Dinesh Ramesh Joshi, Nashik V. ITO, Ward 2(2), Nashik

ITA 516/PUN/2013

• Counselvise Citation: 51624514 RSA 2013
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-03-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 18-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A K MODI
• Keywords: Bad and doubtful debts
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE MS . SUSHMA CHOWLA , JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 417 /PN/20 1 1 ASSESSMENT YEAR : 20 0 7 - 0 8 THE INCOME TAX OFFICER, WARD 1 ( 4 ), NASHIK . . APPELLANT VS. LATE SHRI RAMESH MURLIDHAR JOSHI, THROUGH L/H SMT. PUSHPA RAMESH JOSHI 480 - 8 - 0, JOSHI SADAN, OPP. KBH VIDYALAY, SHARANPUR ROAD, NASHIK. . RESPONDENT PAN : AAKPJ5902C ITA NO. 321 /PN/201 3 ASSESSMENT YEAR : 20 08 - 09 THE INCOME TAX OFFICER, WA RD 1(3), NASHIK. . APPELLANT WA RD 1(3), NASHIK. . APPELLANT VS. LATE SHRI RAMESH MURLIDHAR JOSHI, THROUGH L/H SMT. PUSHPA RAMESH JOSHI, 480/8 / 0, JOSHI SADAN, OPP. KBH HIGH SCHOOL, SHARANPUR ROAD, NASHIK. . RESPONDENT PAN : AAKPJ5902C ITA NO. 516 /PN/201 3 ASSESSME NT YEAR : 20 05 - 06 DINESH RAMESH JOSHI, L/H OF LATE RAMESH MURLIDHAR JOSHI, 480/8/0, JOSHI SADAN, OPP. KBH VIDYALAY, SHARANPUR ROAD, NASHIK. . APPELLANT PAN : AAKPJ5902C. VS. THE INCOME TAX OFFICER, WARD 2(2), NASHIK . RESPONDENT ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SHRI A. K. MODI , CIT DATE OF HEARING : 17 - 0 6 - 2015 DATE OF PRONOUNCEMENT : 25 - 0 6 - 2015 ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 2 ORDER PER SUSHMA CHOWLA , JM : OUT OF THIS BUNCH OF THREE APPEALS, TWO ARE FILED BY THE REV ENUE AGAINST THE ORDER S OF CIT(A) - I , NASHIK DATED 19 .0 1 .201 1 AND 02.11.2012 RELATING TO ASSESSMENT YEAR S 20 0 7 - 0 8 AND 2008 - 09 RESPECTIVELY AG AINST RESPECTIVE ORDER S PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. THE OTHER APPEAL FILED BY THE ASSE SSEE IS AGAINST THE ORDER OF CIT(A) - II, NASHIK, DATED 11.11.2008 RELATING TO ASSESSMENT YEAR 2005 - 06 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. ALL THE APPEALS RELATING TO THE SAME ASSESSEES ON SIMILAR ISSUES WERE HEARD TOGE THER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. HOWEVER, WE PROCEED TO TAKE UP THE FACTS IN ITA NO. 417 /PN/201 1 TO ADJUDICATE THE ISSUES. 3 . IN ITA NO.417/PN/2011 AND 321/PN/2013 , T HE REVENUE HAS RAISED THE FOLLOWING COMMON GROUNDS OF APPEAL : - 01. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 30,00,000/ - MADE ON ACCOUNT OF DISALLOWANCE OF BAD DEBT, WITHOUT CONSIDERING THE FACT THAT THE ASSESSEES CASE IS NOT COVERED BY SUPREME COURT DECISION IN THE CASE OF T.R.F. LTD. VS. CIT (2010) 230 CTR (SC) 14. 