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2016 (9) TMI 15 - AT - Income TaxAllowable Business loss - Loss incurred by the assessee due to sale of repossessed assets - Held that:- When the appellant generate income out of hire purchase transactions, (on account of realisation of installments from the hirers) the same is treated as Business Income. Considering the same fact, when there is a loss on account of repossession of hire purchase stock, the same should be considered as a Business Loss since the main business of the company is to give assets on hire and as such, any loss arising out of sale of repossessed stock is incidental and inherent part of the business of hire purchase carried on by the company. Repossessed hire purchase assets constitute stock-intrade ("current assets") for the appellant and are classified as such in its accounts also. They are neither classified as fixed assets nor is any depreciation claimed thereon by the appellant. Stock-in-trade has been specifically excluded from the purview of 'Capital Assets' vide clause (i) of section 2(14) of the Act. Accordingly, the repossessed assets are not capital assets of the appellant. The above mentioned loss arose consequent to the repossession of assets given on hire purchase, following a default by the hirer's. The shortfall of the realizable value/sale proceeds vis-a-vis the amount recoverable from the hirers constituted the loss incurred by the Appellant is a Business loss. Respectfully following decision of Hon'ble Supreme Court in the case of CIT Vs Nainital Bank Ltd. (1964 (9) TMI 11 - SUPREME Court ), we hold that the loss incurred by the assessee due to sale of repossessed assets are allowable as business loss Loss on sale of debentures and Govt. Securities have been rightly claimed as business loss by the assessee.
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