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2015 (12) TMI 560 - AT - Income TaxLoss while carrying on of the business activities - whether allowable under sections 28 and 29 and / or 37 of the Act - whether the provisions of section 36(1)(vii) of the Act are not applicable since it is not the claim of bad debts i.e. write off of any debtors on account of raw material or machinery? - Held that:- The claim of the assessee has to be seen from the angle of the provisions of section 37(1) of the Act, wherein it is provided that all expenditure relating to carrying on of the business is to be allowed as deduction while computing the income chargeable under the head profit from business or profession, where the expenditure is not in the nature described in sections 30 to 36 of the Act and not being in the nature of capital expenditure. The provision made by the assessee in its books of account on account of non-recovery of advance made for the purchase of machinery cannot be said to be a provision made on account of bad debts and hence, the provisions of section 36(1)(vii) of the Act are not attracted. The said advance though was for the purchase of a capital asset, but since the capital asset never came into existence, the bar envisaged in section 37(1) of the Act do not apply. The expenditure claimed by the assessee is not covered by any of the provisions of sections 30 to 36 of the Act and being not a capital expenditure and having been incurred for the purpose of carrying on of the business, is eligible for deduction under section 37(1) of the Act. The advance made by the assessee for the purchase of equipments, which in turn, was to be used in the line of business carried on by the assessee and in the absence of machinery having been delivered to the assessee and also because of Insolvency proceedings filed, where there is no chance of recovery of advance made by the assessee, we find merit in the claim of the assessee in writing off of the said advance as business loss in its hands. Non-claiming of a loss in original Return of Income - whether is not an omission or wrong statement which entitles an assessee to file a Revised Return of Income? - Held that:- The CIT(A) was of the view that the revised return of income filed by the assessee does not fulfill the conditions laid down under section 139(5) of the Act. It may be considered at this juncture that in the original return of income, the assessee had not made any claim of deduction on account of write off of the advance paid to Italian company, such claim was made only in the revised return of income. In case, the revised return of income is not accepted, then how can the issue be so elaborately decided on merits? Once the merits of deduction have been considered by both the Assessing Officer and CIT(A), which admittedly was claimed only in the revised return of income, we find no merit in the order of CIT(A) in this regard and accordingly, we allow the ground of appeal No.2 raised by the assessee. Further, the perusal of the assessment order itself reflects that the working of income is, as per the revised return of income, ₹ 15.97 crores and in these circumstances, there is no merit in rejecting the revised return of income filed by the assessee.
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