Pact Securities & Financial Services Limited, Hyderabad V. ACIT, Central Circle-1, Hyderabad

ITA 873/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82243 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: V SIVA KUMAR
• Keywords: Search and seizure; Bad and doubtful debts; Competent authority
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 873/HYD/2013 ASSESSMENT YEAR : 2004-05 PACT SECURITIES & FINANCIAL SERVICES LTD., HYDERABAD. PAN AABCP 4438 R ASST. COMMISSIONER OF INCOME- TAX, CENTRAL CIRCLE 1, HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI V. SIVA KUMAR REVENUE BY SHRI P. SOMA SEKHAR REDDY DATE OF HEARING 17-06-2014 DATE OF PRONOUNCEMENT 13-08-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST ORD ER DATED 28/12/2013 OF THE CIT(A)-I, HYDERABAD, PERTAINING T O THE ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE ARISING FOR CONSIDERATION IN THE PRESENT APPEAL IS IN RESPECT OF DISALLOWANCE OF BAD DEBTS OF RS. 54,9 9,965/- MADE BY THE AO AND CONFIRMED BY THE CIT(A). 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A COMPANY REGISTERED WITH THE RBI AS A NON-BANKING FINANCIAL COMPANY (NBFC). THE ACTIVITY OF THE ASSESSEE BROADLY ARE ACCEPTING DEPOSITS OF MONE Y FROM PUBLIC AND LENDING TO BORROWERS IN VARIOUS FORMS LIKE LEAS ING, HIRE PURCHASING, DEMAND LOANS, MORTGAGE LOANS ETC. FOR T HE IMPUGNED 2 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. ASSESSMENT YEAR ASSESSEE ORIGINALLY HAD FILED A RET URN OF INCOME ON 30/10/2004 DECLARING TOTAL INCOME OF RS. 30,34,932/ -. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED IN CASE OF THE ASSE SSEE. AS A CONSEQUENCE OF WHICH THE AO ISSUED NOTICE U/S 153A OF THE ACT, CALLING UPON THE ASSESSEE TO FILE HIS RETURN OF INC OME. IN RESPONSE TO THE SAID NOTICE, ASSESSEE FILED RETURN OF INCOME O N 04/11/2010 DECLARING THE SAME INCOME OF RS. 30,34,932/- AS WAS DECLARED IN THE RETURN FILED BY IT ORIGINALLY. DURING THE ASSESSME NT PROCEEDING, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS. 54,99,965/- IN THE P&L A/C TOWARDS BAD DEBTS WRITTE N OFF. WHEN ASKED TO EXPLAIN, THE ASSESSEE STATED THAT IT HAS L ENT MONIES TO BOTH RELATED AND UNRELATED PARTIES AND THE LOANS ARE GEN ERALLY SERVICED AND REPAID. IT WAS SUBMITTED THAT MOST OF THE MONI ES THAT ARE LENT IN THE ORDINARY COURSE OF BUSINESS ARE OUTSTANDING AS STANDARD ASSETS MEANING THEREBY THAT THEY ARE DULY SERVICING THE IN TEREST FROM TIME TO TIME. ONLY IN CASE OF THREE SISTER UNITS BAD DEBTS AROSE. THESE WERE WRITTEN OFF BECAUSE THOSE CONCERNS EITHER COULD NOT TAKE OFF THEIR OPERATIONS TO THE EXPECTED SCALE OR ARE FORCED OUT OF OPERATIONS DUE TO CONTINUED AND ACCUMULATING BUSINESS LOSSES. AO