TMI Blog2019 (9) TMI 1070X X X X Extracts X X X X X X X X Extracts X X X X ..... nking or money lending which is carried on by the assessee. Writing off of sums which represent money lent in the ordinary course of business is allowed as deduction. AO has clearly erred in not considering the later part of the aforesaid section. He is clearly into error in holding that for writing off of money lent in ordinary course of business the allowance/deduction can be allowed only if the sum has been computed as income in the earlier assessment year.- Decided against revenue. - I.T.A. No. 6537/Mum/2017 - - - Dated:- 16-9-2019 - Shri Shamim Yahya (AM) And Shri Pawan Singh (JM) For the Assessee : Shri Anuj Kisnadwala For the Department : Shri Manoj Kumar Singh ORDER PER SHAMIM YAHYA (AM) :- This appeal by the revenue is directed against order of learned CIT(A) dated 4.9.2017 and pertains to assessment year 2010-11. 2. The grounds of appeal read as under :- 1. On the facts and circumstances of case and in law, the Ld. CIT (A) has erred in treating giving and taking of loans as normal business activity of the Assessee Company and not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or for any of the earlier years, the condition laid down in Section 36(2) is not fulfilled and therefore the said amount of ₹ 5,69,78,892/-representing the write off of principal amount of loans advanced cannot be allowed as a deduction u/s. 36(l)(vii). 4. Against the above order assessee appealed before the CIT(A). Learned CIT(A) elaborately considered the submissions of the assessee. The learned CIT(A) noted that apart from real estate assessee is also engaged in financial transactions business. He noted that assessee has given loans and advances in the course of its financing business. The learned CIT(A) noted that when the loans and advances given in the financing business become bad and are not recoverable they are liable to be allowed under section 36(2), when they are duly written off. In this regard learned CIT noted that assessing officer has erred in referring to only part of the provision of section 36(2). He found that the assessee's case was falling under second limb of section 36(2). Learned CIT accordingly deleted the addition/disallowance by holding as under :- 19. I have carefully considered the assessment order and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the earlier year was recovered from the borrower. During the previous year relevant to the present assessment year, the balance principal amount of ₹ 3.84 crores and the balance interest amount of ₹ 2.77 lakhs was written off in the books of account as bad debts. 21. In respect of the loan advanced to Zenal Construction P. Ltd., it is noticed from the information furnished by the appellant before the A.O. during the assessment proceedings that loans of ₹ 1.00 crores and Rs. 3.15 crores were advanced to the said borrower during the previous years relevant to the A.Ys. 07-08 and 08-09 respectively. Principal amounts of ₹ 1.30 crores and ₹ 1.00 crores were recovered from the borrower during the previous years relevant to the assessment years 2008-09 and 2009-10 respectively. Interest aggregating to ₹ 48.65 lakhs( net of TDS) was charged on the said loans during the previous years relevant to the A.Ys 08-09 and 09-10 and interest to the extent of ₹ 2.96 lakhs was recovered from the borrower during the previous year relevant to the A.Y. During the previous year relevant to the present assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off. This condition specifies that deduction shall be allowed where the bad debt written off represents money lent in the ordinary course of the business of banking or money lending which is carried on by the assessee. Having regard to the facts relating to the write off of principal amounts of loans advanced during the course of money lending business carried on by the appellant which have been detailed in the preceding paragraphs, it is clearly evident that the irrecoverable principal amounts of ₹ 3,84,78,892/- in the case of the borrower Pravara Oos Tod Va Vahatuk and of ₹ 1,85,00,000/- in the case of the borrower Zenal Construction P. Ltd which were written off in the books of account during the previous year relevant to the present A.Y. satisfy the second limb of the condition specified in Clause (i) of Section 36(2). 26. In view of the above, the appellant is entitled to the deduction claimed towards bad debts written off u/s. 36(l)(vii) read with section 36(2) in respect of the said irrecoverable principal amount of loans aggregating to ₹ 5,69,78,892/-. Hence, the disallowance made by the A.O. of the said amount is hereby deleted. This gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or money lending which is carried on by the assessee. 10. From the above it is amply evident that writing off of sums which represent money lent in the ordinary course of business is allowed as deduction. The assessing officer has clearly erred in not considering the later part of the aforesaid section. He is clearly into error in holding that for writing off of money lent in ordinary course of business the allowance/deduction can be allowed only if the sum has been computed as income in the earlier assessment year. 11. This view is duly supported by the case laws referred by the learned counsel of the assessee. We may gain fully refer to the head notes of the above case was as under :- Bombay High Court in the case of Smt. Padma S. Bora (supra) : Section 36(1)(vii) of the Income-tax Act, 1961 - Bad debts (Money lending business) -Assessment year 2006-07 - Assessee lent certain amount in ordinary course of money lending business - Certain amount was written off after effort to recover same was unsuccessful - Whether assessee was entitled to deduction of said amount as bad debt -Held, yes - Whether merely beca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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