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2021 (2) TMI 226 - AT - Income TaxCapital or revenue loss - non-recovery of advances given by the assessee for acquiring immovable property in carrying out the business activities of the assessee - HELD THAT: In the present case, the loss has direct nexus with carrying on business and is incidental to the business activity of the assessee wherein immovable property is stock in trade to the assessee. The assessee's business activity is dealing in Real Estate. Since there is a direct and proximate nexus with the assessee and the loss is incidental to the business of the assessee. The deduction has to be granted to the assessee u/s. 37 - One more argument was advanced by the ld.DR that the assessee treated the amount as capital loss in its books of accounts and the same was reflected in the P & L Account. The assessee might have treated this loss as capital expenditure in regular books of accounts maintained and for fairly disclosing financial status of the assessee, as required by law. Capitalization of this expenditure in the books of accounts alone was not the decisive factor for examining the expenditure for the purpose of income tax. The name given to an expenditure is a nomenclature in the books of accounts is not the final test to decide the exact nature of expenditure for the purpose of income tax. Classification of this expenditure as capital in nature in its books of accounts of the assessee for the purpose of Companies Act does not ipso facto make that expenditure as capital expenditure for the purpose of income tax. Hence we are of the view that the non-recovery of advances given by the assessee for acquiring immovable property in carrying out the business activities of the assessee had to be treated as business loss instead of capital loss and to be allowed u/s. 37 - Decided in favour of assessee.
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