ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2(3), BENGALURU, BENGALURU vs. AGNUS HOLDINGS PRIVATE LIMITED, BENGALURU

PER PRASHANT MAHARISHI, VICE – PRESIDENT 1. This appeal is filed by the ACIT, Central Circle 2(3), Bengaluru [ld. AO] for the AY 2018-19 against the appellate order passed by the ld. CIT(Appeals)- 15, Bengaluru [ld. CIT(A)] dated 18.8.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 147 of the Income Tax Act, 1961 [the Act] dated 27.3.2022 was passed making disallowance of

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Rs.2,25,00,000 being the advances written off which was deleted by the ld. CIT(A) vide para 18 of his appellate order. 2. The ld. AO is aggrieved and has raised the following grounds of appeal:-

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made of Rs.42,98,095 which was deleted by the ld. CIT(A) and the same is not in challenge before us. 4. As per para 6 of the assessment order the ld. AO noted that assessee has claimed advances written off amounting to Rs.2.25 Crores for which a show cause notice was issued on 8.3.2022 asking the assessee to furnish the details of expenditure along with ledger and supporting documents. The assessee submitted reply on 23.3.2022. The ld. AO perused the same wherein it was claimed that these advances were made in the course of business, however as the assessee failed to submit proof of the same and further he found that assessee is borrowing loans and diverting these loans for making investments or giving interest-free loans to various persons and assessee is not deriving any business receipts from sale of such investments, therefore he rejected the claim of the assessee for the reason that assessee has failed to establish the advances given for business purposes. It was further stated that advances are capital in nature and write off of the same cannot be claimed as revenue expenditure. Accordingly Rs.2.25 Crores was disallowed by passing an assessment order on 27.3.2022. 5. The assessee preferred appeal against the above disallowance. Before the ld. CIT(A), assessee contested that advances were made in due course of business which was advanced to Mr. Kannan Ramanujam during FY 2009- 10 in the ordinary course of business. Subsequently it has come to the knowledge of the assessee that his business was running into losses and therefore he could not serve the interest and repayment as per the terms agreed upon. Subsequently it was found that he had defaulted repayment of loans from the companies, banks and other sources. To support its case, the Balance Sheet of the company was also submitted. Thus it was stated that as the said companies were incurring losses, the assessee has written off the above loans in the books of account and claimed as bad debt. The assessee also referred to the Memorandum of Association that assessee is

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carrying on business of financing and investments out of the borrowed funds since last 11 years. The assessment order for AY 2008-09 was also shown that assessee is engaged in the business of investment, finance & trading of shares. Therefore, the claim of the assessee is that the losses were advances in the ordinary course of business. It was further stated that the auditor has also stated that the assessee is required to be registered as Non-Banking Finance Company. The assessee has also shown the object clause of the Memorandum wherein it was found that the object of the assessee was also to lend money. The assessee supported the claim by relying on the decision of Hon’ble Supreme Court in the case of PCIT v. Shapoorji Pallonji & Co. Ltd., 165 taxmann.com 708. 6. The ld. CIT(A) after perusing the above reasons held that the Hon’ble Karnataka High Court in the case of Pranava Electronics Pvt. Ltd. v. DCIT, 124 taxmann.com 242 and further relying on the decision of the Hon’ble Supreme Court in the case of TRF Ltd. v. CIT, 323 ITR 397 held that assessee has met the requirements of section 36(1)(vii) of the Act and deleted the disallowance. 7. The ld. AO is aggrieved. The ld. JCIT, Shri N. Balusamy, Sr. DR, vehemently supported the order of the ld. AO and Shri Padam Chand Khincha, CA, the ld. AR relied upon the order of the ld. CIT(A). He further placed on record the Paperbook containing 489 pages to support his case. 8. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The ld. DR reiterated the grounds of appeal stating that the case of the assessee is distinguishable from the decisions relied on by the ld. CIT(A), whereas the Memorandum of Articles did not mention the advancing of loan as business activity of the assessee company. 9. The ld. CIT(A) has dealt this issue at para 18 of his order as under:-

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Rs.509,651,120 and Rs.1611,236,645 as on 31.3.2017. Thus, it is clear that loans & advances given by the assessee is in the course of business of the assessee. If these items are written off as bad debts in view of the decision of the Hon’ble Supreme Court in the case of TRF Ltd. v. CIT, 323 ITR 37 deserves to be allowed as bad debt written off. Thus the advances have become bad, this has been written off, such advances were given in the ordinary course of business and hence the same is allowable. The ld. DR could not controvert the findings of the ld. CIT(A). Accordingly we confirm the order of the ld. CIT(A) and dismiss all the 3 grounds against which the above disallowance is raised by the ld. AO. 11. In the result, the appeal filed by the ld. AO is dismissed.

Pronounced in the open court on this 26th day of May, 2026.

Sd/- Sd/-

( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT

Bangalore, Dated, the 26th May, 2026.

TNTS/Desai S Murthy /

Copy to:

By order

Assistant Registrar ITAT, Bangalore.