H OWEVER REJECTING THE CLAIM OF THE ASSESSEE COMPLETED THE ASSESSMENT ON 22/12/2006 BY ASSESSING THE INCOME AT RS. 1,09,27,800 WHICH IN CLUDED THE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF BAD DEB TS OF RS.54,99,965/-. THE ASSESSEE CHALLENGED THE ASSESSM ENT ORDER BEFORE THE CIT(A). THE CIT(A) DELETED THE ADDITION S MADE BY THE AO. BEING AGGRIEVED THE DEPARTMENT PREFERRED APPEAL BEF ORE THE ITAT. THE ITAT WHILE DISPOSING OFF THE DEPARTMENTS APPEA L UPHELD A COUPLE OF ADDITIONS MADE BY THE AO. HOWEVER, SO FAR AS, DE DUCTION CLAIMED TOWARDS BAD DEBTS IS CONCERNED, ITAT SET ASIDE THE MATTER TO THE FILE OF THE AO TO EXAMINE WHETHER THE ADVANCES MADE WERE IN CAPITAL OR REVENUE FIELD AND THEREAFTER DECIDE THE ISSUE. IN PURSUANCE TO THE DIRECTION OF THE ITAT, THE AO INITIATED ASSESSMENT PROCEEDING AGAIN. 3 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. 4. IN COURSE OF ASSESSMENT PROCEEDING, THE AO AFTER EXAMINING THE DETAILS AND CONSIDERING THE SUBMISSIONS OF THE ASSESSEE NOTED THAT THE ASSESSEE HAD ADVANCED ABOUT 91% OF THE LOA NS TO PARTIES WHO ARE RELATED EITHER TO THE COMPANY OR THE DIRECT ORS. FROM THESE, THE AO CONCLUDED THAT SINCE LOAN ADVANCED TO OUTSID ERS ARE IN MEAGER PERCENTAGE THE ADVANCES LOOSE THE CHARACTER OF BUSINESS AND BECOME CAPITAL. AO OBSERVED THAT ASSESSEE HAS ALSO VIOLATED THE GUIDELINES OF RBI WHILE ADVANCING LOANS TO SISTER C ONCERNS. EXAMINING IN DETAIL THE ADVANCES IN RESPECT OF WHICH THE DEDU CTION WAS CLAIMED THE AO NOTED AS UNDER: S.NO. NAME OF THE PARTY AMOUNT ADVANCED REMARKS 1. PACT INSURANCE BROKERS PVT. LTD. 233150 SISTER CONCERN OF THE ASSESSEE WITH COMMON DIRECTORS. 2. K. VENUGOPAL 1500 3. PANINIYASANKRIT 5986 THE ASSESSEE FAILED TO INVOKE THE BANK GUARANTEE AGAINST THE FDR MADE BY THE BORROWER WITH COSMOS BANK. 4. ELGEN (INDIA) LTD. 1568000 NO REGISTERED LOAN AGREEMENT. VIOLATED THE PRINCIPLES OF RBI FOR GIVING LOANS WITHOUT ENSURING ANY SECURITY AND REGISTERED LOAN AGREEMENT. SISTER CONCERN OF THE ASSESSEE, OPERATING FROM THE SAME PREMISES WHERE THE OFFICE OF THE ASSESSEE IS LOCATED I.E. PRATHIMA HOUSE, ERRAMANZIL, HYDERABAD. 5. P. SRIDEVI 301329 RELATED TO THE DIRECTORS OF THE ASSESSEE COMPANY. NO REGISTERED LOAN AGREEMENT. 6. G. EASHWANTH RAO 640000 RELATED TO THE DIRECTORS OF THE ASSESSEE COMPANY. NO REGISTERED LOAN AGREEMENT. 7. PRATHIMA INDS. PVT. LTD. 2750000 NO REGISTERED LOAN AGREEMENT. SISTER CONCERN OF THE ASSESSEE, OPERATING FROM THE SAME PREMISES WHERE THE OFFICE OF THE ASSESSEE IS LOCATED I.E. PRATHIMA HOUSE, ERRAMANZIL, HYDERABAD. 4 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. 