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2015 (9) TMI 1418 - ITAT AHMEDABAD

2015 (9) TMI 1418 - ITAT AHMEDABAD - TMI - Disallowance of business loss - Revenue's basic thrust of the arguments is that since the loss is not incurred in the course of business carried on by the assessee, it should not be allowed as a deduction - CIT(A) allowed the claim - Held that:- It is an undisputed position that the assessee did in fact trade in processed agricultural produce, in connection with which advances in question were made, and it was in the course of this trading that business .....

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did not take away assessee’s right to claim reasonably foreseeable business loss. Learned CIT(A) has given categorical and detailed findings about these advances having become actually bad and these findings remain uncontroverted

As regards learned CIT(A)’s having confirmed the disallowance of business loss in respect of monies unrecoverable from Quality Foods (Rs.7,12,500) and S.N. Das Freight Forwarders Pvt. Ltd. (Rs.2,99,387), the assessee could not bring on record any material, t .....

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mar AM: 1. These cross appeals are directed against the order dated 22nd November, 2011 passed by the learned CIT(A) in the matter of assessment under section 143(3) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year 2008-09. We will take up these appeals together. 2. Grievances raised by the parties are as follows:- Grievance raised by the assessee 1.1 The order passed u/s. 250 on 22.11.2011 for A.Y. 2008-09 by CIT(A)-GNR, Abad upholding the disallowance of ₹ 10,11 .....

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warders Pvt. Ltd. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT ought not to have upheld the disallowance of the claim of bad debts/trading loss for ₹ 10,11,887/- in respect of M/s. Quality Foods and S.N. Das Freight Forwarders Pvt. Ltd. Grievance raised by the Assessing Officer 1. The learned CIT(Appeals) has erred in law and on facts in deleting disallowance of ₹ 4,95,02,105/- without appreciating the fact that the claim of the assessee is not i .....

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nd arise on the same set of facts, we will take up all these grievances together. 4. The main business pursued by the assessee in the relevant assessment year, as noted in the assessment order itself, was of trading in gold jewellery, land and shares. The Assessing Officer noted that the turnover of the assessee in this year was only ₹ 71,81,811 as against the turnover in the immediately preceding assessment year at ₹ 35,32,77,269. The Assessing Officer also noted that the assessee h .....

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orwarders Pvt. Ltd. F.Y. 2005-06 Rs.2,99,387 Irrecoverable amount on transportation (6) Sakar Overseas Pvt. Ltd. F.Y. 2004-05 Rs.2,72,11,993 Advance given for purchase of dehydrated onion flakes (7) Shree Ram Trading Co. F.Y. 2004-05 Rs.2,05,90,112 Advance given for purchase of sesame Seeds Total Rs.5,24,59,472/- 5. The Assessing Officer, however, declined this claim in respect of item nos.2 to 7 above. The bad debts deduction in respect of A.P. Sayona Trade Association was allowed. As for the a .....

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bts. As regards dues from Quality Foods and S.Y.P. Exporter, the Assessing Officer was of the view that these were trade advances for purchases which could not be treated as bad debts. As regards S.N. Das Freight Forwarders Pvt. Ltd., the Assessing Office noted that this represent excess payment made for forwarding expenses. In any case, according to the Assessing Officer, there was nothing to show that amounts have actually turned bad. It was in this background that the Assessing Officer disall .....

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actions in question were not disputed and the assessee has demonstrated that loss has actually incurred, the same is to be allowed as deduction as business loss. It was also noted that the assessee had exported substantial qualities of agricultural processed goods, including dehydrated garlic flakes and white onion power, and it was in this connection that the assessee bonafide and in the course of normal business gave advances to S.Y.P. Exporter, Sakar Overseas Pvt. Ltd. and Shree Ram Trading C .....

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ts there. As regards dues from Quality Foods and S.N. Das Freight Forwarders Pvt. Ltd., learned CIT(A) upheld the disallowance on the ground that the assessee could not establish that these amounts have actually become unrecoverable and as such business loss was not established. 6. None of the parties is satisfied by the stand taken by the ld CIT(A). While assessee is aggrieved of the ld. CIT(A) s confirming the disallowance of business loss in respect of amounts written off i.e. ₹ 7,12,50 .....

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f business carried on by the assessee, it should not be allowed as a deduction. However, it is an undisputed position that the assessee did in fact trade in processed agricultural produce, in connection with which advances in question were made, and it was in the course of this trading that business loss of making unrecoverable advances was incurred. The losses were thus wholly incidental to the business carried on by the assessee. There may not be any trading transactions of these products in t .....

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