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of <h1>ITAT upholds deletion of business loss addition, emphasizing direct relation to business activities.</h1> <h3>ACIT, Circle-8, Ahmedabad Versus Unique Mercantile Services Pvt. Ltd.</h3> ACIT, Circle-8, Ahmedabad Versus Unique Mercantile Services Pvt. Ltd. - TMI Issues:- Appeal filed by Revenue against CIT(A) order for A.Y. 2007-08- Addition of Rs. 46,75,000/- as unadjusted balance of advances written off as business lossAnalysis:1. The appeal was filed by the Revenue against the CIT(A) order for the assessment year 2007-08. The main issue revolved around the addition of Rs. 46,75,000/- as an unadjusted balance of advances written off as a business loss by the Assessee.2. The Assessee, a company engaged in various business activities, including providing services, filed its return declaring total income. During scrutiny, the Assessing Officer (A.O.) observed the writing off of Rs. 46.75 lakhs as an unadjusted balance of advance against Business Development Expenditure. The Assessee justified this action by explaining the nature of advances given to agents for business development purposes. However, the A.O. disallowed this claim, stating that the advances were not offered to tax in earlier years and did not fulfill the conditions under relevant sections of the Income Tax Act.3. The CIT(A), considering the Assessee's explanation and relying on the Tribunal's decision in the Assessee's own case for A.Y. 05-06, deleted the addition. The Revenue, aggrieved by this decision, appealed before the ITAT. The ITAT noted that the facts were similar to the preceding year's case and referred to the Tribunal's earlier decision to dismiss the Revenue's appeal. The ITAT found that the written-off amount was directly related to the Assessee's business activities and therefore constituted a business loss.4. By analyzing the previous Tribunal decisions and considering the nexus between the advances written off and the Assessee's business operations, the ITAT concluded that the amount of Rs. 46.75 lakhs written off as a balance of advance against Business Development Expenditure was a business loss and allowable. The ITAT dismissed the Revenue's appeal, emphasizing the consistency in facts and circumstances with earlier cases.5. In light of the above analysis, the ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 46,75,000/- as a business loss written off by the Assessee. The appeal filed by the Revenue was dismissed, and the order was pronounced in open court on 07-02-2014.
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