By TIOL News Service

CHENNAI, SEPT 03, 2018: THE ISSUE IS - Whether even though one of the company's objects includes money lending business but a single instant of loan cannot be acceptable as part of business and hence write off of bad debts cannot be allowed. YES IS THE ANSWER.

Facts of the case

The assessee company, publisher of newspaper and magazines, had filed return for relevant AY. One of the objects of the assessee company was to do money lending business. The assessee had granted advance of Rs. 1.60 Crores to one Mr. Sanjay Khemani during the FY 2000-01 against security of shares. The party had refunded a part of such amount by the end of the year 2001-02, and had also paid interest thereon. But the party did not refund any money after the year 2001- 02, and therefore the Board of the assessee decided to write off the loan as bad debt. During assessment, AO was of the view that only a trading debt could be written off. The assessee contended that since the loan given by the assessee fell within its objects, it could be only considered as a trading debt. But AO did not agreed and made disallowance of bad debts write off. On appeal, CIT(A) upheld the order of AO.

On appeal, Tribunal held that,