5. THE AO ACCORDINGLY, CONCLUDED THAT LOANS ADVANCE D ARE IN THE NATURE OF CAPITAL, HENCE, LOSS INCURRED ON THAT ACC OUNT WOULD ONLY BE A CAPITAL LOSS. ON THE AFORESAID PREMISES, THE AO DISALLOWED ASSESSEES CLAIM AND ADDED THE AMOUNT OF RS. 54,99, 965/-. BEING AGGRIEVED OF THE ADDITION MADE, THE ASSESSEE PREFER RED APPEAL BEFORE THE CIT(A). 6. DURING THE APPEAL PROCEEDINGS, THE ASSESSEE REIT ERATING THE SUBMISSIONS MADE BEFORE THE AO SUBMITTED THAT SINCE THE MAIN ACTIVITY OF THE ASSESSEE IS LENDING MONEY THE AMOUN T ADVANCED IN ORDINARY COURSE OF BUSINESS CANNOT BE TREATED AS IN VESTMENT. IT WAS THEREFORE SUBMITTED THAT IF IN ITS ORDINARY COURSE OF BUSINESS ANY AMOUNT ADVANCED TURNS DOUBTFUL OR BAD THE SAME WOUL D HAVE TO BE ALLOWED AS A BAD DEBT IF IT IS ACTUALLY WRITTEN OFF IN THE BOOKS OF ACCOUNT IRRESPECTIVE OF THE FACT, WHETHER IT WAS A DVANCED TO SISTER CONCERN OR THIRD PARTY. THE ASSESSEE SUBMITTED THA T IN EARLIER ASSESSMENT YEARS ALSO BAD DEBTS EMANATING OUT OF MO NIES LENT TO SISTER CONCERNS WERE DULY ALLOWED. HENCE, IN THE PR ESENT ASSESSMENT YEAR THE AO CANNOT DIVIDE THE MONIES ADVANCED INT O TWO CATEGORIES I.E. LOANS TO SISTER CONCERNS AS INVESTMENT AND TO THIRD PARTIES AS LOANS. IT WAS SUBMITTED THAT IN CASE OF A SMALL CL OSELY HELD COMPANY EFFORT IS ALWAYS MADE TO LEND MONEY TO KNOWN PARTIE S AS RECOVERY OF MONEY LENT IS ONE OF THE MOST IMPORTANT RISK IT CAR RIES. EXPLAINING THE DEBT WRITTEN OFF IN RESPECT OF INDIVIDUAL LOANEES I T WAS SUBMITTED THAT OUT OF RS. 15,68,000/- WRITTEN OFF IN CASE OF ELGEN (INDIA) LTD. THE SAID COMPANY HAD REPAID DEBT TO THE EXTENT OF RS. 13,70, 000 IN FY 2005- 06 WHICH HAS ALSO BEEN OFFERED TO TAX BY THE ASSESS EE IN THE CORRESPONDING ASSESSMENT YEAR THEREBY LEAVING A VER Y SMALL NET BAD DEBT. IN RESPECT OF BAD DEBT WRITTEN OFF OF RS. 27 ,50,000 IN RESPECT OF PRATHIMA INDUSTRIES PVT. LTD., IT WAS SUBMITTED THA T THE AMOUNT WAS ADDED BACK AT THE HANDS OF THE SAID COMPANY IN ASSE SSMENT MADE U/S 143(3) WHICH HAS ALSO BEEN CONFIRMED IN THE FIR ST APPEAL. AS THE SAID COMPANY HAS NOT CONTESTED THE ORDER PASSED BY THE FIRST 5 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. APPELLATE AUTHORITY, THE ADDITION MADE STANDS FINAL IZED AT THE HANDS OF THE SAID COMPANY. IT WAS THUS SUBMITTED THAT THE S AME AMOUNT CANNOT BE ADDED AT THE HANDS OF TWO DIFFERENT ASSES SEES. IN RESPECT OF LOAN OF RS. 2,31,000 TO PACT BROKERS PVT. LTD IT WAS SUBMITTED THAT THE SAID COMPANY NEVER COMMENCED ITS BUSINESS OPERA TIONS AND ULTIMATELY WOUND UP. THEREFORE, THE DEBT BECAME UNR ECOVERABLE. SO FAR AS THE DEBT RELATING TO SHRI G. VISWANATH RAO, IT WAS SUBMITTED THAT THE SAID PARTY REPAID THE AMOUNT OF RS. 6,40, 000 IN PREVIOUS YEAR 2005-06 AND ASSESSEE HAS ALSO OFFERED IT AS IN COME IN THE CORRESPONDING AY. IT WAS THEREFORE SUBMITTED THAT T HE AMOUNT IN QUESTION HAVING BECOME BAD DEBT AND ACTUALLY WRITTE N OFF IN THE BOOKS OF ACCOUNT THE DEDUCTION CLAIMED IS ALLOWABLE U/S 3 6(1)(VII) OF THE ACT. 7. