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| The Tax Publishers2020 TaxPub(DT) 4090 (Mum-Trib) INCOME TAX ACT, 1961
Section 36(2)(i)
Where inter-company deposits (ICD) together with its interest portion thereof was written off by assessee due to its non-recovery and due to fact of borrower expressing its inability to pay and finally arriving at one time settlement thereof, any consequential write-off of remaining figure in ICD would obviously become business loss incurred by assessee because advancing of money thereof was done in ordinary course of its business.
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Business deduction under section 36(i)(iii) - Disallowance made on account of inter-corporate deposits written off by assessee - Interest income on ICD was taxed by revenue in earlier assessment years under head 'Income from business' - Deposits, whether advanced by the assessee in the ordinary course of its business
Issue arose as to whether CIT(A) was justified in deleting the disallowance made on account of inter-corporate deposits written off by assessee. Assessee contended that ICD carried an interest rate of 12% per annum and assessee duly offered to tax interest income on such ICD under the head 'Income from business'. Held: Interest income on ICD was taxed by revenue in earlier assessment years under head 'Income from business'. This action itself went to prove that revenue factually accepted the fact that ICD was advanced by the assessee in the ordinary course of its business. When such ICD together with its interest portion thereof was written off by the assessee due to its non-recovery and due to the fact of borrower expressing its inability to pay and finally arriving at one-time settlement thereof, any consequential write off of the remaining figure in ICD would obviously become only business loss incurred by the assessee as the advancing of money thereof was done in the ordinary course of its business.
Followed:CIT-V, Pune v. Pudumjee Pulp & Paper Mills Ltd. (2015) 63 Taxmann.com 283 (Bom) : 2015 TaxPub(DT) 3314 (Bom-HC).
REFERRED : Trf. Ltd. v. CIT (2010) 323 ITR 397 (SC) : (2010) 190 Taxman 391 (SC) : 2010 TaxPub(DT) 1481 (SC) and CIT v. Shri Shreyas S. Morakhia (2012) 342 ITR 285(Bom) : 2012 TaxPub(DT) 0718 (Bom-HC).
FAVOUR : In assessee's favour.
A.Y. : 2014-15
IN THE ITAT, MUMBAI BENCH
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