Inter-corporate deposits written off in the books allowable as business expenditure where the incomes from such deposits were taxed as business income in earlier years

CIT Vs ABC Bearing Limited (Bombay High Court)- The taxpayer was engaged in the business of advancing loans. Interest received from inter-corporate deposits was offered to tax as business income and accepted by the Assessing Officer in earlier years. During the year, the taxpayer filed its return of income, claiming inter-corporate deposits written off in the books as allowable business expenditure. While such claim by the taxpayer was not accepted at lower levels, the Income-tax Appellate Tribunal  allowed the claim of the taxpayer based on facts. Aggrieved by the aforesaid order of the Tribunal, the Revenue preferred an appeal before the Honourable Bombay High Court.

High Court has held that the finding of fact recorded by the Tribunal is that the taxpayer was engaged in the business of advancing loans and that interest received from the inter-corporate deposits have been assessed as business income in the past.The said inter-corporate deposits had become bad and the taxpayer has written off the amount. The interest income from the inter-corporate deposits have been assessed as business income and hence on the facts allowing the claim of the taxpayer in writing off the inter-corporate deposits cannot be faulted.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO. 2262 of 2009

The Commissioner of Income Tax Vs ABC Bearing Limited

CORAM: J.P. Devadhar &

K.K. Tated, JJ.

DATE : 16th September 2011

P.C.:

1. Whether the Income Tax Appellate Tribunal was justified in allowing the claim of the assessee under the head “inter ­corporate deposits” written off by the assessee is the question raised in this appeal.

2. The finding of fact recorded by the Income Tax Appellate Tribunal in para ­5 of its order is that the assessee was engaged in the business of advancing loans and interest received from the inter­ corporate deposits have been assessed as business income in the past. Since the said inter­ corporate deposits had become bad, the assessee in the assessment year in question had written off that amount. Since the interest income from the inter­ corporate deposits have been assessed as business income, in the facts of the present case allowing the claim of the assessee in writing off the inter ­corporate deposits cannot be faulted. Accordingly, the appeal is dismissed with no order as to costs.

(K.K. Tated, J.)                                     (J.P. Devadhar, J.)