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2021 (12) TMI 760 - AT - Income TaxDisallowing the business advances written off - Trading loss u/s 28 - claim of assessee to be considered u/s. 28 or section 37 - HELD THAT:- Admittedly the money advanced by assessee to Golden Gate was for the purposes of business - AO rightly rejected the claim of assessee u/s 36(2) as assessee had never taken into account the said advance in computing the income of assessee in any of the previous year which is the necessary condition laid down in section 36(2)(i) - AO did not verify the claim as a trading loss u/s. 28 - CIT(A) admitted to the fact that assessee took steps to recover the money from Golden Gate. However, upheld the addition by holding that for year under consideration assessee did not file any case related to bouncing of remaining cheques. In the present facts of the case, there is no dispute that the advances were given by the assessee in the normal course of its business and when a loss arises due to non-recovery of such advances and when the same is irrecoverable and written off as such, the same should be allowed as a business loss while computing the profit and gains of business. As relying in SUMANGAL OVERSEAS LTD. [2011 (11) TMI 45 - DELHI HIGH COURT] we hold that the amount that could not be recovered is to be treated as trading loss. Accordingly, the grounds raised by assessee stands allowed.
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