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE VIS--VIS FACTS AND MATERIAL ON RECORD WAS OF THE V IEW THAT THOUGH THE ASSESSEE HAD CLAIMED THAT THE LOANS WERE GIVEN IN O RDINARY COURSE OF BUSINESS HOWEVER THE ASSESSEE COULD NOT SUBSTANTIAT E THE NATURE OF SUCH LOANS AS REVENUE BY EXPLAINING AS TO HOW THE L OANS RECEIVED BY THE CONCERNED PARTIES WERE UTILIZED. THE CIT(A) NOT ED THAT AS THE ASSESSEE HAS ADMITTED THAT THE LOANS HAD TO BE WRIT TEN OFF AS THE SISTER CONCERNS COULD NOT TAKE OFF THEIR OPERATIONS , THAT ITSELF INDICATE THAT THE AMOUNTS CONCERNED WERE GIVEN TO THEM TO ES TABLISH THEIR BUSINESS. HE FURTHER OBSERVED THAT THE FACT THAT NO AGREEMENTS WERE ENTERED INTO BY THE ASSESSEE FOR ADVANCING SUCH AMO UNTS ALSO SHOW THAT THESE WERE NOT ORDINARY LOANS AS ADVANCED BY N BFC IN THE ORDINARY COURSE OF BUSINESS, BUT, WERE THE ASSESSEE S INVESTMENTS THEREIN. THE CIT(A) OBSERVED THAT AS 91% OF THE TO TAL LOANS GIVEN BY THE ASSESSEE WERE TO SISTER CONCERNS IT INDICATES T HAT THERE IS INTRA GROUP MOVEMENT OF FUNDS MADE BY THE ASSESSEE WITH A VIEW TO LOOK AFTER THE FINANCIAL INTEREST OF THE ENTIRE GROUP. T HEREFORE, EVEN IF THE CONCERNS IN THE GROUP ARE SEPARATE LEGAL ENTITIES, THE AMOUNT ADVANCED BY THE ASSESSEE TO THEM ARE IN THE NATURE OF INVESTMENTS AND NOT ORDINARY LOANS AS GIVEN BY ANY NBFC TO UNRE LATED PARTIES. 6 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. FURTHER CONSIDERING THE FACT THAT IN FEW CASES THE PARTIES CONCERNED HAVE REPAID BACK CERTAIN AMOUNTS IN SUBSEQUENT YEAR S THE CIT(A) OBSERVED THAT FACT ITSELF SHOWS THE WRITE OFF BAD D EBTS WAS MADE BY THE ASSESSEE ONLY WITH A VIEW TO HELP OUT THOSE CON CERNS AND AT THE SAME TIME POSTPONE ITS OWN TAX LIABILITY FOR THE YE AR EVEN THOUGH THE AMOUNTS ACTUALLY WERE NOT TURNED BAD. WITH THE AFOR ESAID OBSERVATION, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO. 8. THE LEARNED AR THROUGH HIS SUBMISSIONS MADE AT T HE TIME OF HEARING AS WELL AS THE WRITTEN SUBMISSIONS FILED BE FORE HAS MOSTLY REITERATED THE STAND TAKEN BY THE DEPARTMENTAL AUTH ORITIES. 9. THE LEARNED DR ON THE OTHER HAND STRONGLY SUPPOR TED THE ORDER OF THE CIT(A). 10. