Pr. Commissioner of Income-tax-2 v. Homi Mehta & Sons Pvt. Ltd - 2020-LL-0107-57

Citation	2020-LL-0107-57
Appellant Name	Pr. Commissioner of Income-tax-2
Respondent Name	Homi Mehta & Sons Pvt. Ltd.
Court	HIGH COURT OF BOMBAY
Relevant Act	Income-tax
Date of Order	07/01/2020
Assessment Year	2008-09
Judgment	View Judgment
Keyword Tags	subsidiary company • question of law • interest bearing loan • deduction of bad debts • irrecoverable amount
Bot Summary:	The Respondent- Assessee had advanced loans to its subsidiary company. The Respondent- Assessee claimed that the subsidiary company became loss making company and the Respondent- Assessee took a decision to write off the loan and claim the same as bad debts. The said claim has been denied by the Assessing Officer on two counts that the Respondent- Assessee was not in the business of giving loans and conditions of section 36(2) of the Income Tax Act, 1961 were not satisfied and that the claim of the Respondent- Assessee of loan becoming bad debts was not genuine as the Assessee was knowing that the loan was not recoverable. The Commissioner of Income Tax confirmed the decision of the Assessing Officer the Tribunal held in favour of the Respondent- Assessee holding that the claim of the Assessee was allowable. The decision of the Supreme Court in the case of S.A.Builders Ltd. v. Commissioner of Income Tax, Chandigarh1 holds the field on the issue of the assessee not being in the business of giving loans. The decision of the Madras High Court in the case of Commissioner of Income Tax v. Y.Ramakrishna Sons Ltd2 relied upon by the Tribunal deals with genuineness of the 1 158 Taxman 74 2 326 ITR 315 ::: Uploaded on - 15/01/2020 ::: Downloaded on - 16/01/2020 09:51:54 ::: skn 3 1407.17-itxa. In the decision decision of of this Court in the case of Commissioner of Income-tax v. Star Chemicals Ltd.3 and in the the decision of the Supreme Court in the case of T.R.F. Ltd. v. Commissioner of Income-tax 4, it is laid down that after the amendment of 1 April 1989, it is not necessary for the Assessee to establish that the debt has become irrecoverable and if the Assessee writes off the same as bad debts, it would serve the purpose.

IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1407 OF 2017 Pr.Commisioner of Income-Tax-2. Appellant. V/s. Homi Mehta & Sons Pvt.Ltd. Respondent. Mr.Suresh Kumar for Appellant. CORAM : NITIN JAMDAR AND M.S. KARNIK, JJ. DATE : 7 January 2020. P.C. : Heard learned counsel for Appellant. 2. By this appeal under section 260A of Income Tax Act, 1961, Appellant has challenged order dated 9 September 2016 passed by Income Tax Appellate Tribunal. 3. This appeal pertains to assessment year 2008-09. 4. Appellant- Revenue has raised various questions of law in appeal memo, however, question of law No.4(1), in our ::: Uploaded on - 15/01/2020 ::: Downloaded on - 16/01/2020 09:51:54 ::: skn 2 1407.17-itxa.doc opinion, would suffice as questions of law Nos.4(2) to 4(6) are in nature of arguments in support of question of law No.4(1). 5. Respondent- Assessee had advanced loans to its subsidiary company. loan was interest bearing. Respondent- Assessee claimed that subsidiary company became loss making company and Respondent- Assessee took decision to write off loan and claim same as bad debts. said claim has been denied by Assessing Officer on two counts (i) that Respondent- Assessee was not in business of giving loans and, therefore, conditions of section 36(2) of Income Tax Act, 1961 were not satisfied and (ii) that claim of Respondent- Assessee of loan becoming bad debts was not genuine as Assessee was knowing that loan was not recoverable. Commissioner of Income Tax (Appeals) confirmed decision of Assessing Officer, however, Tribunal held in favour of Respondent- Assessee holding that claim of Assessee was allowable. 6. decision of Supreme Court in case of S.A.Builders Ltd. v. Commissioner of Income Tax (Appeals), Chandigarh1 holds field on issue of assessee not being in business of giving loans. decision of Madras High Court in case of Commissioner of Income Tax v. Y.Ramakrishna & Sons Ltd2 relied upon by Tribunal deals with genuineness of 1 (2007) 158 Taxman 74 (SC) 2 (2010) 326 ITR 315 (Madras) ::: Uploaded on - 15/01/2020 ::: Downloaded on - 16/01/2020 09:51:54 ::: skn 3 1407.17-itxa.doc claim of loan being bad debt. In decision decision of of this Court in case of Commissioner of Income-tax v. Star Chemicals (Bombay) (P) Ltd.3 and in the decision of Supreme Court in case of T.R.F. Ltd. v. Commissioner of Income-tax 4, it is laid down that after amendment of 1 April 1989, it is not necessary for Assessee to establish that debt has, in fact, become irrecoverable and if Assessee writes off same as bad debts, it would serve purpose. 7. In view of above decisions, question raised in present appeal stands covered and does not give rise to any substantial question of law. Appeal is, therefore, dismissed. (M.S. KARNIK, J.) (NITIN JAMDAR, J.) 3 (2008) 220 CTR 319 (Bombay) 4 (2010) 190 Taxman 391 (SC) Pr. Commissioner of Income-tax-2 v. Homi Mehta & Sons Pvt. Ltd

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