The Tax Publishers2020 TaxPub(DT) 5562 (Karn-HC)

INCOME TAX ACT, 1961

Section 36(2)

Holding of money lending licence is not a prerequisite for allowing a claim of bad debts. It is enough if the irrecoverable debt is written off in the books of account for claiming deduction under section 36(2).

Bussiness deduction under section 36(2) - Bad debts - Written off of outstanding amount -

Assessee was carrying on the money lending business and was taxed under the head 'Business income'. It claimed the outstanding amount written off as bad debts as allowable deduction. AO held that assessee was neither a bank nor a money lender and therefore, was not entitled to written off the outstanding amount. Held: Assessee had been engaged in money lending business since its inception. The schedule of loans and advances is a continuing feature in all the past years and had been accepted by the department as part of business by taxing the income under the head 'Income from business'. It is pertinent to mention here that holding of money lending licence is not a prerequisite for allowing a claim of bad debts as is held by Supreme Court in TRF Ltd. [(2010) 323 ITR 397 (SC) : 2010 TaxPub(DT) 1481 (SC)] and it is enough if the irrecoverable debt is written off in the books of account. Hence, denying the bad debts written off as allowable deductions was not justified.

REFERRED : TRF Ltd. [(2010) 323 ITR 397 (SC) : 2010 TaxPub(DT) 1481 (SC)].

FAVOUR : In favour of assessee.

A.Y. : 2010-11


INCOME TAX ACT, 1961

Section 36(2)

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