TMI Blog2018 (3) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... without invoking the computation methology stipulated in Section 50B of the Act. On this point we do not find the first and the second appellate fora went wrong in law. The assessee showed separate sale of furniture and fixtures and plant and machinery. The impact of subsequent development of property was also considered by the Commissioner of Appeals. We, accordingly, answer the first question in the negative and in favour of the assessee. Writing off bad advances - Held that:- We accept the argument of Mr.Khaitan that for determining the character of claim for deduction AO need not confine his scrutiny on the accounts as submitted by the assessee but he ought to analyse the nature of the claim himself on the basis of materials on record. AO has not undertaken that exercise. But in our opinion without that exercise being undertaken, the Tribunal ought not to have had sustained the claim of the assessee straightway. There is no proper analysis of the nature of advances which were sought to be written off. For this reason, we answer the second question in affirmative and in favour of the Revenue and remand the matter to the AO for deciding the limited question as to whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but in our view those questions are covered by the two points on which we are admitting the appeal. As we find from the order of assessment itself, during the relevant previous year, the Assessee had sold its immovable property, the location of which we have already referred to, for a sum of ₹ 30 crores and 50 lakh. From the order of the Tribunal, we find that old scrapped and junked plant and machinery, furniture fixtures and stores items lying at the said property were removed and disposed off for consideration of ₹ 54,80,769/-. Admitted position is that there was a building on the said property. According to the Assessee, the property was sold for redevelopment as a result of which the building had no value and no consideration was received on that head. Mr. Nizamuddin, learned Counsel appearing for the Revenue has sought to make out a case that this was a case of composite sale, which shall be chargeable under Section 50B of the Income Tax Act. The Tribunal dealing with this question held : 22 . We have given a careful consideration to the rival submissions . We have perused the agreements by which the Assessee sold the property at Ghatkopar to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. Whether it is a composite sale of the assets or there was the sale of individual components thereof is essentially a question of fact. On this point, we find both the Commissioner of Appeals and the Tribunal went with the Assessee s case. The Commissioner in particular has analysed the transaction and directed the Assessing Officer to allow relief to the appellant considering the amount of long term gains computed by the Assessee itself which was without invoking the computation methology stipulated in Section 50B of the Act. On this point we do not find the first and the second appellate fora went wrong in law. The assessee showed separate sale of furniture and fixtures and plant and machinery. The impact of subsequent development of property was also considered by the Commissioner of Appeals. We, accordingly, answer the first question in the negative and in favour of the assessee. Next comes the question of writing off bad advances. The assessee in its accounts had treated bad advances and bad debts separately. So far as writing off bad advances are concerned, thrust of submission of Mr. Nizamuddin was that no attempt of recovery was demonstrated by the assesssee and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be emphasised that the loss for which a deduction could be made under section 10 ( 1 ) must be one that springs directly from the carrying on of the business and is incidental to it and not any loss sustained by the assessee, even if it has some connection with his business . If, for example, a thief were to break overnight into the premises of a money - lender and run away with funds secured therein, that must result in the depletion of the resources available to him for lending and the loss must, in that sense, be a business loss, but it is not one incurred in the running of the business, but is one to which all owners of properties are exposed whether they do business or not . The loss in such a case may be said to fall on the assessee not as a person carrying on business but as owner of funds . This distinction, though fine, is very material as on it will depend whether deduction could be made under section 10 ( 1 ) or not . The other authority on which Mr.Khaitan has referred to is the case of Sutlej Cotton Mills Ltd . Vs . Commissioner of Income Tax, West Bengal, which is also a decision of the Hon ble Supreme Court reported in 116 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... off the amounts disputed in this appeal as irrecoverable advances . The fact that these sums are allowable as deduction u / s . 28 of the Act as loss incidental to the business of the Assessee is not disputed by the Revenue . The only grievance of the revenue is that the Assessee has not established that these outstanding were irrecoverable . It is no doubt true as a legal requirement that the Assessee in order to claim deduction of a sum as loss incidental to business has to prove that the losses were incidental to the business and connected with the carrying of business of the Assessee and also prove that the sum claimed as loss have become irrecoverable . A copy of the details of Bad advances and bad other current assets is given as annexure to this order . A perusal of the details in annexure shows that these were advances to raw material suppliers, advances to staff for various petty cash expenses, advance to suppliers, inter branch suspense, suspense purchases, suspense - staff travel etc . As far as the sum of Rs . 2,73,866 written off is concerned, the same was security deposits for electricity, telephone connection and others . The Assessee swi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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