02. THE LEARNED CIT(A) IS NOT JUSTIFIED IN ALLOWING RELIEF TO THE ASSESSEE: ( I ) IGNORING THE DIRECTION GIVEN BY THE HONBLE ITAT TO DECIDE THE ISSUE AS P ER FACT. ( II ) WITHOUT ADJUDICATING ON THE ISSUE WHETHER THE ASSESSEE WAS CARRYING OUT ANY BUS I NESS ACTIVITY. ( III ) IGNORING THE FACT THAT IN CASE OF THE APPELLANT, NO BUSINESS ACTIVITY WAS BEING CARRIED OUT AS HELD BY THE PREDECESSOR CIT(A). 03. THE APPELLANT CRAV ES LEAVE TO ADD/ALTER/AMEND THE GROUNDS OF APPEAL. 4. IN ITA NO.516/PN/203, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 3 ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW I ) THE HON'BLE CIT APPEALS - II, NASHIK HAS ERRED IN NOT DELETING THE I ) THE HON'BLE CIT APPEALS - II, NASHIK HAS ERRED IN NOT DELETING THE DISALLOWANCE OF THE BAD DEBTS OF RS. 50 LAKHS. II ) THE HON'BLE CIT APPEALS - II, NASHIK HAS ERRED IN NOT DECIDING THE ISSUE OF THE BAD DEBTS OF RS. 50 LAKHS WRITTEN OFF IN THE BOOKS OF ACCOUNTS DUE TO THE LOSS ON ACCOUNT OF NON - RECEIPT OF FIXED DEPOSITS FRO M BANK THOUGH THE HON'BLE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH - A VIDE ITS ORDER DATED 31/03/2011 RESTORED THE FILE TO DECIDE THE ISSUE TO THE EXTENT OF WRITE OFF . III ) THE HON'BLE CIT APPEALS - II, NASHIK IS WRONG IN NOT FOLLOWING THE DIRECTION GIVEN IN THE ORDER OF ITAT PUNE BENCH - A. IV ) THE HON'BLE CIT APPELAS - II, NASHIK HAS COMMITTED A MISTAKE OF IV ) THE HON'BLE CIT APPELAS - II, NASHIK HAS COMMITTED A MISTAKE OF DECIDING THE SAME ISSUES WHICH HAS BEEN DECIDED BY THE PREDECESSOR CIT APPEAL IN HIS ORDER DATED 11/11/2008 FOR THE SAME ASSESSMENT YEAR 2005 - 06 OF DEN Y ING THE BAD DEBTS (LOSS) WRITTEN OFF OF RS. 50 LAKHS DUE TO NON RECOVERY OF FIXED DEPOSIT DUE TO LIQUIDATION OF SHRIRAM SAHAKARI BANK LTD. THOUGH THIS ORDER OF CIT APPEAL HAS BEEN CONSIDERED BY THE HON'BLE ITAT PUNE BENCH - A VIDE ITS ORDER DATED 31/03/2011 V ) THE APPELL ANT CRAVE S LEAVE TO ADD, ALTER DELETE AND MODIFY ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL IF NECESSARY. 5. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE INDIVIDUAL WAS 5. BRIEFLY, IN THE FACTS OF THE PRESENT CASE, THE ASSESSEE INDIVIDUAL WAS ENGAGED IN SHARE TRADING ACTIVITY. HE WAS ALSO CARRYING ON THE BUSINESS OF DEPOSITS AND LOANS TO THE PRIVATE PARTIES AND WAS ALSO MAKING INVESTMENTS AND CHEQUE DEPOSITS WITH THE BANKS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD CLAIMED BAD DEBTS AMOUNTING TO RS.30 LAKHS. THE AMOUNT WAS THE FIXED DEPOSIT WITH SHRIRAM SAHAKARI BANK LTD., NASHIK AND SINCE THE BANK HAD GONE INTO LIQUIDATION, THE FDS WHICH WERE MATURING DURING THE RELEVANT FINANCIAL GONE INTO LIQUIDATION, THE FDS WHICH WERE MATURING DURING THE RELEVANT FINANCIAL YEAR WERE CLAIMED AS BAD DEBTS UNDER SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT. THE ASSESSING OFFICER