9911796707
TMI Blog1984 (7) TMI 155X X X X Extracts X X X X X X X X Extracts X X X X ..... added back by the ITO on the ground that there is no provision under the Income-tax Act for such allowance. The first appellate authority confirmed the addition primarily on the ground that the claim against the FCI was not brought to tax and that, therefore, the possibility of expenditure when such claim was not accepted cannot arise. In other words, he was not satisfied that the claims had entered the computation of income in earlier years, a point not taken up by the ITO himself. 3. The learned representative for the assessee took us over the past accounts to show that the claims were taken into account in the computation of the assessee's income. He pointed out that the FCI recognised the assessee's claim partly and that it was only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------ ------------------- 57,305.55 62,881,19 7. Less credit balance of handling charges---wheat and wheat products ---- ---- ---- 2,722.24 ---------------------- ------------------- Net carried to P L A/c 57,305.00 60,160.00 ---------------------- ------------------- It may be seen therefrom that the wheat transport charges alone, with which we are concerned, were Rs. 27,467.02 and Rs. 33,401.64 for the two years. The manner in which they were reckoned for the two years are as below : WHEAT TRANSPORT CHARGES C. Y. 1975 C. Y. 1976 C. Y. 1975 C. Y. 1976 Rs. Rs. Rs. Rs. Actual expenditure during the year 86,905.30 1,21,898.96 Less : Amount realised during the year 18,537,8 47,480.02 Amount credited b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same was certainly taken by the assessee without any ' adjustment ' by the ITO. It is clear that the assessee would have been entitled to larger deductions of Rs. 40,900 and Rs. 41,017 for C.Y. 1975 and 1976, respectively, but for its refraining to claim the same as on the assumption that it would be reimbursed by the FCI to this extent. The aggregate of the two sums Rs. 40,900.60 and 41,017.30 being Rs. 81,918 was the subject-matter of ' representations ' according to the FCI and ' dispute ' according to the assessee as between the FCI and all Roller Flour Mills represented by Regional Associations and Federation. It was only on 18-7-1977 that the assessee received communication from FCI that the matter was considered by the Ministry (Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed to consider the ' legal ' argument of the ITO reiterated by the learned departmental representative that there is no provision in law for allowance of deduction of such amounts. 5. We have found that the amount of Rs. 47,590 was taken on credit as realisable reimbursement of business expenditure in computation of the assessee's income for the assessment years 1976-77 and 1977-78. The amount was found to be not realisable for the first time during the accounting year relevant to the assessment year under consideration. It was clearly a trade debt which was found to be unrealisable. The learned departmental representative's argument that it is a case of remission of debt by the assessee is not factually correct because the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as a loss incidental to business inasmuch as the claim itself arose in the course of business. As long as loss is connected with the business and is of non-capital nature, it has to be allowed as a business deduction, though it may not be possible to treat it strictly as business expenditure. It has been so held by the Supreme Court in Badridas Daga v. CIT [1958] 34 ITR 10 and CIT v. Nainital Bank Ltd. [1965] 55 ITR 707. Even if the assessee had not accepted the decision communicated to it and had not written off this amount in its accounts, it would appear that the assessee would be entitled to claim this amount even as a disputed liability, where mercantile system of accounting has been adopted. The Allahabad High Court in CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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