TMI Blog2023 (11) TMI 1100X X X X Extracts X X X X X X X X Extracts X X X X ..... l loan/advance given to JV Company in its audited financials. It was also asserted that nowhere the assessee has claimed the said amount as bad debt in the profit and loss account. Also the loss is allowable under section 28(i) r.w. section 36(1)(vii) or 37(1) as a normal business loss. Support was derived from the decision of Hon ble Supreme Court in Madnani Development Corporation Pvt. Ltd. [ 1986 (7) TMI 2 - SUPREME COURT ] wherein it is held that business losses are allowable on ordinary commercial principles of computing profits, provided they are of non-capital nature. Reliance was also placed on the decisions Mahendra N. Shah [ 2005 (10) TMI 37 - GUJARAT HIGH COURT ], Turner Morrison Co. Ltd. [ 2000 (3) TMI 34 - CALCUTTA HIGH COURT ] Thus we are of the considered view that it would be appropriate and expedient as also in the interest of justice and fair play to set aside the order of the Ld. CIT(A) in both the AYs and restore the matter back to the file of the Ld. AO to decide the issue afresh. Disallowance being bad debt written off - said sum comprised of debit balances of suppliers written off and being loans to employees written off - AO made the disallowance f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.2 That while sustaining the said disallowance the learned CIT (A) has failed to appreciate the fact that the assessee company has never claimed the said expenditures under section 36(2) of the Act, rather the said expenditures are allowable as business loss under section 28 or 37 of the Act, as the same have been incurred during the normal carrying on of business and the genuineness of the same being not disputed, the same should have been allowed, as such 2 That the learned Commissioner of Income Tax (Appeals) has further erred in sustaining a disallowance of Rs. 5,61,999/- on account of loans to employees and debit balance of suppliers written off, which disallowance is based on irrelevant and extraneous considerations, and as such the disallowance so sustained is wholly untenable either on facts or in law. 2.1 That while sustaining the said disallowance the learned CIT (A) has failed to appreciate the fact that the assessee company has never claimed the said expenditures under section 36(2) of the Act, rather the said expenditures are allowable as business loss under section 28 or 37 of the Act, as the same have been incurred during the normal carrying on of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenditures under section 36(2) of the Act, rather the said expenditures are allowable as business loss under section 28 or 37 of the Act, as the same have been incurred during the normal carrying on of business and the genuineness of the same being not disputed, the same should have been allowed, as such. 2.2 That the adverse findings recorded by the learned AO and Commissioner of Income Tax (Appeals) are perverse and have been recorded with preconceived notions and without considering the submissions/evidences/material produced on record and also without providing fair and proper opportunity of being heard, hence such findings are vitiated and deserves to be deleted. 3. Briefly stated, the assessee company is engaged in the business of manufacturing of garments having its factory at Gurgaon. It has also installed windmills in Gujarat and is selling electricity to Gujarat State Electricity Board. For AY 2014-15 the assessee e-filed return on 25.11.2014 declaring income of Rs. 16,58,88,120/-. The case was selected for scrutiny under CASS. Statutory notices were served and responded to. The Ld. Assessing Officer ( AO ) completed the assessment on total income of Rs. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the year under concern 4.8 In the present case the write off of loss has not arisen during the course of business of assessee as money lending is not the activity that is carried on by assessee and it has never been the claim of assessee nor it has been proved before the authorities below. There has been no evidence that is placed on record to prove that the loss has occurred during the year. Therefore the claim of loss by assessee does not hold good on both these counts. The reasons given by Ld. CIT (A) to allow the claim as business loss are irrelevant and is without considering the provisions of the Act. Ed. CIT (A) also accepted that the issue stands covered in the favour of assessee by the decision of Hon'ble Gujarat High Court in the case of Manohar N Shah reported in 280 ITR 462. We have perused the said decision of the Hon'ble Gujarat High Court, and it is observed that the loss proved to have been arisen during the year which was actually a business loss. 4.9 Therefore we are inclined to reverse the findings of Ld. CIT (A) and restore the order of Ld. 4.10. Accordingly this ground raised by revenue stands allowed. The facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itures are allowable as business expenditure/losses under section 28 or 37 of the Act as the same have been incurred during the normal carrying on of business. According to him, the genuineness of the expenditures have not been disputed and therefore, the same should have been allowed. 6.1 The Ld. AR pointed out that against the order of the Tribunal in the assessee s case for AY 2012-13, appeal has been filed before the Hon ble Delhi High Court and a question of law has been framed on the issue for consideration vide order dated 15.05.2019 in ITA No. 1123/2018. 6.2 The Ld. AR referred to the judgment of the Hon ble Supreme Court in PCIT vs. Khyati Realtors (P) Ltd. 447 ITR 167(SC) and the decision of Hon ble Delhi High Court in Mohan Meakin Ltd. vs. CIT 348 ITR 109(Delhi) in support of his submission that the order of the Tribunal for AY 2012-13 on the issue in assessee s own case should not be followed. 7. The Ld. DR supported the order of the Ld. CIT(A) who has followed the order of the Tribunal in assessee s own case for AY 2012-13. 8. We have carefully considered the rival submissions of the parties and perused the records. It is not in dispute that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respectively had claimed that the chances of recovery of the impugned sum is nil and the same is allowable as an expense under section 37(1) of the Act. The Ld. AO ignored the assessee s claim in both the years. Before the Ld. CIT(A) the assessee submitted that it has written off Rs. 57,19,947/- in each of the two years being 20% of the total loan/advance given to JV Company in its audited financials. It was also asserted that nowhere the assessee has claimed the said amount as bad debt in the profit and loss account. It was submitted that the loss is allowable under section 28(i) r.w. section 36(1)(vii) or 37(1) as a normal business loss. Support was derived from the decision of Hon ble Supreme Court in Madnani Development Corporation Pvt. Ltd. (1986) 161 ITR 165 (SC) wherein it is held that business losses are allowable on ordinary commercial principles of computing profits, provided they are of non-capital nature. Reliance was also placed on the decisions of Hon ble Gujrat High Court in CIT vs. Mahendra N. Shah (2006) 280 ITR 462(Guj); decision of Hon ble Calcutta High Court in Turner Morrison Co. Ltd. (2001) 245 ITR 724 (Cal); decision of ITAT Hyderabad in Gulf Oil Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X
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