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2015 (6) TMI 1239 - AT - Income TaxAddition towards trade advance written off - as per AO claim of the assessee cannot be treated as debt arose during the regular course of business and the same cannot be allowed for deduction under section 36(1)(vii) - Whether outstanding from Century Wood Limited is, whether the advance is capital loss or business loss? - HELD THAT:- There is nothing on record that the assessee has received wood frame from Century Wood Limited. The assessee has also not explained the reasons for advancing various amounts in different dates when the assessee has not received any materials from Century Wood Limited. It is not the case of the assessee that the assessee is required the material. Therefore, from the business necessity or business requirement, the advances were made. If it is so and if it business requirement, the assessee ought to have been purchased the materials from some other company. The assessee has not able to prove that the advances made by the assessee are for the purpose of business. The assessee itself noted in the ledger account that the amount was receivable from Century Wood Limited and interests were charged as on 31.03.2001 and the entire amount receivable as on 31.03.2001 was a loan. Once the assessee itself treated it as loan, now it cannot be said that it is a trade advance. The assessee has not able to produce any material to show that it is a trade advance - we hold that the claim of the assessee cannot be allowed as trade advance and the same was rightly treated by the Assessing Officer as capital loss, which was confirmed by the ld. CIT(A). Alternative ground raised by the assessee that under section 37 of the Act it is a business loss - We find that the assessee is not in the business of money lending. The assessee also not able to explain as to why it has advanced various amounts in different dates and it has not able to correlate the amount given and the material i.e. wood frame the assessee wanted to purchase from Century Wood Limited. Under these circumstances of the case, we are of the opinion that it is not relating to the business of the assessee and it is only a capital loss. Accordingly, the alternative ground raised by the assessee is rejected.
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