9911796707
TMI Blog1987 (9) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year of the assessee relevant to the asst. yr. 1976-77 ended on 31st May, 1975 and relevant to the asst. yr. 1977-78 ended on 31st May, 1976. In the asst. yr. 1976-77 the assessee processed goods for MICO and debited Rs. 2,19,040 as service charges realisable to the account of MICO and credited the same to the profit and loss account under the head "miscellaneous receipts". Payment of the said amount was disputed by MICO to the extent of Rs. 1,20,201. MICO sent a debit note for Rs. 1,20,201 to the assessee on 27th Oct., 1975, that is to say, after the end of the previous year relevant to the asst. yr. 1976-77. The assessee claimed deduction of Rs. 1,20,201 from its profits for the asst. yr. 1976-77, but it was denied by all the authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or as a trading loss in the instant year. The order of the CIT(A) allowing the said claim is, therefore, set aside and the issue is referred back to the ITO for fresh decision according to law with advertence to the observations made above. 6. The facts relating to Rs. 68,098 are these: "MC Karnpur was subsidiary of the assessee company. It had deposited certain amount in 1964 with the assessee company as security deposit and Rs. 68,098 stood as credit balance in the account of the subsidiary. The subsidiary went into liquidation. The assessee squared off the account of the subsidiary in the asst. yr. 1973-74 by debiting Rs. 68,098 to its account and crediting the same amount to the profit loss account. However the assessee was req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 68,098 ceased did not ultimately come out to be true and as a result of which what was treated as deemed profit in the asst. yr. 1973-74 turned into loss in the asst. yr. 1977-78. The loss is connected with the business and is not foreign thereto. While taking it as deemed profit under s. 41(1) in the asst. yr. 1973-74, it was treated as cessation of trading liability. The revival of the liability therefore must be taken as trading loss. Trading loss may be of any type and if it springs out of the business whose profits are being computed it has to be taken into account while computing the profits. Loss suffered due to mistake in business transactions like excess payment is taken as a business loss. Similarly, subsequent revival of a tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xclusively for the purpose of such business..." occurring in either of the two provisions has not been able to take within its ambit loss of property or money by theft or dacoity as it is not an expenditure which has an element of volition, but a forced loss. The cases have laid down that such a loss is a trading loss in the commercial sense and has got to be taken into account for ascertainment of true taxable profits." 9. In the instant case, as stated above, the assessee was required to part with money which was taken as its income because of its own mistaken belief. Thus, what was taken as deemed profit in the asst. yr. 1973-74 must be taken as a deemed trading loss in the instant assessment year when the mistake was realised and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there remained unrealisable balance of Rs. 3,91,061 which was written off in the instant assessment year. He thus claimed deduction of Rs. 5,46,768 either as a bad debt or as a trading loss. The assessee was unable to explain these claims before the ITO. It was stated by the assessee in its letter dt. 24th Feb., 1983 addressed to the ITO that for the balance amount of Rs. 6,71,627 the relevant files were misplaced in the heaps of files maintained by their sales Department and the supporting documents for the balance amount were under the scrutiny of the Chartered Accountants M/s L.B. Jha Co. who were expected to submit the report soon. No such report was submitted either before the ITO or the CIT(A) and, therefore, the disallowance w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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