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TMI Blog2016 (2) TMI 876X X X X Extracts X X X X X X X X Extracts X X X X ..... fault when first advance is outstanding (which was given for against first Order) and still it gave further order and also paid advance against such order. 2.1) The learned A.O. (and learned CIT-A erred in confirming) erred in not accepting the Income as per the revised Return of Income the assessee. 3) The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case. 3. The learned Authorized Representative for the assessee at the outset pointed out that the issue raised in the present appeal is identical to the issue raised by the assessee in assessment year 2009-10, and is covered by the order of Tribunal dated 01.12.2015. It was further pointed out by the learned Authorized Representative for the assessee that the assessee had booked loss on account of un-recoverable advance @ 30% in assessment year 2009- 10 and 30% in the present assessment year. 4. The learned Departmental Representative for the Revenue placed reliance on the orders of authorities below. 5. We have heard the rival contentions and perused the record. Briefly, in the facts of the present case, the assessee had claimed deduction in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services. However, the loss was in the course of carrying on of the business and hence, was eligible under sections 28, 29 and / or 37 of the Act. Reliance was placed on the ratio laid down by the Hon'ble Rajasthan High Court in CIT Vs. Anjani Kumar Co. Ltd. (2003) 259 ITR 114 (Raj). The Assessing Officer in this regard issued show cause notice to the assessee stating that the said expenditure was not deductible as bad debt under section 36(1)(vii) of the Act and / or also was not covered under sections 28, 29 and/or 37 of the Act. The assessee, in turn explained the factual aspect and pointed out that the deduction claimed was not bad debt referred to in section 36 of the Act, but was loss incurred in the course of carrying on of the business and the same should be allowed as deduction, unless there was prohibition for the said allowance. Reliance was placed on series of decisions of Hon'ble Supreme Court in this regard, which are part of reply given by the assessee before the Assessing Officer, which in turn, are incorporated at pages 3 to 5 of the assessment order. Further, reliance was placed on the decision of Hon'ble High Court of Rajasthan in CIT Vs. Anjani Kumar Co. Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and training of the operator. It was also agreed that during the installation and commissioning of the Chakan unit, the assessee was to bear round air tickets, boarding and lodging charges of the said persons. Out of the total price for the equipment, 20% was to be paid as down payment and further 20% within two months after the down payment. The equipment was to be delivered at Mumbai on or before 24.10.2008. Further, the assessee on 12.08.2006 and M/s. Galileo Vacuum System had entered into another contract for the supply of High Vacuum Batch Metallizing Machine Model V201VZ/99. The terms of the agreement were slightly at variance i.e. there were more specifications of the items to be supplied and the scope of work and technical specifications. The terms of payment were 10% after PO acceptance and 30% four months before the shipment of the machine. The delivery date as per the agreement was not to be later than 31.12.2007. The purchase order is placed at pages 7 to 12 of the Paper Book - I. The delivery of the equipments were delayed and the assessee deputed its Engineers to visit Italy, who in turn reported that the concern M/s. Galileo Vacuum System had filed Insolvency an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act are not attracted. The said advance though was for the purchase of a capital asset, but since the capital asset never came into existence, the bar envisaged in section 37(1) of the Act do not apply. The expenditure claimed by the assessee is not covered by any of the provisions of sections 30 to 36 of the Act and being not a capital expenditure and having been incurred for the purpose of carrying on of the business, is eligible for deduction under section 37(1) of the Act. The advance made by the assessee for the purchase of equipments, which in turn, was to be used in the line of business carried on by the assessee and in the absence of machinery having been delivered to the assessee and also because of Insolvency proceedings filed, where there is no chance of recovery of advance made by the assessee, we find merit in the claim of the assessee in writing off of the said advance as business loss in its hands. We find support from the ratio laid down by the Hon'ble High Court of Rajasthan in CIT Vs. Anjani Kumar Co. Ltd. (supra), wherein, it was held as under:- "5. The admitted facts are that the advance was paid for acquiring the agricultural land to set up a factor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the assessee and delete the addition of Rs. 2,96,135/- treating the same as a revenue expenditure u/s. 37(1) of the Act as admittedly, no capital asset came into existence." 13. The Mumbai Bench of Tribunal in DCIT Vs. Edelweiss Capital Ltd. (supra) further held as under:- "8. On merits, the judgment of the Rajasthan High Court in the case of CIT Vs. Anjani Kumar Co. Ltd. (supra) supports the assessee's plea. In this case the assessee intended to acquire agricultural land to set up a boiler factory and made advances to the agriculturists for purchase of the land. The project did not materialize. The agriculturists however refused to refund the advances. The assessee filed the suit but lost it. The amounts were written off in its books of account and were claimed as revenue loss. The Rajasthan High Court held that in these circumstances no capital asset has been acquired and, therefore, irrecoverable advances were to be allowed as business loss. This judgment of the High Court has been applied by the Mumbai Bench of the Tribunal in its order dated 28th January 2010, in ITA No:6847/Mum/2008, in the case of M/s. Pik Pen Private Limited vs. ITO. There advances were made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. twenty lakhs was given not for its own purpose by way of business expenditure for modernizing the mill, but as capital to the lessor who in turn had to modernize the mill. In the resolutions made by the board of directors, it was clear that the transaction entered into was not in the nature of a loan transaction or a money lending transaction and thus the loss suffered by the assessee was a capital loss and hence, the amount could not be deducted from the assessee's income as business loss." 15. The perusal of the facts before the Apex Court reflects that the assessee was engaged in the business of manufacture and sale of tea. The advance was given in line with leave and licence agreement entered into with another concern for running of cotton mill. The said advance of Rs. 20 lakhs was not given for own purpose by way of business expenditure, but as capital to the lessor, who had to modernize the mill, was the finding of the Tribunal, which was considered by the Apex Court and it was held that the loss suffered by the assessee was a capital loss. However, in the facts of the present case as pointed out by us in the paras hereinabove, the assessee had made the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'ble Bombay High Court vis-à-vis year of allowability and not the question of deductibility. In view thereof, we find no merit in the order of CIT(A) in this regard. 18. The CIT(A) further placed reliance on certain case laws for deciding the question of deductibility under section 37(1) of the Act. In view thereof, where facts of the cases relied upon by the CIT(A) are at variance to the facts of the issue before us and the facts and issue are squarely covered by the ratio laid down by the Hon'ble High Court of Rajasthan, which in turn has been applied by the Mumbai Bench of Tribunal in two decisions referred to hereinabove, accordingly, we find no merit in the order of CIT(A) in this regard. In the totality of the above said facts and circumstances, we direct the Assessing Officer to allow the claim of the assessee. The ground of appeal No.1 raised by the assessee is thus, allowed." 7. The issue arising before us is in respect of second installment of the claim made on account of unrecoverable advance to the extent of 30% of the total amount. The facts and issues arising in the present captioned assessment year are identical to the facts and issues in assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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