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2023 (2) TMI 117 - ITAT AHMEDABADBad Debts / loss u/s. 36(1)(vii) - business advances given to subsidiary company which has become irrecoverable - AO held that the above amount written off is not in the revenue field and was not a trade advance - as argued amount was advanced by the assessee company to its subsidiary, which is in a similar line of business and therefore, such advance was on account of purely commercial considerations and hence allowable as business loss - HELD THAT:- Assessee company was seeking to extend into line of edible oil business like groundnut seeds, mustard etc for exporting purposes using the same “cold press technology” which was being currently used by the assessee company for non-edible oils. A perusal of the terms memorandum of understanding of the assessee company and its subsidiary shows that the assessee and its subsidiary were primarily engaged in the similar line of business and that the purpose of advancing such loan was further expansion/diversification into similar/associate line using the “cold press technology”. From the facts it is evident that the purpose of assessee to advance the loan to its subsidiary were two fold, firstly, to extend into a similar line of business and secondly to insulate business of the assessee from the vagaries of its existing business owing to dependency primarily on one client based out of Germany. Therefore, in the instant facts we are of the considered view that the loss on account of non-payment of advance of subsidiary was a business loss in the assessee’s line of business and the same is allowable as a business reduction to the assessee. Thus we are of the considered view that the above amount is allowable as a business loss in the hands of the assessee. Appeal of the assessee is allowed.
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