TMI Blog2011 (7) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... rtain other disallowances were also made. Aggrieved, the assessee carried the matter in first appeal, wherein the Commissioner (Appeals) granted part relief. Being aggrieved, the Revenue is in appeal before the Tribunal on the issue of addition made on account of disallowance of bad debt. 3. Facts of this case, as brought out in the order of Commissioner (Appeals) vide Pages-2 and 3 / Para-4, are extracted below for ready reference:- 4. As per the brief facts of the case, the appellant is an individual engaged in the business of export of garments for the relevant assessment year. In assessment, the A.O. has observed that the appellant has claimed business loss of ` 9,97,894 for the A.Y. 2005-06 and ` 54,00,000 for the A.Y. 2006-07. On verification of the details submitted by the appellant in this regard, the A.O. observed that the appellant has advanced certain amounts to different parties in his earlier years, which were not recoverable and, therefore, written off during the relevant assessment years. The particulars there of are as under:- S.No. Name of the Party A.Y. 2005-06 A.Y. 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that the advances granted to the above named parties were in fact irrecoverable and assessee had made the efforts for the recovery of the amount from the above parties. 4.1.1 Accordingly, in view of the above, the entire loss claimed on account of write off of advances or loss is disallowed, since according to the A.O. advances claimed as irrecoverable are not genuine and the loss claimed is capital loss not allowable under the Act. 4. The first appellate authority, for the reasons given at Para-4.3 of his order, allowed the claim of the assessee holding that the loss claimed by the assessee is directly related to his business operations and it is a genuine loss. Aggrieved, the Revenue is in appeal before the Tribunal. 5. Before us, learned Departmental Representative, Mr. G.P. Trivedi, relied on the order of the Assessing Officer and submits that the loss is a capital loss and has wrongly been allowed by the Commissioner (Appeals). He submits that the assessee s submissions before the Assessing Officer were that the advances become irrecoverable and no other details were filed. He pointed out that the assessee has not filed any supporting evidence like details o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nefit due to write-off of this loss and it is not the case of the Assessing Officer that by incurring this expenditure, the assessee is carrying on the business in a more efficient manner. He filed a paper book running into 92 pages and drew the attention of the Bench to the various documents filed before the Revenue authorities to demonstrate his case that adequate evidence has been furnished in support of the claim and that factually, the Assessing Officer has not controverted any of the evidence filed by the assessee. 9. Learned Departmental Representative, in his reply, submits that the Commissioner (Appeals) should have supplied all the materials to the Assessing Officer before coming to a conclusion. In any event, he submits that such loss is not allowable under section 37 of the Act as it is capital in nature. 10. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record, as well as the case laws cited before us, we hold as follows:- i) The points have been summarised at Page-8 of the Commissioner (Appeals) s order, which are extracted below for ready reference:- i) the advances are mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the operation carried on and the nature of risk involved in carrying them out. The degree of the risk or its frequency is not much relevant but its nexus to the nature of the business is material. Again, the Hon ble Apex Court in the case of Ramchander Shiv Narayan v/s CIT, 111 ITR 263 (SC) has held that loss is deductible where there is a direct and proximate nexus between the operation and the loss or where the loss is incidental to it, as, without the business operation and doing all that is incidental to it, no profit can be earned. iii) We do not find any infirmity in the aforesaid findings of the Commissioner (Appeals). Hon'ble Jurisdictional High Court in I.B.M. World Trade Corporation (supra) held that where the assessee advanced money to a landlord for construction of factory shed as well as the residential plant, for leasing them to the assessee and the landlord became insolvent making the amounts irrecoverable, it was held that the assessee was entitled to a deduction by way of business loss. On the assumption of the Assessing Officer that legal proceedings should be launched for recovery of advance so as to claim business loss, we hold that there is no suc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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