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TMI Blog2013 (2) TMI 324X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Such a loss cannot be treated as a business expenditure in the present year for the reason that the assessee is mainly carrying out agency business for various machinery component and accessories from which it gets certain percentage of income and any expenditure relating to agency business can be claimed in relation to such income. For claiming such expenses, the year of incurring of expenses is important in the method of "Cash System Accounting", therefore, such a loss which has been recognized in this year due to above facts, has to be allowed as a business loss. Thus, the amount of Rs. 14,35,644, though cannot be allowed as bad debt written-off but can definitely be allowed as a business loss - in favour of assessee. Computation of capital gains - sale consideration u/s. 50C being value adopted by the Stamp Duty Authority (SDA) OR actual sale consideration adopted by the appellant - Held that:- The provisions of clause (a) of sub-section (2) of section 50C, provides that where the assessee claims before the Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub-section (1) exceeds the fair market value of the property as on the dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2873/Mum./2011, for assessment year 2003-04. The sole ground raised by the assessee, reads as follows:- "1. The learned CIT(A) has erred in disallowing non-recoverable balance written off of Rs. 14,35,644 being expenses incurred on behalf of the principal on the ground that the appellant is not obliged to incur these expenses and that it follows cash system of accounting. On the basis of the facts and circumstances of the case, non-recoverable balance written off of Rs.14,35,644 out to be allowed either as bad debt under section 36(1)(vii) or as business expenses under section 37 of the Act." 2. Briefly stated the facts of the case are that during the course of assessment proceedings, the Assessing Officer noted that in the Profit Loss Account, the assessee has debited a sum of Rs. 15,79,917, on account of non-recoverable balance written-off. Since the assessee was following the method of "Cash System Accounting", wherein the income is recognized upon "Receipt Basis" and expenditure is debited as and when paid, therefore, there was no question of sundry debtors and sundry creditors were written-off. Accordingly, a show cause notice was issued as to why such a claim should n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration, as Motex did not have any commercial future and Its net worth was virtually eroded. Accordingly the assessee wrote off the amount irrecoverable against the exhibition expenses. It was submitted that the assessee had incurred expenses on behalf of Motex in the ordinary course of business and the same had to be written off on account of commercial expediency. Therefore, the write off by the assessee was incidental to the business of the assessee company. In this connection it relied on the decision of CIT v. Inden Biselers [1990] 181 ITR 69 wherein it has been held that non recovery of advances is a trading loss if it arose directly from the carrying on of the business and is allowable as trading loss being incidental to the business of the assessee. In view of the above, since the write off was dictated by commercial consideration, the same may kindly be allowed as expenses incidental to the business u/s. 37(1) of the Act. The Assessing Officer, however, rejected the same and disallowed he entire amount. 3. The Commissioner (Appeals) too rejected the contentions of the assessee and held that insofar as the assessee's claim of bad debt is concerned, the same i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture on account of exhibition on behalf of various principals including that of Motex Engineering Co. P. Ltd. The issue for our adjudication is, whether such non-recovery of expenditure from Motex Engineering Co. P. Ltd., can be claimed as a loss or expenditure in this year. It is also admitted fact that the assessee is following the method of "Cash System of Accounting" since last several years. Therefore, in such circumstances, such an expenditure cannot be allowed as bad debt under section 36(1)(vii) r/w section 36(2). Now, coming to the issue as to whether such a claim can be allowed as a business loss or not. 7. For claiming a loss, it is essential that the same should be on revenue account and must have been incurred during the course of carrying on business or profession during the year. Such a loss is allowable while computing the income under section 28. In the present case, the incurring of expenditure by the assessee on behalf of its principal was part of its business practice which it has been following regularly, therefore, at the time of incurrence, it was in the course of its business activities only. This loss has been incurred only in a particular case when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpugned order passed by the Commissioner (Appeals) and allow the ground raised by the assessee is treated as allowed. 9. In the result, assessee's appeal is allowed. We now proceed to disposes off the appeal in ITA no. 2874/Mum./2011, for assessment year 2005-06, on the following grounds:- "1. Learned CIT(A) has erred in confirming the action of the Assessing Officer in computing the capital gains in respect of property situated at Maker Chamber-IV, Nariman Point, Mumbai (the property) by adopting sale consideration at Rs. 5,40,99,000/- u/s. 50C being value adopted by the Stamp Duty Authority (SDA) as against actual sale consideration of Rs. 4,30,00,000/- adopted by the appellant.. On the facts and circumstances of the case and in law, the Learned CIT(A) ought to have upheld the contention of the appellant that the actual sale consideration of Rs. 4,30,00,000/- adopted by the appellant and duly supported by the report of a recognised valuer ought to be taken as sale consideration for the purpose of computation of capital gain. 2. Learned CIT(A) has erred in dismissing the ground relating to the Assessing Officer adding an amount of Rs. 13,80,000/- to the income of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. In support of this contention, various decisions were relied upon which has been incorporated in Para-12 of the appellate order. The Commissioner (Appeals) did not accept the assessee's contention and dismiss the assessee's ground on the following observation and holding as under:- "13. I do not agree with the submissions of the authorised representative. I find that provisions of section 50C are mandatory as the word used in section 50C is "shall" which means the valuation made by the stamp duty authority is binding on the A.O. Although there is a provision that the A.O. may refer the matter to valuation officer if the assessee objects to the valuation made by the stamp duty authority still he has to accept the valuation made by the stamp duty authority in view of the binding nature of provision of section 50C. According, I hold that A.O. is justified in computing the capital gain on the basis of valuation made by the stamp duty authority. The case laws relied by the assessee are distinguishable on facts. This ground of appeal is dismissed." 12. Thus, the Commissioner (Appeals), though agreed that the Assessing Officer may refer the matter to the valuation officer if the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms of sub-section (2) of section 50C. Accordingly, the matter is restored back to the file of the Assessing Officer who shall make a reference to the Valuation Officer and to get an estimate of fair market value for determining the valuation of the asset which is the subject matter of sale. Consequently, we set aside the impugned order passed by the Commissioner (Appeals) and restore the matter to the file of the Assessing Officer. Accordingly, ground no.1, is hereby treated as allowed for statistical purposes in accordance with the aforestated directions given by us. 16. In ground no. 2, the assessee has challenged the addition of Rs. 13,18,00,000, under section 68 of the Act. 17. The Assessing Officer, in the course of assessment proceedings, noted that the assessee had sold flat No. 817, in Delhi for Rs. 13,80,000, and after claiming indexed cost and selling expenses, has claimed long term capital gain of Rs. 21,82,830. The Assessing Officer treated the said amount of Rs. 13,18,000, as deemed income under section 68, which was credited in the books of account on the ground that the assessee has failed to bring any evidence on record that it was on account of sale of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X
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