“Principal” portion out of the lease rental which becomes irrecoverable can be claimed as “bad-debts”:

Assessee, engaged in the business of leasing and hire purchase of equipment, investment, trading of shares and securities, etc., claimed certain sum as “Bad-debts” during the year under consideration. AO allowed the “Interest” portion of hire and lease charges out of total bad-debts but disallowed the “Principal” portion on the count that the said amount was never offered as income. Hon’ble ITAT observed that “Interest” portion of lease rental was duly offered as income. Such interest is a part of debt and hence, part of the debt has been taken into account in computation of income. Accordingly, conditions stipulated in S.36(2) stands satisfied. Hence, the assessee was eligible for deduction in respect of such bad-debts and accordingly, the impugned disallowance was deleted.