been able to recover the principal amount and the balance outstanding was merely a portion of the interest recoverable. The assessing officer noted that the assessee had not made any effort of recovery and, therefore, according to him the said amount could not be treated as bad, hence the disallowance. Aggrieved, the matter was carried before the CIT (A). 5. On appeal, the assessee reiterated its contention before the CIT (A) who has since negatived its claim. 6. It is canvassed by Shri K. Sampath, the learned counsel for the assessee that the impugned debt was carried forward balance of the earlier year as the transaction of hiring was made in the earlier years; that the accounts of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ek with effect from 1-4-1989 clause (vii) of sub-section (1) to section 36 included the words any debt or part thereof, which is established to have become a bad debt in the previous year . Whereas post-amendment, the aforesaid words have since been replaced with the wording any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year . A perusal of the difference in the wordings clearly suggest the intention of the legislature to the effect that prior to amendment an assessee was required to satisfy that the debt which is written off is established to have become bad whereas post-amendment it would be sufficient to allow the claim for bad debt if in the opinion of the assessee a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting 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 assessment year or it represents moneys lent in the ordinary course of business of banking on money lending carried on by the assessee. In the present case, the only requirement to be seen is as to whether the impugned debt represented moneys tent in the ordinary course of business of money lending carried out by the assessee. It is undisputed that the assessee is engaged in the business of financing and hire purchase which qualify to be the business of money lending as understood for the purposes of section 36(2)(i) of the Act. Therefore, in-so-far as the requirement of the said section is concerned, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus the short-term capital loss of ₹ 66,880 has been held to be speculative loss. The CIT (A) has sustained the stand of the assessing officer. Section 73 of the Act deals with losses in speculation business. Explanation to section 73 reads as under: Explanation Where any part of the business of a company (other than a company whose gross total income consists mainly of income which is chargeable under the heads interest on securities , Income from house property . Capital gains and Income from other sources ) or a company the principal business of which is the business of banking or the granting of loans and advances consists in the purchase and sale of shares of other companies, such company shall, for the purposes of this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss made from such purchase and sale of shares. To the extent that the assessee before us is a company and has carried out purchase and sale of shares of other companies, the provisions of the Explanation are attracted. However, the case of the assessee falls in the exception carried out in the said Explanation which takes the assessee out of the mischief of the said section. Apart from others, the Explanation makes an exception in relation to those corporate assessees whose principal business is of granting loans and advances. Admittedly, the business of the assessee is of financing, leasing and hire purchase as can be seen from the order of the assessing officer itself. Therefore, the assessee-company can be said to be in the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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