TMI Blog2016 (5) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... course of its business operation. Therefore, the Assessing Officer is directed to allow the aforesaid disallowance made by him. - Decided in favour of assessee - IT(SS)A No.600/Ahd/2011 - - - Dated:- 31-3-2016 - SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER For The Assessee : Shri J.P. Shah, AR For The Revenue : Shri R.I Patel, CIT-DR ORDER PER SHAILENDRA K. YADAV, JUDICIAL MEMBER: This appeal by the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-II, Ahmedabad dated 19.09.2011 for Assessment Year 2009-10. 2. The concise ground of appeal raised by the assessee reads as under:- The C.I.T. (Appeals) erred in upholding the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out job works for the assessee and that the advances to both the parties were made in the course of the assessee s business of dealing in Readymade Garments. He further submitted that the debit balance in the accounts of the two parties in question had remained after taking into account debits in respect of payments for job work charges and advances made to the parties from time to time and the credits for fabrication charges payable to them for job works carried out for the assessee and that it was indisputable that those debit balances had arisen in the course of the assessee s business in readymade garments. The Authorized Representative has referred to the written submission filed before the lower authorities in support of its claim a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards running and maintenance of their units for manufacturing readymade garments to be supplied to the assesseecompany. It was claimed by the assessee-company that subsequently, due to adverse market conditions, the business of readymade garments had to be discontinued and the assessee-company made all efforts to recover the aforesaid debts but failed; and therefore, debts became irrecoverable and bad. In this regard, the stand of the assessee has been that the Assessing Officer has misunderstood the nature of trade debts as he disallowed the same under the provisions of Section 36(1)(vii) of the Act with regard to bad debts while the fact is that the assessee has never claimed such deduction. The deduction was claimed either under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the purpose of its business, since the amount had factually became unrealizable during the assessment year under consideration. The copy of the Board's resolution approving write off of the said advances has also been placed on record. In this regard, we find that the amount which is written off in the books of account was in the nature of a trading loss incurred while carrying out the business and was directly incidental to the operation of the business activities. Hence, the same is allowable under Section 37 of the Act. Moreover, there is a direct and proximate relationship between the business operations and the loss; and the same is deductible while computing the income of the assessee. It is also pertinent to note that all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 51,186/- and on 30.06.1975, the debit balance stood at ₹ 38,686/-. The assessee claimed this amount as a bad debt for the Assessment Year 1976-77. The Income-tax Officer rejected the claim of the assessee. The Tribunal, however, allowed the claim of the assessee treating it as a business loss or alternatively as business expenditure. On a reference, Hon ble High Court held that, according to the terms of the agreement between the assessee-firm and D , payment for the goods of D sold by the assessee was the responsibility of the assessee and therefore, when H did not pay the amount to D , the liability fell upon the assessee. Therefore, the Tribunal was right in holding that the sum of ₹ 38,686/- debited to the assessee s a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with M/s. M.P. and since there was no evidence to suggest that any partner of the said debtor-firm was related to partner of the assessee firm, held that the impugned loss should be allowed as a deducting under Section 28. On a reference: Held, on the facts, that the Tribunal had overlooked the statements of the assessee and the debtor-firm where it had been clearly stated that these advances were asked for and made in fact, having regard to the commercial relations between the parties and the commercial relations were admittedly of principal and commission agents. The tribunal was not justified in holding that the advance to M/s. M.P. was not in the ordinary course of business of the assessee firm. The debt owed by M/s. M.P. was one w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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