TMI Blog2018 (4) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... t case. This action of the ld. AO itself goes to prove that he accepted the lending activity as part of the business of the assessee, wherein the interest paid has been allowed as business expenditure by the AO. AO all along had been treating the business income only under the head income from business but strangely for the year under appeal, had classified the same as income from other sources. Since, we have already held that the lending activity has been carried out by the assessee only as part and parcel of its normal course of its business, the interest income offered thereon should be assessed only under the head income from business. Write off of bad debt would be squarely allowable as deduction u/s 36(1)(vii) read with Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares quoted in recognized stock exchange. The ld. AO observed that the assessee is engaged in the business of investment and general merchant and commission agency. The assessee pleaded that it is also engaged in the business of money lending by granting loans to several parties with or without interest, out of own funds as well as borrowed funds. The assessee wrote off of the sum of ₹ 56,94,685/- as bad debt in its profit and loss account comprising of principal portion of ₹ 20 lacs and interest outstanding of ₹ 36,94,685/- and claimed the same as deduction u/s 36(1)(vii) of the Act. Admittedly the assessee had offered the interest income of ₹ 36,94,685/- in respect of loan given to Mr. Umesh Jatia, 4, MIDC, Bosan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year were ₹ 2,28,18,599/- thereby levying a closing balance of ₹ 7,70,044/-. Apart from this, the assessee had also given advances to Mr. R.K.Dixit in the ordinary course of business amounting to ₹ 12,65,000/- in the earlier years which was lying as outstanding as on 31.03.2012. The assessee pleaded that it has received interest from most of the parties to whom loans were given at the interest rate of 12%, 13%, 15%, as the case may be, and offered the said interest income under the head income from business consistently in the past and which has been accepted by the Department and assessed as such under the head income from business. The ld. AO however did not accept this contention and proceeded to disallow the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is not engaged in the money lending business. But on perusal of the financial statements of the assessee, it is revealed that the assessee had given substantial part of its funds for the purpose of lending and had actually received interest from most of the parties. From the perusal of the details furnished in page 5 of the paper book, it is seen that the assessee during the year had advanced loans to three parties to the tune of ₹ 1,86,29,850/- and the assessee also received interest thereon. The assessee has been consistently offered interest income on various loans given to various parties under the head income from business. The assessee has been advancing loans to various parties in the regular course of carrying on its b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal portion of ₹ 20 lacs loan to Mr. Umesh Jatia was given by the assessee company in the normal course of money lending and hence the write off of the same as irrecoverable in the books of accounts of the assessee would be sufficient compliance of the condition prescribed in section 36(2) of the Act. For the sake of convenience, the provisions of section 36(2) clause (i) is reproduced hereunder: Section 36- Other deductions (2) in making any deduction for a bad debt or part thereof, the following provision was applied- i)no such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company is engaged in the business of money lending. The ld. DR argued that the assessee company is not a non-banking finance company and lending is not part of its business. He also drew our attention to page 5 of the paper book filed by the assessee wherein in respect of certain parties, the assessee has not charged any interest which is unusual of a money lender. Accordingly, he pleaded that the assessee cannot be construed as a money lender. In this regard, we find that what is to be seen is whether lending activity was carried on by the assessee in the normal course of its business. It is prerogative of the assessee to charge or not to be charge interest on certain loans. Anyway in case if the revenue alleges that the interest from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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