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND PERUSED THE MATERIAL ON RECORD AS WELL AS THE ORDERS OF THE REVENUE AUTHORITIES. IN THE EARLIER ROUND WHEN THE MATTER W AS REMITTED BACK TO THE FILE OF THE AO THE TRIBUNAL IN ITS ORDER IN IT A NO. 1028 & 1059/HYD/2007 DATED 30/09/2011 DIRECTED AS UNDER: 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIALS ON AVAILABLE ON RECORD. THE CONTENTION OF THE DEPAR TMENT IS THAT THE MONEY WAS NOT ADVANCED TO SISTER CONCERN IN THE ORDINARY COURSE OF ITS BUSINESS. THE MONEY ADVANCED TO SISTE R CONCERN IS A CAPITAL INVESTMENT AS SUCH IT IS A CAPITAL LOS S. BUT, IN OUR OPINION, THESE FACTS ARE TO BE EXAMINED BY THE LOWE R AUTHORITIES. IF THE MONIES ADVANCED IN THE ORDINARY COURSE OF THE BUSINESS OF THE ASSESSEE AND IT BECOMES BAD, IT IS TO BE ALLOWABLE AS DEDUCTION IN VIEW OF THE JUDGMENT OF T HE SPECIAL BENCH IN THE CASE OF OMAR INTERNATIONAL BANK (SA OG ) 100 ITD 285 (MUM) (SB). IF IT IS OTHERWISE, IT IS A CAPITAL LOSS AND IT CANNOT BE ALLOWED. AS SUCH, WE SET ASIDE THESE ENTI RE ISSUE TO THE FILE OF AO TO GIVE FINDINGS REGARDING THE NATUR E OF ADVANCE WHETHER IT IS IN THE CAPITAL FIELD OR IN REVENUE FI ELD AND DECIDE ACCORDINGLY. 7 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. 11. AS CAN BE SEEN FROM THE AFORESAID EXTRACTED POR TION FROM THE ORDER OF THE TRIBUNAL, THE SPECIFIC DIRECTION TO TH E AO IS TO EXAMINE WHETHER THE ADVANCE IS IN THE CAPITAL FILED OR IN T HE REVENUE FIELD. WHILE DIRECTING AS ABOVE, THE TRIBUNAL HAS ALSO OBS ERVED THAT IF THE MONIES ADVANCED ARE IN THE ORDINARY COURSE OF BUSIN ESS AND IT BECOMES BAD IT IS TO BE ALLOWED AS DEDUCTION IN VIE W OF THE ORDER OF THE SPECIAL BENCH IN CASE OF OMAN INTERNATIONAL BAN K (SAOG) 100 ITD 285 (MUM.). KEEPING IN VIEW THE AFORESAID SPECI FIC DIRECTION OF THE COORDINATE BENCH IT HAS TO BE EXAMINED WHETHER THE AO HAS COME TO A PROPER CONCLUSION WITH REGARD TO NATURE OF ADV ANCE, WHETHER CAPITAL OR REVENUE. AS CAN BE SEEN FROM THE ASSESSM ENT ORDER THE AO HAS TREATED THE ADVANCES TO BE CAPITAL IN NATURE PR IMARILY FOR THE FOLLOWING REASONS: 1. LOANS WERE MOSTLY ADVANCED TO RELATED PARTIES 2. THE ASSESSEE WHILE ADVANCING LOAN TO SISTER CONC ERNS HAS VIOLATED THE GUIDELINES OF RBI. 12. IN OUR VIEW, NONE OF THE ABOVE CONSIDERATIONS A RE RELEVANT TO COME TO A CONCLUSION REGARDING THE NATURE OF ADVANC E WHETHER CAPITAL OR REVENUE. UNDISPUTEDLY, ASSESSEE IS A NBFC REGIST ERED WITH THE RBI. THEREFORE, SO FAR AS THE NATURE OF BUSINESS OF THE ASSESSEE IS CONCERNED THERE CANNOT BE ANY DOUBT THAT MONEY LEND ING IS ONE OF ITS BUSINESS ACTIVITIES. ONLY BECAUSE IN REGULAR COURSE OF ITS MONEY LENDING BUSINESS IT HAS ALSO ADVANCED LOANS TO SIST ER CONCERNS/RELATED PARTIES, SOLELY ON THAT BASIS THE ADVANCES CANNOT BE SAID TO BE IN THE NATURE OF INVESTMENT, HENCE, COMI NG IN CAPITAL FIELD. THE DEPARTMENTAL AUTHORITIES CERTAINLY CANNOT DECID E TO WHOM THE ASSESSEE WILL ADVANCE LOAN IN ITS REGULAR COURSE OF BUSINESS. THAT CERTAINLY REMAINS WITHIN