TMI Blog2011 (6) TMI 913X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground is against the restoration of the disallowance on account of bad debts in respect of Inabling Technologies P. Ltd. 3. Briefly stated, the facts of this ground are that the assessee was engaged in the business of internet and web hosting services. A sum of ₹ 59,54,553/- was written off as bad debts after reducing the amount of bad debts of ₹ 60.82 lakhs from the sundry creditors written back at ₹ 120.37 lakhs. On being called upon to furnish details of bad debts, the assessee filed necessary details. Evidence regarding legal proceedings pending against three parties was also filed, whose balance stood at the aggregated figure of ₹ 41.76 lakhs. The AO observed that the assessee failed to substantiate its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee for the previous year subject to the provisions of sec. 36(2). The Hon ble Supreme Court in T.R.F. Ltd. vs. CIT (2010) 323 ITR 397 (SC) and the Hon ble jurisdictional High Court in CIT vs. Star Commercial (Bombay) Pvt. Ltd.(2009) 313 ITR 126 (Bom) have held that once the assessee has written off the debt as bad debt, the requirements of sec. 36(1)(vii) are satisfied and the claim for deduction of bad debt is allowable. These judgments have laid down that the mere writing off of the bad debts in the books of account is sufficient for claiming deduction u/s.36(1)(vii) and there is no further requirement to prove that the debt should have become bad in the previous year relevant to the assessment year under consideration. As the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table is interest on deposit amounting to ₹ 5,06,442/-. Page 6 of the paper book contains details of such interest received on fixed deposits during the year. Some part of the interest income has been shown to have arisen from the investment of spare funds, whereas the other part has been claimed to have arisen from fixed deposit receipts which were required for business purposes. It is obvious that in so far as interest income on investment of spare funds is concerned, it has to be assessed under the head Income from other sources . To this extent, the ld. A.R. has also conceded. However, interest income on FDRs, which were made for some business purposes and for pledging as Bank guarantee etc., has to be taken as Business income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given back to the assessee company as security deposit. On such loan of ₹ 21.18 lakhs, the assessee charged interest during the year at ₹ 1,90,632/- which was claimed as Business income . The authorities below did not accept this contention and treated it as income from other sources . 9. After considering the rival submissions and perusing the relevant material on record, we approve the action taken by the ld. CIT(A) on this issue for the reason that primarily it is not the business of the assessee company to advance loans. Secondly, the loan was given to M/s. Medusind Solutions India P.Ltd. who were to take a part of the premises taken by the assessee on lease on a further lease for 3 years. In our considered opinion, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts of internet and web hosting services, it is nothing but exploitation of commercial assets for business purpose. These data servers were retained by the assessee in its premises and only the user was provided to such customers. In our considered opinion, there is no difference in the income arising from such leasing of data servers on a wholesale basis (as is the case under review by leasing such data servers) and that received from individual customers on retail basis. In both the cases, the business activity of the assessee, which is that of internet and web hosting services, has been carried on. We, therefore, hold that finance charges on leased assets amounting to ₹ 4,35,691/- were liable to be considered as Business income a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The first ground is against the confirmation of disallowance u/s.14A at ₹ 3,22,775/-. 14.1. After considering the rival submissions and perusing the relevant material on record, we find that the issue raised in this appeal is no more res integra in view of the judgment of the Hon ble jurisdictional High Court in Godrej Boyce Mfg. Ltd. vs. DCIT (2010) 328 ITR 81 (Bom) in which it has been held that disallowance is called for u/s.14A in such circumstances. However, the manner of computation of such disallowance has been restored to the file of AO for making on some reasonable basis. It has further been held in this case the provisions of Rule 8D are not applicable as these are prospective. Respectfully following the precedent, we ..... X X X X Extracts X X X X X X X X Extracts X X X X
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