Business loss deduction allowed where genuine advance for overheads became irrecoverable in ordinary business dealings.

An amount advanced for business purposes to meet common overhead expenses was treated as a genuine business outlay, not a bogus claim. Although the assessee had also sought deduction under section 37(1) and section 36(1)(vii), the decisive alternative plea was that the sum was deductible as a business loss under section 28 if not allowable as expenditure. The lower authorities had sustained the addition without addressing that alternative basis. On the record, the loss arose from recovery difficulties in the ordinary course of business, so the claim was allowable as a business loss and the addition was deleted.

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Issues: Whether the disallowance of the amount written off as bad debt or business loss was justified, and whether the claim was allowable as a business loss under the Income-tax Act, 1961.

Analysis: The amount in question was advanced for business purposes to meet common overhead expenses. The claim was not found to be bogus. Even though the assessee had also pressed the claim under section 37(1) and section 36(1)(vii), the decisive contention was that, if not allowable as an expenditure under those provisions, the amount was nevertheless deductible as a business loss under section 28. The addition was sustained below without dealing with that alternative plea. The record showed a genuine business loss arising from recovery issues in the ordinary course of business.

Conclusion: The claim was allowable as a business loss and the addition was directed to be deleted.

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