INCOME TAX ACT, 1961

--Business income--Profit chargeable to tax under section 41(1)Discontinuation of business--During the year under consideration assessee had written back a sum of Rs. 48.50 lakhs being sundry balances. AO noticed that since these balances were representing unsecured interest-free advances not payable by assessee and assessee had not carried out any business activity; therefore, this written amount was treated as income from other sources and not as business income. On appeal, the Commissioner (Appeals) had confirmed the action of AO. Held: There is no error or illegality in the order of Commissioner (Appeals) on this issue; accordingly the same was upheld .

Income Tax Act, 1961, Section 41(1)

INCOME TAX ACT, 1961

--Business deduction under section 36(1)(vii)--Bad debtsTrading loss vis-a-vis commercial expediency--Assessee claimed bad debts being advances to two sister concerns. AO disallowed the claim of assessee on the ground that the amount of such bad debts has not been taken in the computation of the income of assessee in the year earlier. AO further noted that assessee has failed to prove that the concerned loans given to group company constitutes trading loss. On appeal, the Commissioner (Appeals) confirmed the action of AO. Held: Assessee had given the advance to the sister concern, therefore, it is a trading debt. Further, assessee had not carried out any business activity since many years and there is no commercial expediency for giving loans to the group company. Accordingly the conditions as provided under section 36 were not satisfied for allowing the claim of bad debts. Since assessee failed to establish the commercial expediency for giving such loans, therefore, the claim of business loss was also not justified except for the assessment year 2005-06.

Income Tax Act, 1961, Section 36(1)(vii)

INCOME TAX ACT, 1961