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2017 (5) TMI 1731 - AT - Income TaxAddition on account of settlement compensation for closed units - AO has treated the payment made to the employees of Chennai unit in addition to the payment of VRS in the nature of VRS AND applied the provisions of section 35DDA and accordingly allowed 1/5th of such expenses and remaining expenses were disallowed - CIT-A deleted the addition made by the AO by observing that the additional payment is not covered under section 35DDA - HELD THAT:- In the instant case the assessee was having several units and few of them were close down. All the units of the assessee constitute a single business. In consequence to the closure of the units based in the Chennai, the assessee had to pay certain compensation over and above the VRS to the employees, therefore in our considered view the extra payment is eligible for deduction under section 37(1) of the Act. In view of above we do not find any reason to interfere in the order of ld CIT(A). We hold accordingly and this ground of appeal of the Revenue is dismissed. Addition on account of advance written off - CIT-A delete the addition - HELD THAT:- From the details furnished by the assessee in the paper book it is found that the assessee had given full details of each item of the advances. The amounts represented advances given to the parties for the purchase of raw materials, advance to employees, security deposited with the landlord, electricity and telephones etc. The advances were given during the course of business. The amount became irrecoverable from the parties to whom the advances were made. Thus, the advances were totally connected with the business activities of the assessee. The learned CIT (Appeals) was justified in observing that the amount of advance was a trading loss. After seeing the details of amounts, it is observed that the assessee was not required to take a lengthy litigation for recovering the small amounts. In our opinion, therefore, the approach of the learned CIT (Appeals) is justified. claim of deduction is allowable as trading loss u/s 37 of the Act. AO is directed accordingly. Ground taken by the Revenue is, therefore, dismissed.
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