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Issues involved: Assessment of deduction on account of loss due to dacoity u/s 28 and bad debts u/s 36(2)(i) for the assessment year 2001-02.
Assessment of deduction on account of loss due to dacoity: The assessee, a company engaged in the business as jewellers and bullion dealers, claimed a deduction of Rs. 60 lakhs as a result of dacoity during which cash was lost while being taken to the bank for deposit. The Assessing Officer disallowed the claim stating it did not relate to the assessment year under consideration. The Commissioner of Income-tax (Appeals) upheld the disallowance, questioning the ownership of the lost money and the genuineness of the claim. The Tribunal found that the loss belonged to another entity, Balaji Enterprises, and could not be claimed as a deduction by the assessee-company. The Tribunal emphasized that losses of one entity cannot be adjusted against the profits of another entity, as per the provisions of the Income-tax Act. The claim for deduction on account of loss due to dacoity was thus denied. Assessment of deduction as bad debts u/s 36(2)(i): The Tribunal observed that the amount of Rs. 60 lakhs, treated as an advance recoverable from Madan Jain by Umesh Chand Gupta, did not meet the conditions of being considered a bad debt u/s 36(2)(i). The amount was not a debt arising in the course of business and did not go to swell the profits of the assessee. Additionally, the alternative claim for the amount to be allowed as a business loss u/s 28 was rejected as the loss belonged to Balaji Enterprises, not the assessee. The Tribunal emphasized that losses of one entity cannot be adjusted against the profits of another entity, as per the specific provisions of the Income-tax Act. The claim for deduction as bad debts u/s 36(2)(i) was thus disallowed. In conclusion, the Tribunal confirmed the disallowance of the deduction of Rs. 60 lakhs, upholding the orders of the income-tax authorities. The appeal of the assessee was dismissed with no order as to costs.
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