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TMI Blog2024 (1) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... selves to subscribe to the view taken by the lower authorities who had declined the assessee s claim for the deduction, set aside the order of the CIT(Appeals) and vacate the disallowance - Decided in favour of assessee. - Shri Ravish Sood, Judicial Member And Shri Arun Khodpia, Accountant Member For the Assessee : Shri R.B. Doshi, C.A. For the Revenue : Shri Satya Prakash Sharma, Sr.DR ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), dated 19.06.2023, which in turn arises from the order passed by the A.O. u/s. 143(3) of the Income-tax Act, 1961 (for short Act ), dated 31.12.2016 for A.Y. 2015-16. The assessee company has assailed the impugned order on the following grounds of appeal before us: 1. Ld. CIT(A) erred in confirming the disallowance of Rs. 27,67,124/- made by AO on account of advance/balance written off claimed by the appellant as deduction. The disallowance made by AO and confirmed by Ld. CIT(A) is arbitrary, illegal and not justified. 2. The appellant reserves the right to add, amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t against Shri Ashutosh Gupta and then had written off the balance in company's books of account. The appellant has relied upon judicial decisions. The AO was reasonable in allowing bad debts of Rs. 3,03,458/- u/s 36(1)(vii) as the same was offered as income in earlier years but the balance amount of Rs. 27,67,124/- was not offered as income and has not given any convincing justification and further efforts for recovery including status and fate of FIR to the AO. Further, the same cannot be considered as allowable expenditure u/s 37. Reliance is placed on rationale held in the cases of:- 1. PCIT vs. Khyati Realtors Pvt. Ltd. 141 taxmann.com 461 (2022) (SC) where the appellant failed to prove that amount paid to developer as advance for booking commercial space was in the ordinary course of business section 36(1)(vii) r.w.s. 28(i). 2. Elite International Pvt. Ltd. vs. ACIT 83 taxmann.com 213 (Mum-ITAT) (2017) Assessee could not produce any evidence to show that supplier refused to pay outstanding amount or denied their liability in any manner, assessee's claim could not be allowed. 3. South India Surgical Company Ltd. vs. ACIT 153 taxman 491 (Madras) (2006). I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s claim for deduction of the amount of advance given to Shri Ashutosh Gupta (supra) for purchase of land, i.e., stock-in-trade, on having been rendered as irrecoverable was rightly claimed as a business loss. Admittedly, it is a matter of fact borne from the record that the assessee company had written off the aforesaid amount as irrecoverable in its books of account. Although we concur with the A.O that the aforesaid amount of Rs. 27.67 lacs which had become irrecoverable was not allowable as a bad debt for the reason that the said amount was at no stage on an earlier occasion offered by the assessee as its income, at the same time, we cannot remain oblivion of the fact that the same being in the nature of a loss incidental to the carrying of its business, thus, was allowable as a deduction for arriving at its true income. Considering the fact that the assessee had suffered the loss of the amount that was advanced by him to Shri Ashutosh Gupta (supra), a commission agent, for the purchase of certain agricultural land as stock-in-trade of its business, we find substance in the claim of the Ld. AR that the said amount, having been rendered as irrecoverable, was rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of blende, a new Company called the) Welsh Crown Spelter 'Company was formed, which received-assistance from the English Company in the shape of advances on loan. Later, the English Company was required to write off pound 38,000 odd. The question arose whether the advance could be said to an investment of capital, because if they were, the English Company would have no right to deduct the amount. If on the other hand, it was money employed for the business it could be deducted... Bray, J. who considered these questions, observed: If this were an ordinary business transaction of a contrary by which the Welsh Company were to deliver certain trend, it may be at prices to be settled hereafter, and that this was really nothing more than an advance on account of the price of that blend, there would be a great deal to be said in favour of the Appellants It is impossible to look upon this as an ordinary business transaction of an advance against goods to be delivered I can come to no other conclusion but that this was an investment of capital in the Welsh Company and was not an ordinary trade transaction of an advance against goods.......... The second case, Charles Marsdon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f capital at all. 7. These cases illustrate the distinction between an expenditure by way of investment and an expenditure in the course of business, which we have described as current expenditure. The first may truly be regarded as on the capital side but not the second. Applying this test to this simple case, it is quite obvious which it is. The amount was an advanced against price of one crop. The Oppigedars were to get the assistance not as an investment by the assessee company in its agriculture, but only as an advance payment of price. The amount, so far as the assessee Company was concerned., represented the current expenditure towards the purchase of sugarcane, and it makes no difference that the sugarcane thus purchased was grown by the Oppigedars with the seedlings, fertiliser and money taken on account from the assessee Company. In so far as the assessee Company was concerned, it was doing no more than making a forward arrangement for the next year's crop and paying an amount in advance out of the price, so that the growing of the crop may not suffer due to want of funds in the hands of the growers. There was hardly any, element of investment which contemplates mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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