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TMI Blog2018 (5) TMI 508X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/12/2008 NIL 19/11/2010 2007-08 25/10/2007 NIL 29/12/2009 Loss Rs. 788.3 04/07/2011 2008-09 27/09/2010 NIL 09/04/2010 Rs.13.63 crores 02/09/2011 2.During the course of hearing before us,the Authorised Representative(AR)and the Department -al Representative(DR)agreed that following issue stand covered by the orders of the Tribunal for the AY.2001-02(ITA/3949/Mum/2005/ITA/4269/Mum/2005,AY.2001-02,dtd.08/07/2016)or for the AY.s2002-03 to AY.2006-06(ITA.s/3605 & 6931/Mum/2006,ITA./5177/Mum/2009 and ITA/9163/Mum/2010,Dated 29.09.2017).We are tabulating the issues and the grounds covered by the above mentioned two orders. Issue & GOA Decided by ITA,AY. Pg. & Para Decision Interest on incremental loans given to subsidiaries/ Sister concerns after 31.05.1996.(Gs.AO 1 and 2 for the all the three AY.s.). ITA.s AY. 2001-02 Pg.5-15, Para 5-13 Favouring Assessee Disallowance u/s. 14 A of the Act (Gs.AO 3-6, 3-5 and 3-5 for the AY. 06-07,07-08 and 08-09 respective -ly) ITA.s AY. 2001-02 Pg.15-19 Para 14-20 Favouring Assessee 2.1.Now,we will be tabulating the Gs.AO decided,in the appeals filed by the AO,for the earlier AY.s. Issue & GOA Decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO had rightly held that advances written of could not be allowed u/s. 36 of the Act. He referred to the cases of Basumal Jagat Narayan(38 ITR 447),United Breweries Ltd(321 ITR 446),Greaves Ltd.(251 ITR 190),Wheel and Rim India Ltd (275 ITR 648) and held that losses incidental to business were allowable as deduction despite their being no specific provision for the same, that if there was a direct and proximate nexus between the business operation and the loss,the loss had to be allowed,that the case of the assessee fell under the head business loss and not under the head bad debts,that the parameters for treating business loss and bad debts were different,that in order to claim business loss the assessee had to produce sufficient evidence as to how and what circumstances it had incurred losses,that it had not produced sufficient evidence before the AO or during the appellate proceed -ings for claiming business losses,that the claim could not be entertained.Finally,he upheld the order of the AO. 3.3. Before us,the AR stated that the advances written off included i)travel advances given to the employees, ii)deposits for industrial gas cylinders/LPG gas cylinders/telephone/rent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals of the Revenue. 12. Revenue has taken common grounds for both the assessment years involved. Its grievance is that ld. CIT(Appeals) deleted disallowance of advance write-off made by the assessee. Such advances given to farmers were for supply of raw materials. As per the Revenue, decision of Hon'ble Apex Court in the case of CIT v. Mysore Sugar Co. Ltd. (46 ITR 649) relied on by ld. CIT(Appeals) was not applicable on facts. 13. Short facts apropos are that assessee in its Profit and Loss account for the impugned assessment years debited under the head "irrecoverable advances from farmers" Rs. 39,44,289/- and Rs. 33,38,074/- respectively. As per the assessee, these amounts were given to farmers for supply of raw materials/agricultural produce to the assessee. Since such raw materials were not supplied by the farmers, Vice President of the assessee-company had taken a conscious decision in consultation with the management to write-off the amounts. However, A.O. was of the opinion that the above mentioned write-off was claimed by the assessee under the head "selling and distribution expenses", but, such expenses were, as per admission of the assessee itself, incurred for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not received on such advances, it would definitely be a loss to the assessee and such loss would lie in revenue field only. As held by Hon'ble Apex Court in the case of CIT v. Woodward Governor India P. Ltd. (312 ITR 254), the expression "any expenditure" used in Section 37 of the Act cover both "expenses incurred" as well as loss even if the "loss" amount had not gone out of the pocket of the assessee. Hon'ble Apex Court also observed that business losses are deductible u/s. 37(1) of the Act on the basis of ordinary principles of commercial accounting. We are of the opinion that the advances having failed, assessee was very much right in effecting a writeoff. Though the learned D.R. argued that part of advances written off might have been of the same year, nothing was placed on record to substantiate this contention. We are, therefore, of the opinion that ld. CIT(Appeals) was justified in deleting the disallowances made by the A.O. in this regard. 18. In the result, both the appeals filed by the Revenue are dismissed." Here,we would also like to refer to the writ petition of Madhav Marbles (362 ITR 647 ) wherein the Hon'ble Rajasthan High Court has held as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets". So long as the outstanding debt is shown on the assets side of the balance-sheet, there is no question of claiming the same as deduction from profits and gains of the business computed u/s. 28 of the Income-tax Act. It is only when such a debt or advance turns bad or irrecoverable in the opinion of the assessee, as per the amendment in law after April 1, 1989, a simple book keeping entry to write off the same is enough to entitle the assessee to claim such a deduction. It is not in dispute from the side of the Revenue that such a write off entry was made in the present case by the assessee in its books of accounts. In case even after such a writing off entry is made, if the assessee recovers back any part of such bad debts, it will naturally be credited again in his books and will be taxed in the year of its receipt on recovery. 18. Therefore, going into the requirement of the assessee not establishing the nexus of the advances with his business and computation of profit in the relevant year is of no consequence (emphasis added)and the position of law as obtaining prior to April 1, 1989, has simply changed after April 1, 1989, and the hon'ble Supreme Court decision a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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