Moolchand Kiran Kumar Jain Vs DCIT (ITAT Chennai)
In the case of Moolchand Kiran Kumar Jain Vs DCIT, as adjudicated by the Income Tax Appellate Tribunal (ITAT) in Chennai, the issue revolved around the allowance of bad debts written off in the books of accounts, totaling Rs. 6.69 crore. The appellant had extended loans and advances to M/s. Dilip Chabbria Designs Pvt Ltd over several assessment years, amounting to Rs. 71.14 crores. While interest income from these loans had been duly reported and taxed for the assessment years 2016-17 and 2017-18, the appellant sought to write off the bad debts under Section 36(1)(vii) read with Section 36(2) of the Income Tax Act.
The ITAT deliberated on the conditions stipulated under Section 36(1)(vii) for claiming deduction towards bad debts. These conditions entail that the debt must be incidental to the business or profession of the assessee, taken into account in computing assessable income, and written off in the books of accounts. The tribunal analyzed the nature of the appellant’s activities, which included trading in gold jewelry and bullion as well as money lending. Despite lacking a money lending license, it was established that the appellant engaged in money lending as an ancillary or incidental part of its main business.
