Revenue loss on trade advance waiver: part-payment for raw material remained deductible and was not converted into capital loss.

An advance made in the ordinary course of business as part payment for future sugarcane supplies was treated as a trading outgoing on revenue account, because it was connected with the purchase of raw material rather than the acquisition of an enduring asset or capital employed in a separate venture. The subsequent waiver of part of the amount did not change its character, since the substance of the payment remained linked to business operations. The governing distinction was whether the expenditure was laid out to obtain an enduring benefit or incurred in the normal course of carrying on the business. On that basis, the loss was revenue in nature and deductible in computing business income.

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Issues: Whether the amount of Rs. 2,87,422 waived by the assessee, being advances made against future sugarcane supplies, was a loss of capital or a revenue expenditure deductible in computing business profits.

Analysis: The advances were made as part of the assessee's business arrangement for securing future sugarcane supplies and were adjusted against the price of the crop. They were not made as an investment to acquire an enduring asset or as capital employed in a separate venture, but as an advance payment towards the purchase price of raw material for the business. The mere fact that the assessee ultimately forgave part of the amount did not alter the character of the outgoing; in substance, it remained connected with the trading operations of the business. On the capital and revenue distinction, the decisive test was whether the money was laid out to acquire an asset of enduring benefit or in the ordinary course of carrying on the business.

Conclusion: The amount was a revenue loss and not a capital loss, and it was deductible in computing the assessee's business income.

Ratio Decidendi: An advance made in the ordinary course of business as part payment of the price of trading stock is on revenue account, and a subsequent waiver or write-off of such advance does not convert it into a capital loss.

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