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2016 (9) TMI 591 - AT - Income TaxClaim of bad debts and advances written off - trading loss u/s 28 - Held that:- It is not in dispute that the assessee had advanced the monies to them in the normal course of business and had offered interest income in the earlier years as income from business which has also been accepted as such by the ld AO in the assessment proceedings u/s 143(3) of the Act for the Asst Year 2001-02. We find that the assessee had preferred civil suits against these two parties which are pending in the courts. In case any amount that could be recovered out of the outcome of the civil suits, the same would get taxed as bad advances recovered as income in the year of receipt. We find that the assessee had discharged its onus from all aspects and hence the write off of these advances which were given in the normal course of business and accepted as such by the revenue is allowable as a trading loss u/s 28 of the Act. With regard to debts due from Ameri Gas Pvt Ltd, we find that the assessee had offered the sales in the year of supplies made to that party and had written off as irrecoverable in the year under appeal. The assessee had duly complied with the provisions of section 36(1)(vii) read with section 36(2) of the Act and accordingly we hold that the ld CITA had rightly deleted the disallowance made on that count. With regard to amounts due from Pennzol Investment & Trading Co Pvt ltd, we find that the trade advances against supplies given by the assessee to such party could not be recovered and remaining outstanding for quite a long period of time and hence the assessee decided to write off the same as irrecoverable. We find that the advance was given in the nature of trade and in the normal course of business of the assessee for supply of industrial gases and loss arising on account of irrecoverabilty of the same is a trading loss allowable u/s 28 of the Act. With regard to write off the earnest money deposits, the same was paid in the normal course of business and write off of the same is an allowable trading loss u/s 28 of the Act.
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