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2006 (3) TMI 213 - AT - Income TaxDeduction u/s 37 - written of doubtful debts - trading loss incurred in carrying out the business and being incidental to the operations of the business is allowable u/s 37? - HELD THAT:- From the details furnished by the assessee in the paper book it is found that the assessee had given full details of each item. The amounts represented advances given to the parties. The advances were given during the course of business for supply of raw-material etc. Either the material was not supplied or defective material was supplied. The amount became irrecoverable from the parties to whom the advances were made. Thus, the advances were totally connected with the business activities of the assessee. The learned CIT (Appeals) was not justified in observing that the amount of advance was not a trading loss. After seeing the details of amounts, it is observed that the assessee was not required to take a lengthy litigation for recovering the small amounts. In our opinion, therefore, the approach of the learned CIT (Appeals) is not justified. Hon'ble Gujarat High Court also considered the issue relating to business loss in the case of Dinesh Mills Ltd. v. CIT [2001 (12) TMI 65 - GUJARAT HIGH COURT]. In that case, the assessee incurred a loss on account of embezzlement of its employee between 29-1-1974 and 26-4-1976. The loss was discovered in 1977-78. The Assessing Officer disallowed the claim on the ground that the loss remained indeterminate during the assessment year in question and it could be ascertained only in subsequent years. The ld. CIT(A) allowed part of the loss which approach was also maintained by the Tribunal. The Hon'ble Gujarat High Court, after reversing the view of the Tribunal, held that in view of the statement made on behalf of the assessee to the effect that no deduction had been allowed in any subsequent year, the assessee would be entitled to deduction of loss during the assessment year in question as this was the year in which loss on account of embezzlement was in fact discovered. On the basis of this authority, the submission of the ld. counsel that in the case of the assessee also, nothing has been recovered till now and, therefore, the claim of the assessee should be allowed, carries much force. Thus, we are unable to sustain the approach of the learned CIT (Appeals) and set aside his findings. In our considered opinion, the claim of deduction is allowable as trading loss u/s 37. Grounds taken by the assessee are, therefore, allowed. In the result, assessee's appeal is allowed.
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