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2022 (3) TMI 142 - AT - Income TaxDisallowance of trading/business loss claimed on account of advance forfeited - HELD THAT:- The assessee used to purchase low silica high grade limestone from M/s. Ridhi Siddhi in the past. The assessee also entered into a sale and purchase contract on 14.12.2016 and certain terms and conditions were finalized. A copy of agreement is placed - In Clause 6.0 of this agreement a condition is mentioned as per which in the event of the buyer not purchasing the material, an amount of USD9772 (Indian ₹ 6,61,299/-) will be deducted out of the advance amount as commitment/incidental charges. We notice that the assessee gave certain orders for purchase of material but could not reach to a consensus for the discount on the purchases and the seller did not accept the proposal. Due to this reason, the assessee cancelled the contract and for doing this act the advance amount was forfeited. All these series of facts and looking to the gross turnover of the assessee company, we find merit in the contention of the ld. Counsel for the assessee that the alleged amount is purely a business loss which is incurred in the regular course of doing the business of purchase and sale. We are also satisfied that the alleged amount cannot be treated as capital advance as it was paid for purchasing raw material used by the cement industries. Under these given facts and circumstances, we are of the considered view that the ld. CIT(A) erred in denying the claim of advance forfeited as an expenditure. We direct the AO to allow this claim of the assessee.
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