NOTED THAT THE ASSES SEE HAD MADE INVESTMENT OF HIS SURPLUS FUNDS AS FIXED DEPOSITS WITH THE BANK. THE ASSESSING OFFICER FURTHER OBSERVED THAT INCOME DERIVED FROM INVESTMENT ON SURPLUS FUNDS WAS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES; ON THE OTHER HAND, THE AS SESSEE HAD CREATED A FICTION OF BUSINESS, IN ORDER TO CLAIM THE BAD DEBTS. THE PLEA OF THE ASSESSEE BEFORE THE ASSESSING OFFICER WAS AMONG OTHER THINGS, HE IS ALSO ENGAGED IN THE BUSINESS OF MAKING INVESTMENT IN FIXED DEPOSITS WITH THE BANKS AND PRIVATE PARTIES . THE ASSESSING OFFICER HELD THAT THERE COULD NOT BE ANY TRADING OF FIXED DEPOSITS SINCE ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 4 THE SAME WERE NOT TRANSFERRABLE AND THE INTEREST INCOME EARNED BY THE ASSESSEE ON THE SAID FDS WAS HELD TO BE ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOU RCES. THE ASSESSING OFFICER FURTHER OBSERVED THAT MERELY BECAUSE THE BANK IN WHICH THE ASSESSEE HAD MADE THE INVESTMENT HAD GONE INTO LIQUIDATION, CAUSING FINANCIAL LOSSES TO THE ASSESSEE, COULD NOT BE THE GROUND FOR TREATING THE SAID LOSSES AS BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. IN VIEW THEREOF, THE DEDUCTION CLAIMED BY THE ASSESSEE AT RS.30 LAKHS ON ACCOUNT OF BAD DEBT WRITTEN OFF WAS NOT ALLOWED AS THE SAME WAS BEYOND THE AMBIT OF THE PROVISIONS OF SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT . THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF CIT(A), WHO IN TURN, VIDE ORDER DATED 31.03.2010 NOTED THAT THE ASSESSEE HAD INVESTED HIS OWN SURPLUS FUNDS IN FDS WITH BANKS, POST OFFICE, RBI BONDS, PPF, LIC PENSION FUND, ETC. THE CIT(A) FURTHER NOTE D THAT ONLY INTEREST EARNED BY THE ASSESSEE FROM PRIVATE PARTIES WAS FROM R.M. JOSHI & ASSOCIATES AMOUNTING TO RS.27,000/ - I.E. THE FIRM IN WHICH THE ASSESSEE WAS THE MAIN PARTNER. THE CIT(A) THUS, HELD THAT THE INVESTMENT IN FIXED DEPOSITS IN RBI BONDS, PPF, LIC, ETC. COULD NOT BE REGARDED AS INVESTMENT MADE FOR MAXIMIZING THE INCOME BY TAKING RISK OR CARRYING ON BUSINESS ACTIVITY AS CLAIMED BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE I.E. THE LOSS OF PRINCIPAL AMOUNT OF FDS WITH SHRIRAM SAHAKARI BANK, AS PER THE CIT(A), WAS A CAPITAL LOSS AND COULD NOT BE ALLOWED AS BAD DEBTS OF THE BUSINESS OF THE ASSESSEE. CONSEQUENTLY, THE DISALLOWANCE OF BAD DEBTS AT RS.30 LAKHS ON ACCOUNT OF IRRECOVERABLE FIXED DEPOSITS, MADE BY THE ASSESSING OFFICER, WAS UPHELD BY THE CIT(A). THE ASSESSEE PREFERRED AN APPEAL BEFORE THE TRIBUNAL AGAINST THE SAID ORDER OF CIT(A) AND THE TRIBUNAL VIDE ORDER DATED 08.10.2010 IN ITA NO.842/PN/2009, RELATING TO ASSESSMENT YEAR 2007 - 08 CONSIDERED THE JUDGMENT OF THE HONBLE SUPREME COURT IN T.R.F. LTD. VS. CIT (2010) 230 CTR (SC) 14 AND