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Issues:
- Whether the loss of Rs. 6,249 can be claimed as a business loss. Analysis: The appellant failed to hand over the levy imposed by the State Government, resulting in the confiscation of 92 bags of rice worth Rs. 8,526. Despite the appellant's claim of this amount as a business loss for the assessment year 1974-75, the assessing authority denied the claim. The appellant then appealed to the AAC, citing the loss incurred in the course of business. The AAC upheld the addition, leading to the current appeal before the tribunal. The appellant's counsel argued that the loss of Rs. 6,249 was part of conducting business. Reference was made to the Orissa High Court's decision in Govinda Choudhary and Sons, where a penalty paid for supplying inferior quality goods was considered deductible. Similarly, in Commissioner of Income-tax vs. Prafulla Kumar Mallick, it was held that damages paid due to breach of warranty in the course of business were deductible. The appellant's situation, where paddy was confiscated due to external circumstances, was likened to these cases. The tribunal agreed that the confiscated paddy's value could be claimed as an admissible deduction under section 10(1) of the Income Tax Act, 1922. The tribunal allowed the appeal, acknowledging the connection between the loss incurred and the appellant's business activities. By drawing parallels to relevant legal precedents, the tribunal concluded that the confiscated paddy's value could be considered a deductible business loss. The decision highlighted the necessity of considering the circumstances under which losses occur in relation to the regular course of business operations.
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