The Assessee, a manufacturer of electric stabilizers and rectifiers, advanced funds on interest and wrote off a certain amount as unrealizable; the dispute was whether such write-off qualifies as bad debt or otherwise deductible when the Assessee is not a money lender and the principal was never recognized as income.<\/p>\n
\u00a0<\/p>\n The Revenue contended the write-off cannot be allowed since the principal was never recognized as income, the Assessee is not a moneylender, and the interest was returned under \u201cother sources,\u201d and capital loss\/expenditure claims are impermissible under Sec. 56-57 for this head of income.<\/p>\n The Hon\u2019ble Tribunal dismissed the appeal, holding that bad debt conditions under Sec. 36(2) were not met and deduction under Sec. 57(iii) is confined to revenue expenditure for earning income under \u201cother sources\u201d.<\/p>\n The Hon\u2019ble Punjab & Haryana High Court dismissed the appeal, affirming the Hon\u2019ble Tribunal, holding that deduction is not allowable since the principal was never recognized as income and the Assessee is not in the business of moneylending; claims under Sec. 57(iii) also fail for being capital in nature.\u00a0 (AY. 2004-05)<\/p>\n","protected":false},"excerpt":{"rendered":" S. 36(1)(vii) :Bad debt-Deduction is not allowable where the amount written off was never considered as income earlier and when the Assessee is not in the business of moneylending.[S. 36(2), 56, 57(iii)]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-59525","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-fu5","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/59525","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=59525"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/59525\/revisions"}],"predecessor-version":[{"id":59526,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/59525\/revisions\/59526"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=59525"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=59525"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=59525"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
<\/strong>The Assessee argued that lending\/advances were part of commercial expediency and sought allowance either as bad debt under Sec. 36(1)(vii)\/36(2) or as expenditure under Sec. 37 read with Sec. 57(iii), emphasizing interest income was earned and suits were pursued for recovery.<\/p>\n