Assessee, a non-resident banking company, assigned outstanding loans due from a customer to an asset reconstruction company for a sale consideration of certain amount against outstanding loans of higher amount. Sale consideration was duly recognized in financial statement of assessee and balance in debtors account was actually written off as bad debts. Assessee claimed that loss on sale of NPA was allowable as bad debts under section 36(1)(viia).  Assessing Officer  held  that loss incurred by sale of NPA was not a bad debt to be considered under section 36(1)(viia) as deduction under section 36(1)(viia) was allowable to any bad debt or part thereof which was written off as irrecoverable in accounts of assessee for previous year. CIT(A) affirmed the order of the AO. On appeal the Tribunal held that on date of assignment, loan outstanding in account of customer was a debt in books of assessee as per provisions of section 36(2) which meant that assessee could have written off same as bad debt and claimed as such and instead, as a prudent businessman it sold debt to EARC. Therefore the  claim of assessee as a bad debt was as per provisions of Act and also allowable as a business loss. Addition is deleted.  (AY. 2015-16)