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2013 (2) TMI 324 - AT - Income TaxNon-recoverable balance written off disallowed - allowed either as bad debt under section 36(1)(vii) or as business expenses under section 37 - assessee following a method of "Cash System Accounting" - Held that:- Such an expenditure cannot be allowed as bad debt under section 36(1)(vii) r/w section 36(2). Once the assessee has incurred expenditure on behalf of its principal and after making its efforts could not recover the said expenditure, this will result into a loss only and such a loss can be claimed in the year when the assessee was quite ascertained that the same could not be recovered. The party herein this case from whom the amount has to be recovered was in financial stringency and so much so that the joint venture agreement through which the said company (Motex) was formed got terminated in this year. It was due to this reason that the assessee can be said to have incurred the loss in this year only. Even when the assessee is following the method of "Cash System of Accounting",such a loss which is on account of trading or business cannot be disallowed. 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 date of transfer, the AO may refer the valuation of the capital asset to a valuation officer and once such a reference is made, the Assessing Officer is bound by such a valuation in terms of provisions of section 16A(1). In the present case, the assessee has objected to such valuation adopted by the stamp valuation authority and has also filed the copy of valuation report by an approved valuer. Therefore, the AO was required to make a reference to the valuation officer in terms 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 - in favour of assessee for statistical purposes. Addition u/s 68 - Held that:- The addition made by the AO is wholly erroneous as the assessee has filed a copy of sale agreements in respect of sale of flats wherein it has been mentioned that the said property has been sold for a total sale consideration of Rs.13,80,000. Once the money has been received by way of sale of a property duly mentioned in the sale agreement, it cannot be held that the same remains unexplained. Even the Commissioner (Appeals) has not cared to go through the order passed under section 154, wherein the AO has rejected this contention on the ground that the matter is sub-judice before the Commissioner (Appeals) - addition made by AO stands deleted - in favour of assessee.
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