HELD THAT SINCE THE AUTHORITIES BELOW DID NOT HAVE THE BENEFIT OF DECISION IN T.R.F. LTD. VS. CIT (SUPRA), THE MATTER BE RESTORED BACK TO THE FILE OF CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE AT HAND AS P ER FACT AND LAW, AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 5 6. IN THE SECOND ROUND OF PROCEEDINGS BEFORE THE CIT(A), THE ASSESSEE REITERATED ITS CLAIM AND THE CIT(A) VIDE ORDER DATED 19.01.2011 HELD THAT WHERE THE ASSESSEE HAD WRITTEN OF F ITS CLAIM OF AMOUNT IN ITS BOOKS OF ACCOUNT AND SINCE THE ASSESSEE HAD SATISFIED THE CONDITIONS PRESCRIBED UNDER LAW WITH REGARD TO THE CLAIM OF BAD DEBTS, THE SAME WAS ALLOWED AS DEDUCTION. 7. THE REVENUE IS IN APPEAL AGAINST THE AFORESAID FINDINGS OF CIT(A). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE POINTED OUT THAT THERE WAS NO MERIT IN THE CLAIM OF THE ASSESSEE AS SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE WERE INVESTED IN BANK AND SUCH INVESTMENT WAS NOT IN THE BUSINESS CARRIED ON BY THE ASSESSEE, BUT WAS A PURE INVESTMENT AND THE SAME CANNOT BE ALLOWED AS DEDUCTION ON ACCOUNT OF BAD DEBTS ON ITS WRITE OFF. OUR ATTENTION WAS DRAWN TO THE PROVISIONS OF SECTION 36(2) OF THE ACT, WHICH VERY CLEARLY PROVIDES THAT WHERE THE INVESTMENT IS MADE FOR THE BUSINESS AND ITS NON - RECOVERY, WOULD BE BAD DEBTS IN THE HANDS OF THE ASSESSEE. HOWEVER, THE ASSESSEE BEFORE US COULD NOT BE SAID TO BE ENGAGED IN THE BUSINESS OF FINANCING THE BANKS AND CONSEQUENTLY, THE PROVISIONS OF SECTION 36(2) OF THE ACT WERE NOT APPLICABLE. 9. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE ON THE OTHER HAND POINTED OUT THAT THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2004 - 05, PLACED AT PAGES 10 TO 14 REFLECTS THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF F INANCING. IT WAS FURTHER POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE THAT THE TRIBUNAL IN ASSESSEES OWN CASE HAD SET - ASIDE THE ISSUE TO THE FILE OF CIT(A) IN ORDER TO APPLY THE PROPOSITION LAID DOWN BY THE HONBLE SUPREME COURT IN T.R.F. VS. CIT (SUPRA). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE VEHEMENTLY PLACED RELIANCE ON THE SUBMISSIONS MADE BEFORE THE CIT(A) AND THE ORDER OF CIT(A). THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE FURTHER POINTED OUT THA T THE INTEREST ON BANK WAS PURELY REFLECTED BY THE ASSESSEE AS ITS INCOME. ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 6 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE BEFORE US HAD MADE CERTAIN INVESTMENTS IN FIXED DEPOSITS WITH SHRIRAM SAHAKARI BANK LTD., NASHIK. HO WEVER, THE SAID BANK HAD GONE INTO LIQUIDATION AND THE PLEA OF THE ASSESSEE WAS THAT THE AFORESAID INVESTMENT MADE WITH THE SAID BANK, WHICH HAD BECOME BAD, IS TO BE ALLOWED AS BAD DEBTS UNDER THE PROVISIONS OF SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT. THE ASSESSEE CLAIMS THAT IT HAD WRITTEN OFF THE SAID AMOUNT IN ITS BOOKS OF ACCOUNT AND SINCE THERE WAS NO MEANS OF RECOVERY OF THE SAME, THE WRITE OFF OF THE INVESTMENT WAS CLAIMED AS BAD DEBTS UNDER THE PROVISIONS OF SECTION 36(1)(VII) R.W.S. 36(2) OF TH E ACT. 11. UNDER THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT, WHERE THE ASSESSEE HAS DECLARED INCOME FROM BUSINESS, THEN THE DEDUCTION IS ALLOWABLE TO THE ASSESSEE ON ACCOUNT OF THE BAD DEBTS OR PART THEREOF, WHICH IS WRITTEN OFF AS IRRECOVERABLE IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE PREVIOUS YEAR. HOWEVER, THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT ARE SUBJECT TO THE PROVISIONS HOWEVER, THE PROVISIONS OF SECTION 36(1)(VII) OF THE ACT ARE SUBJECT TO THE PROVISIONS OF SECTION 36(2) OF THE ACT, WHICH IN TURN, LAYS DOWN THAT NO DEDUCTION ON ACCOUNT OF BAD DEBTS OR PART THERE OF SHALL BE ALLOWED, UNLESS SUCH DEBTS OR PART THEREOF, HAD BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE ASSESSEE IN THE PREVIOUS YEAR, IN WHICH THE AMOUNT OF SAID DEBT OR PART THEREOF, IS WRITTEN OFF OR OF A EARLIER PREVIOUS YEAR. SUB - SECTION F URTHER PROVIDES THAT SUCH DEDUCTION SHALL BE ALLOWED IF IT REPRESENTS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING OR MONEY LENDING WHICH IS CARRIED ON BY THE ASSESSEE. THE CLAIM OF THE ASSESSEE BEFORE THE AUTHORITIES BELOW WAS THAT IT WAS ENG AGED IN THE BUSINESS OF MONEY LENDING AND CONSEQUENTLY, WHERE THE INVESTMENT MADE BY THE ASSESSEE HAD BECOME BAD, THE SAME WAS ALLOWABLE AS BAD DEBTS IN THE CASE OF ASSESSEE. 12. NOW, COMING TO THE FACTS OF THE PRESENT CASE, THE CLAIM OF THE ASSESSEE BEFO RE THE ASSESSING OFFICER WAS THAT IT HAD EARNED INTEREST INCOME FROM ITS DEPOSITS WHICH IN TURN, WAS IN THE COURSE OF CARRYING ON ITS BUSINESS. THE ASSESSING OFFICER AND THE CIT(A) IN THE FIRST ROUND, HAS GIVEN A FINDING THAT THE ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 7 ASSESSEE WAS A PARTNER IN TWO CONCERNS AND WAS RECEIVING INTEREST FROM THE SAID CONCERNS AT RS.27,000/ - . FURTHER, THE ASSESSEE HAD EARNED INCOME ON FIXED DEPOSITS OF BANKS, LIC PENSION FUND, NSS, PPF, SAVINGS ACCOUNT, ETC. THE INVESTMENTS MADE BY THE ASSESSEE IN THE AFORESAID IN VESTMENTS WERE OUT OF ITS SURPLUS FUNDS . THE ASSESSING OFFICER NOTED THAT IN THE RETURN OF INCOME, THE ASSESSEE HAS NOT DECLARED THE INTEREST INCOME ON THE FDS. INFORMATION WAS CALLED FOR FROM THE BANK VIS - - VIS INTEREST DUE ON THE FDS AND INTEREST TO TH E EXTENT OF RS. 3,82,311/ - WAS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE IS NOT IN APPEAL AGAINST THE AFORESAID FINDING OF THE CIT(A) IN THE FIRST