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TMI Blog2011 (7) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... debtors and Rs.4,85,397/- towards time barred debts. 2. It is seen from the order of the Assessing Officer that at the time of hearing, the assessee admitted that the time barred debts claim could not be claimed as deduction in the year under consideration. As regards the disputed amount due from the debtors to the tune of Rs.4,75,307/- was concerned, it represented rebates and discounts asked for by the parties. The assessee contended that even though there were correspondences in this regard by the assessee, there was no scope for recovery and hence, it claimed deduction for the said amount. The said claim was rejected by the Officer on the ground that the same was not written off so in the Books of Accounts and hence, the said c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be allowed as a deduction only if the same had been written off in the books of the accounts of the assessee. On the admitted fact that the assessee had not written off the said amount as irrecoverable in the accounts, the claim was rejected. The assessee however made an alternative plea that its claim be considered as a trading loss. The Tribunal viewed that in order to consider the said claim as trading loss, the assessee must show that the loss occurred in the course of business or trade. The inability to recover the amount could not be considered as a trading loss. In the light of the view thus taken by the Tribunal in the order dated 27.2.2004 passed in ITA.Nos.2391 and 2392 of 1992, the assessee's contention as regards the bad de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel for the assessee submitted that even though the deduction is not admissible for the computation of the total income either as a bad debt or as an expenditure wholly incurred for the purpose of business, still, it can be allowed as a trading loss if it arises directly from carrying on the business and is incidental to the business. Thus, when the loss that had arisen herein is one during the course of business, the deduction ought to have been granted in this case even if the assessee not written off the same as bad debt as required under Section 36 of the Income Tax Act. 9. Learned counsel for the assessee also placed reliance on the decision of the Apex Court in the case of C.I.T. v. WOODWARD GOVERNOR OF INDIA P. LTD - 254 ITR 312, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relating to the transaction that the assessee had with the parties, it is seen from the contention taken by the Joint Receivers in the appeal filed before the Tribunal in ITA.Nos.2391 and 2392 of 1992, that the assessee took an alternative plea that the same be considered as a trading loss. The Tribunal rejected the plea of the assessee as regards the claim made on the strength of Section 36(vii) of the Act. However, as regards the alternative plea of the assessee to treat the claim as a trading loss, the Tribunal extended the same reasoning as available under Section 36 of the Act. We do not think the said line of reasoning has the support of any legal principle. 15. As rightly pointed out by the learned counsel for the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; " Under section 28 of the Income Tax Act in computing the income chargeable to Income Tax, a loss other than capital loss, which is merely incidental to the trade, is allowable on ordinary principle of commercial trade though it may not be allowable under any of the specific clauses either under section 36 or under section 37 of the Income Tax Act." 16. In so holding, this Court referred to the decision of the Supreme Court in the case of BADRIDAS DAGA v. C.I.T. - 34 ITR 10 holding that: " When a claim is made for a deduction for which there is no specific provision under section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions 30 to 36, the expressions 'expenses incurred' as well as 'allowances and depreciation' have also been used. The Apex Court pointed out that the expression 'expenditure' as used in Section 37 of the Income Tax Act, 1961, cover an amount which is really a 'loss' even though the said amount has not gone out from the pocket of the assessee. 18. In the background of the law declared by the Apex Court in the case of BADRIDAS DAGA v. C.I.T. - 34 ITR 10; in the case of C.I.T. v. WOODWARD GOVERNOR OF INDIA P. LTD - 254 ITR 312, and that of this Court in the case of C.I.T v. INDEN BISELERS 181 ITR 69, given the fact that the assessee had taken an alternative plea that the claim has to be considered as a trading loss, the question is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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