TMI Blog2021 (5) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... nit Choudhary For the Revenue : Shri Sanjay Sethi (Sr. AR) ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 27.09.2019 passed by the Commissioner of Income Tax (Appeals) -54, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y. 2014-15. 2. The assessee has raised the following grounds: - I The Ld. CIT(A)-54 has erred in law and in fact in upholding the addition made by Ld. AO under section 36(1)(iii) of the Act amounting to ₹ 2,31,02,343/-. 3. The brief facts of the case are that the assessee filed its return of income on 01.10.2014 declaring current year s loss to the tune of ₹ 2,31,246/-. Thereafter, the case was selected for scrutiny. Notices u/s 143(2) 142(1) of the Act were issued and served upon the assessee. On verification, it was found that the assessee had debited a sum of ₹ 2,31,02,343/- against the head sundry balances written off. Notice was given to the assessee, the assessee furnished the ledger copy of the parties whose transaction was made in earlier year and claimed by him in his books of accounts during the current financial year. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee shall not include any provision for bad and doubtful debts made in the accounts of the assessee; As per the provisions of section 36(2) states as below:- 36(2) hi making any deduction for a bad debt or part thereof the following provisions shall apply (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 part thereof is written off or of an earlier previous year. or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assesse. 5.3. As per the above sub-sections, if the assessee has to write off any debt as bad, the same should have been taken into account to compute the income of the assessee either in the year in which it is written off or in any earlier previous years or the money should have been lent in the ordinary course of business of banking or money lending carried out by the assessee. In the instant case, the nature of the amounts written off do fit in the above referred sub-section. Out of the amount of ₹ 2,31,02,343/-, ₹ 36,3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Gupta has treated the amount of lb. 60 lakhs as advance recoverable from Madan Jain. The advance has been taken over by the assessee-company and written off in order to claim the same as a bad debt, it should have been a debt which arose in the course of the assessee's business and should have gone to swell its profits. Section 36(2)(i) says that the debt or part thereof should have been taken into account in computing the income of the assessee for the previous year in which it is written off or of an earlier previous year. This condition has not been satisfied in the present case. Even the basic condition that it should be a debt in the proper sense has not been satisfied The amount represented money handed over to Madan Jain for being deposited into the bank. It was not a debt which arose in the course of the business of Balaji Enterprises. The amount of ₹ 60 lakhs also does my represent money lent either by dap Enterprises or by the assessee in the course of banking or money lending business. The assessee does not carry on any such business nor did Boleti; Enterprises carry on such business. Since the conditions of section 36(2)(i) of the income tax Act have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rade debts and it cannot include loans made to one's own employee or moneys overdrawn by an employee on commission account, which are entirely private limiters independent of the business. The expression 'bad debts also includes doubtful debts. 12. Clause (vii) [Section 10(2)(xi) of 1992 Act deals with bad debts, in which, conditions for disallowance has been stipulated:- This clause grants an allowance in respect of bad debts of a business, profession or vocation and in respect of irrecoverable. loans in the case of banking or money-lending business. A bad debt presupposes the existence of a debt [as reported in CIT v. JK Chemicals 207 ITR 985: CIT Howrah flour Mills Ltd (1999] 236 ITR 156 and in cases in which there never was any debt owing to the assessee, no question can arise of invoking this clause in reported National Petroleum v. CIT 13 ITR 336 13. Four conditions which govern the grant of an allowance under this clause have been enlightened in the decision reported in Surangpur Cotton Mfg. Co. Ltd v. C1T 119831 1.13 ITR 166/12 Taxman 259 (Gun. (0 The debt or loon should L., in respect of a business which is carried on by the assessee in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... due as on incident to the business; it is not of that character it will be a capital loss. 17. The claim for deduction on account of bad debt did not satisfy the eligibility criteria as enunciated in the decision reported in Sarangpur Cotton Mfg. Co. Ltd. (supra). Applying the correct legal position. the Assessing Officer has given a finding that the alleged debt was out part of assessee's stock in trade and that as it has not been incurred while purchasing or selling the goods, in which the company was dealing with, and therefore, the expenditure Involved cannot be treated as a debt and therefore. it is not an admissible deduction. Therefore, there is no reason to interfere with the findings of the Tribunal. 5.4. In view of the facts and circumstances of the case discussed above and judicial precedents referred to supra, the disallowance made by the AO to the tune of ₹ 2,31,02,343/- on account of bad debts is upheld. This ground of appeal is DISMISSED. 5. On appraisal of the above mentioned finding, we find that the assessee failed to prove this fact that the loan was given in the ordinary course of business of banking or money lending carried out by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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