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Reading out conditions in grant of deduction for bad debts the Bombay High court in (2021) 439ITR 399 found that the assessee having lent monies to its sister concern did accrue interest on the same in one year and that according to the Court was good enough reason to allow deduction of both principal and interest sum as bad debt notwithstanding whether or not the assessee has been into the business of lending which is one of the two conditions to be satisfied under the law.

In this case the interest income is found assessed to tax under the head business in earlier years which perhaps also would suggest the lending of money in the ordinary course of business.

It is thus always wise to provide for some interest on any money lending transaction to avail benefit later in the event of writing it off entirely or part thereof.

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