ROUND AS IS APPARENT FROM THE GROUNDS OF APPEAL RAISED BEFORE THE TRIBUNAL IN ITA NO.842/PN/2009. ON THE OTHER HAND, THE ONLY ISSUE RAISED BY THE ASSESSEE BEFORE THE TRIBUNAL (SUPRA) WAS AGAINST THE DISALLOWANCE OF BAD DEBTS OF RS.30 LAKHS. THE FACTS RELEVANT TO THE CLAIM OF BAD DEBTS WERE THAT THE ASSESSEE HAD MADE INVESTMENT IN FIXED DEPOSITS WITH SHR IRAM SAHAKARI BANK LTD., WHICH HAD GONE BAD SINCE THE BANK HAD GONE INTO LIQUIDATION. THE RECOVERY OF THE PRINCIPAL AMOUNT DEPOSITED IN FIXED DEPOSITS WITH THE SAID BANK HAD BECOME IRRECOVERABLE AND THE ASSESSEE CLAIMS THAT IN THE COURSE OF CARRYING ON IT S BUSINESS ACTIVITIES INCLUDING THE PARKING OF THE FUNDS WITH THE BANK, WR O TE OFF THE SAID AMOUNT IN ITS BOOKS OF ACCOUNT AS BAD DEBTS UNDER SECTION 36(1)(VII) OF THE ACT. IT MAY BE POINTED OUT THAT MERE WRITING OFF AMOUNT IN ITS BOOKS OF ACCOUNT, DOES NO T JUSTIFY THE CLAIM OF DEDUCTION ON ACCOUNT OF BAD DEBTS WRITTEN OFF, IN THE HANDS OF THE ASSESSEE, WHERE THE ASSESSEE HAD NOT FULFILLED THE CONDITIONS LAID DOWN UNDER SECTION 36(2) OF THE ACT. WE HAVE ALREADY MADE REFERENCE TO THE AFORESAID PROVISIONS OF SECTION 36(2) OF THE ACT, UNDER WHICH IT IS VERY CATEGORICALLY POINTED OUT THAT THE CLAIM OF BAD DEBTS ON ITS WRITTEN OFF, WOULD BE ALLOWED IN RESPECT OF SAID DEBTS, INCOME RELATING TO WHICH HAS BEEN DECLARED BY THE ASSESSEE EITHER IN THE YEAR OF WRITTEN OFF OR IN EARLIER YEARS. THE SECOND PART OF SECTION 36(2) OF THE ACT TALKS ABOUT THE MONEY LENT BY A PERSON IN THE ORDINARY COURSE OF CARRYING ON THE BUSINESS OF BANKING OR MONEY LENDING, WHICH IS CARRIED ON BY THE ASSESSEE. THE DEPOSITS WITH THE BANK UN DER NO CONDITIONS CAN ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 8 BE SAID TO BE MADE UNDER MONEY LENDING BUSINESS, IF ANY CARRIED ON BY THE ASSESSEE. SUCH PARKING OF FUNDS IN FDS WITH BANK CAN ALSO NOT BE SAID TO BE LENT IN THE ORDINARY COURSE OF BUSINESS OF BANKING, AS THE ASSESSEE IS NOT CARRYING THE BUSINESS OF BANKING. IN VIEW THEREOF, EVEN IF THE AMOUNT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT OF THE ASSESSEE, THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEDUCTION AS IT HAS FAILED TO FULFILL THE CONDITIONS LAID DOWN IN SECTION 36(2) OF THE ACT. THE TRIBUNAL IN THE FIRST ROUND OF APPEAL WHILE SETTING ASIDE THE ISSUE , NOT ED THE DECISION OF HONBLE SUPREME COURT IN T.R.F. LTD. VS. CIT (SUPRA), WHEREIN IT HAS BEEN HELD THAT AFTER FIRST APRIL, 1989, IT WAS NOT NECESSARY FOR THE ASSESSEE TO ESTA BLISH THAT THE DEBTS, IN FACT, HAD BECOME IRRECOVERABLE AND IT WAS ENOUGH IF THE BAD DEBT WAS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. WHILE SETTING ASIDE THE ISSUE BACK TO THE FILE OF CIT(A), A DIRECTION WAS GIVEN BY THE TRIBUNAL TO DECIDE