THE DISCRETION OF THE ASSE SSEE CONSIDERING THE BUSINESS EXPEDIENCY. SO FAR AS THE OTHER ALLEG ATION OF THE AO 8 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. THAT THE ASSESSEE HAS NOT ADHERED TO THE GUIDELINES OF THE RBI, IN OUR VIEW, THE AO IS NOT THE COMPETENT AUTHORITY TO DECI DE THAT ISSUE. IT IS FOR THE RBI TO TAKE A DECISION WHETHER THE ASSESSEE HAS ACTUALLY VIOLATED ANY GUIDELINES OR NOT. IN AFORESAID VIEW OF THE MATTER, THE LOANS ADVANCED BY THE ASSESSEE COULD NOT HAVE BEEN TERMED AS INVESTMENTS. THE CIT(A), IN OUR VIEW, HAS ALSO NOT PROPERLY APPRECIATED THE FACTS. HE HAS SIMPLY GOT SWAYED AWA Y BY THE OBSERVATIONS OF THE AO THAT 91% OF THE LOAN WAS TO RELATED PARTIES/SISTER CONCERNS. THERE BEING NO RESTRICTION IN ADVANCING LOAN TO SISTER CONCERNS IT CANNOT BE MADE A FACTOR TO CO NCLUDE THAT LOANS ADVANCED TO SISTER CONCERN BY ITSELF MAKE THEM INVE STMENTS. ANOTHER IMPORTANT ASPECT WHICH CANNOT BE IGNORED IS, IN RES PECT OF TWO OF THE CREDITORS I.E. M/S ELGEN(INDIA) LTD AND G. VISWANAT H RAO, THE AMOUNTS RECOVERED IN SUBSEQUENT ASSESSMENT YEAR OUT OF THE AMOUNTS CLAIMED AS BAD DEBTS WRITTEN OFF HAVE BEEN OFFERED AS INCOM E IN THE RESPECTIVE ASSESSMENT YEARS BY THE ASSESSEE. THAT BEING THE CASE, THE DISALLOWANCE OF THE SAID AMOUNT WOULD AMOUNT TO DOUBLE ADDITION. SIMILARLY IN CASE OF LOAN ADVANCED TO PRATHIMA INDU STRIES LTD., HAS BEEN TREATED AS INCOME AT THE HANDS OF THE SAID PAR TY AND WHICH STANDS CONFIRMED BY THE CIT(A). THAT BEING THE CASE , IT CANNOT BE TREATED AS INVESTMENT MADE BY THE ASSESSEE AND AGAI N ADDED AT HIS HANDS. THEREFORE CONSIDERING THE FACTS OF THE CASE IT HAS TO BE HELD, AS ADVANCES MADE BY THE ASSESSEE ARE IN REGULAR COU RSE OF ITS BUSINESS AS NBFC, THEY HAVE TO BE TREATED AS REVENU E IN NATURE. ONCE THE ADVANCES MADE ARE HELD TO BE OF REVENUE NA TURE, THEN, THE OTHER CONSEQUENCE OF CLAIM OF DEDUCTION U/S 36(1)(V II) WOULD AUTOMATICALLY FOLLOW IF THE ASSESSEE ACTUALLY HAS W RITTEN THEM OFF IN ITS BOOKS OF ACCOUNT AS BAD DEBT. THEREFORE, CONSIDERI NG THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ADDITION MADE IS NOT JUSTIFIED AND ACCORDINGLY DELE TE THE SAME. 9 ITA NO. 873/HYD/2013 PACT SECURITIES & FINANCIAL SERVICES LTD. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. PRONOUNCED IN THE OPEN COURT ON 13/08/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 13 TH AUGUST, 2014 KV COPY TO:- 1) PACT SECURITIES & FINANCIAL SERVICES LTD.,PLOT NO. 213, PRATHIMA, ROAD NO. 1, FILM NAGAR, HYDERABAD. 2) ACIT, CENTRAL CIRCLE - 1, AAYAKAR BHAVAN, BASHEE RBAG, HYDERABAD. 3) CIT(A)-I, HYDERABAD. 4) CIT(CENTRAL), HYDERABAD 5)THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDER ABAD.