TMI Blog2017 (6) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Upon perusal of documents placed on record, we find that the assessee could not produce any evidence to show that the suppliers refused to pay the outstanding amount or denied their liability in any manner which can lead to a conclusion that the impugned provision crystallized during the year. The expenditure to be admissible, at the threshold, must be capable of being classified as an expenditure at the first instance and deduction of mere provisions / estimation could not be allowed to the assessee unless provided by the statute. On the same analogy, the same is not admissible either under Section 28(i). Therefore, to conclude, we hold that the impugned expenditure, being mere provisions, were not allowable to the assessee whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of ₹ 5,30,47,066/- which are written off during the year on account of damages during the process of cloth by process house and finally not recoverable. 2. Facts leading to the dispute are that the assessee, being resident corporate assessee engaged in the business of manufacturing Export of Textile made-ups handloom products , was assessed for impugned AY u/s 143(3) at loss of ₹ 10,87,20,428/- vide Assessing Officer [AO] order dated 28/11/2011 as against returned loss of ₹ 16,17,67,494/- efiled by assessee on 30/09/2009. The sole addition suffered by assessee was for ₹ 530.47 Lacs against provision for certain doubtful debts u/s 36(i)(vii), as the same being, in the opinion of Ld. AO, mere provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the appellant in the previous year or years prior thereto as is the requirement laid down in section 36(2) of the Act. As stated hereinabove, the impugned amounts are not written off even. In view of these facts and also the legal position discussed heretofore, the appellant s claim is not tenable in the eyes of law from any angle. Therefore, the grounds of appeal raised by the appellant in Form No. 35 stand dismissed and the A.O. s action of making disallowance on this count stands confirmed. Aggrieved, the assessee is in appeal before us. 4. The Ld. Counsel for assessee [AR], while drawing our attention to paper book, contended that the assessee presently being a sick company, for the purpose of export, procured raw mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and therefore, not allowable. Moreover, the assessee s case was not at all covered by the provisions of Sec. 36(i)(vii) as it was not a case of debts being written off but a matter of claim of business expenses u/s 37 and therefore, reliance placed by the assessee on the judicial pronouncements was misconceived. 6. We have heard the rival contentions and perused the relevant material on record including the cited case laws. First of all, upon perusal of financial statements we find that the assessee has claimed the said expenditure of ₹ 530.47 Lacs under the head Provision for doubtful advances and this provisions has been reduced from the figures of Advances recoverable in cash or in kind or for value to be received un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d gains of business or profession . Upon perusal of statutory provisions, we find that any expenditure laid out or expended wholly and exclusively for the purposes of business shall be allowed provided that same is not personal expenditure or capital expenditure and not of the nature covered by Section 30 to 36. However, prime condition to claim the same is that the expenditure, at the first instance, must have crystallized during the impugned AY before which the same could be claimed by the assessee and this factor, in our opinion, is missing in the instant case. Upon perusal of documents placed on record, we find that the assessee could not produce any evidence to show that the suppliers refused to pay the outstanding amount or denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt rendered in Vijaya Bank Vs. CIT [supra] for the contention that deduction of provisions on aggregate basis in the Balance Sheet amounts to actual write-off. However, the same principle do not apply in the instant case as we are dealing with admissibility of expenditure u/s 37 and not u/s 36(i)(vii) according to which, there must be an expenditure at the first instance which has crystallized during the impugned AY as against deduction u/s 36(i)(vii) which is allowable to the assessee the moment bad debt is written off in the books of accounts, notwithstanding the fact that whether the same has actually become bad or not. Similarly, the decision in Southern Technologies Ltd. Vs. JCIT [supra] CIT Vs.Tainwala Chemicals Plastic India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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