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TMI Blog2015 (6) TMI 1239X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that the amount was receivable from Century Wood Limited and interests were charged as on 31.03.2001 and the entire amount receivable as on 31.03.2001 was a loan. Once the assessee itself treated it as loan, now it cannot be said that it is a trade advance. The assessee has not able to produce any material to show that it is a trade advance - we hold that the claim of the assessee cannot be allowed as trade advance and the same was rightly treated by the Assessing Officer as capital loss, which was confirmed by the ld. CIT(A). Alternative ground raised by the assessee that under section 37 of the Act it is a business loss - We find that the assessee is not in the business of money lending. The assessee also not able to explain as to why it has advanced various amounts in different dates and it has not able to correlate the amount given and the material i.e. wood frame the assessee wanted to purchase from Century Wood Limited. Under these circumstances of the case, we are of the opinion that it is not relating to the business of the assessee and it is only a capital loss. Accordingly, the alternative ground raised by the assessee is rejected. - ITA No. 575/Mds./2015 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4,162/- on 31.12.1998 and 31.03.1999 respectively. They had given temporary loan of Rs. 10 lakhs each on 23.04.1998 and 13.06.1998 and the same has been received back on 04.05.1998 and 24.06.1998 respectively and whatever payment represented loan, the same has been repaid and the remaining amount represented trade advances. Century Wood Limited did not supply wood frames to cover the advance money outstanding as on 01.04.2000 of Rs. 41,29,127/- and they did not return the money. Hence, they charged the interest of Rs. 4,12,913/- on outstanding amount of Rs. 41,29,127/-. The charging of interest does not indicate that the amount outstanding represented loan. As the amount of Rs. 69,58,763/- right from 31.03.2003 could not be recovered, the same was written off and claimed and their claim is allowable under section 37 of the Act. 3. The Assessing Officer, after considering the explanation of the assessee, has observed that it was stated that they purchased the woods for Rs. 53,61,090/- and Rs. 12,84,192/- on 31.12.1998 and 31.03.1999 respectively and noticed from the account copy of Century Wood Limited in the books of the assessee that the amount receivable as on 01.04.2000 of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... travelling 6,010 14.07.2000 Amount paid 20,000 24.11.2000 Amount paid as advance for purchase 5,00,000 24.11.2000 Amount paid as advance for purchase 1,65,000 04.12.2000 Amount paid as advance for purchase 5,00,000 11.12.2001 Amount paid as advance for purchase 5,00,000 11.12.2000 Amount paid as advance for purchase 75,000 02.01.2001 Amount paid as advance for purchase 5,30,712 09.01.2001 Amount paid as advance for purchase 50,000 12.02.2001 Amount paid as advance for purchase 10,000 13.03.2001 Amount paid as advance for purchase 20,000 13.03.2001 Amount paid as advance for purchase 30,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed. 7. The assessee carried the matter in appeal before the ld. CIT(A) and reiterated the submissions as made before the Assessing Officer. The ld. CIT(A), after considering the submissions of the assessee, dismissed the appeal of the assessee by observing as under: In the course of appellate proceedings, the AR of the appellant reiterated the submissions made before the AO vide his letter dated 27.12.2012. I have considered the findings of the AO, and also submissions made before the undersigned carefully. The AO elaborately discussed in the assessment order explaining how the amount of disallowance made was not related to advances for supply of wooden frames. The AO also held in the assessment order that amount receivable as on 01.04.2000 of Rs. 41,29,127/- was treated by the assessee itself as a loan receivable and interest was also charged on the loan amount. The treatment made by the appellant with respect to this transaction was continued till the accounting year relevant to A.Y. under consideration. No material was purchased by the appellant after 01.04.2000 i.e. the date on which the amount was treated by the appellant in his books of accounts as loan receivable. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the amount given by the assessee as trade advance and it had to be treated as a bad debt and it has to be covered under section 36(1)(vii) of the Act. Alternatively, he has submitted that it has to be treated as a business loss. He has also relied on the decision in the case of Commissioner Of Income-Tax v. Southern Polymers P. Ltd. [2011] 229 ITR 540 (Mad.). 10. On the other hand, the ld. DR strongly supported the orders of authorities below and submitted that it is a capital loss and not a business loss. He has also submitted that the appeal filed by the assessee may be dismissed. 11. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal in respect of the amount outstanding from Century Wood Limited amounting to Rs. 41,29,127/- is, whether the advance is capital loss or business loss. In the assessment order, the Assessing Officer has observed from the ledger account copies of the assessee that the amount receivable by the assessee as on 01.04.2000 was 41,29,127/-. The assessee charged an amount of Rs. 4,12,913/- as on 31.03.2001 towards interest holding that the entire amount receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o purchase from Century Wood Limited. Under these circumstances of the case, we are of the opinion that it is not relating to the business of the assessee and it is only a capital loss. Accordingly, the alternative ground raised by the assessee is rejected. 13. So far as case law relied on by the assessee in the case of CIT v. Integrated Finance Co. Ltd. [2011] 339 ITR 391/[2012] 20 taxmann.com 526 (Mad.) , the Hon'ble High Court has considered the facts that the assessee advanced money to the manufacturing company for the purchase of machinery. On the advance thus made, for the delay in delivery, the manufacturing company was stated to have been paid interest and the advance paid was adjusted against the purchase price. In the present case, the assessee has failed to show that the advance paid by the assessee was for the purpose of trade advance. That apart, the assessee has recorded in the ledger account as a loan. Once the assessee itself has treated it as loan and interest received, it cannot be said that it is for the purpose of business. There is no material placed before us to show that the amount advanced is for the purpose of purchase of materials from Century Wood ..... X X X X Extracts X X X X X X X X Extracts X X X X
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