THE ISSUE AT HAND AS PER FACT AND LAW AFTER PROVIDING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE CIT(A) IN THE SECOND ROUND OF APPEAL HAS FAILED TO CONSIDER THE FACTUAL ASPECTS OF THE CASE AND LAW I.E. THE PROVISIONS OF SECTION 36(2) OF THE AC T AND HAS ONLY TOUCHED UPON THE ISSUE OF WRITE OFF OF INVESTMENT IN THE BOOKS OF ACCOUNT, MAINTAINED BY THE ASSESSEE. WE FIND NO MERIT IN THE ORDER OF CIT(A) IN THIS REGARD AND REVERSING THE SAME, WE HOLD THAT IN VIEW OF NON - FULFILLMENT OF THE CONDITIONS LAID DOWN IN SECTION 36(2) OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO THE CLAIM OF DEDUCTION OF RS.30 LAKHS BEING THE INVESTMENT IN FDS, MADE OUT OF ITS SURPLUS FUNDS, WHICH HAD BECOME IRRECOVERABLE AS THE BANK WITH WHICH IT HAD MADE INVESTMENTS HAD GONE INTO LIQUIDATION. ACCORDINGLY, WE SET - ASIDE THE ORDER OF CIT(A) AND ALLOW THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 13. IN ITA NO.321/PN/2013, THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE ON ACCOUNT OF W RITE OFF OF BAD DEBTS OF RS.25 LAKHS, WHICH IN TURN, WAS THE INVESTMENT IN FDS WITH SHRIRAM SAHAKARI BANK LTD. ITA NO . 417 /PN/20 1 1 ITA NO.321/PN/2013 ITA NO.516/PN/2013 9 14. THE FACTS AND ISSUE IN ITA NO. 321/PN/2013 ARE IDENTICAL TO THE FACTS AND ISSUE IN ITA NO. 417/PN/2011 AND OUR DECISION IN ITA NO. 417/PN/2011 SHALL APPLY MUTATIS MUTANDIS TO ITA NO.321/PN/2013 . 15. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.50 LAKHS ON ACCOUNT OF WRITE OFF OF NON - RECEIPT OF FDS WITH THE BANK INVESTED IN SHRIRAM SAHAKARI BANK LTD. 16. THE ISSUE ARISING IN THE APPEAL FILED BY THE ASSESSEE IS IDENTICAL TO THE ISSUE ARISING IN THE APPEAL FILED BY THE REVENUE IN ITA NO.417/PN/2011, WHEREIN THE CIT(A) HAD ALLOWED THE SIMILAR CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF WRITE OFF OF THE INV ESTMENT IN FDS WITH THE BANK. FOLLOWING OUR DECISION IN ITA NO.417/PN/2011, WE UPHOLD THE ORDER OF CIT(A) IN ASSESSMENT YEAR 2005 - 06 AND ACCORDINGLY, WE DISMISS THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE. 1 7 . IN THE RESULT, BOTH THE APPEAL S OF THE REVE NUE ARE ALLOWED AND THE APPEAL OF 1 7 . IN THE RESULT, BOTH THE APPEAL S OF THE REVE NUE ARE ALLOWED AND THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER P RONOUNCED ON THIS 25 TH DAY OF JUNE , 201 5 . SD/ - SD/ - ( R.K. PANDA ) ( SUSHMA CHOWLA ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 25 TH JUNE , 2015 GCVSR COPY OF THE ORDER IS FORWARDED TO : - 1 ) THE ASSESSEE; 2 ) THE DEPARTMENT; 3 ) THE CIT(A) - I , NASHIK ; 4 ) THE CIT - I , NASHIK ; 5 ) THE CIT(A) - II , NASHIK ; 6 ) THE CIT - II , NASHIK ; 7 ) THE DR B BENCH, I.T.A.T., PUNE; 8 ) GUARD FILE. BY ORDER //TRUE COPY/ / SR. PRIVATE SECRETARY I.T.A.T., PUNE