AI Drafter 
TaxTMI 
TaxTMI 
2016 (5) TMI 241
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....umstances of the case the Ld. CIT (A) II has grossly erred in not allowing trading advance given in ordinary course of business to M/s Saraswati Exports as business loss. (iii) On the facts and in the circumstances of the case the Ld. CIT (A) II has grossly erred in not allowing bad debts In the Name of Shri Mohiuddin of Rs. 2,87,930/-. (iv) On the facts and in the circumstances of the case the Ld. CIT (A) II has grossly erred in restricting the disallowance to 10% against 15% made by the AO out of the various expenses amounting to Rs. 6,16,855/-" 2. The C.O. of the assessee was filed on 07/1/2016, is delayed by 934 days. In this regard, the ld AR of the assessee has filed an affidavit for condonation of delay on the basis of order of the ld CIT(A). It was submitted that the assessee has filed 154 application against the order of the ld CIT(A) but till date, it has not been decided. Whereas the revenue on this issue has filed appeal before the Hon'ble Tribunal. The AR has further argued that the assessee was under the impression that the ld CIT(A) would decide another ground of appeal raised in form No. 35 before him, which is directly related to the appeal fil....
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....ets by M/s Saraswati Exports for which the assessee was supposed to give design and necessary technical know how. The exports were to be done by M/s Saraswati Exports to the customer identified by the assessee. In turn the assessee was supposed to get commission on sales on terms mentioned in the agreement. 5. M/s. Saraswati Exports requested assessee that he was short of capital and required financial assistance in his business for smooth functioning of business. For this all business assessee agreed to give financial assistance in the form of mobilization advance to Saraswati Exports. Assessee given a total advance of Rs. 1,47,87,930/- to M/s Saraswati Exports on various dates. Post dated cheques were obtained for necessary security of the advance and a formal agreement was entered between the parties. A copy of letter issued by M/s. Sarawati Exports herewith enclosed. 6. The responding party M/s Saraswati Exports fails to fulfill its obligation and therefore assessee lodged the cheques for recovering the advance given by us. The cheques were dishonoured and therefore criminal suit was filed u/s 138 of The Negotiable Instrument Act, 1881 for bouncing of cheques ....
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....ame are not allowable under section 36 (l)(vii) even than possibility to be consider to allow it as trading loss under section 28(i). 15. Sir, the decision quoted above has taken plea of law made by Hon'ble Apex Court in the matter of BadrDas Daga Vs. CIT (34 ITR 10), CIT Vs. Woodward Governor Of India (P) Ltd. (312 ITR 254) and Madras Industrial Investment Corporation Ltd. Vs. CIT (225 ITR 802). 16. Sir, apart from these decisions there are several decision in which the view has been affirmed by the courts that if any claim is incidental to business and is being done on the ground of ordinary commercial practice of the trade than it should be allowed and finally it should be allowed under sec. 28(i). 17. In the matter of CIT Vs. Inden Biselers (47 Taxmann 225) it has been held that " We fell that it is not necessary to go into that contention to answer the reference as we agree with the finding of the Tribunal that expenditure is allowable as a trading loss. As that conclusion is sufficient, we answer the reference against the revenue and in favour of the assessee" Sir, in this matter the expenses of payment of lorries was allowed e....
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....IT (2011-TIOL-344-HC-DEL-IT). The assessee has failed to prove that amount claimed as bad debt has been accounted for in its income in any previous year. Alternate claim of the assessee is also not found tenable to the Assessing Officer on the ground that the assessee had given this amount to M/s Saraswati Exports as a financial assistance to cover up the capital deficit of M/s Saraswati Exports on the basis of agreement made between them. Accordingly he made addition of Rs. 1,47,87,390/-. 4. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had allowed the appeal partly by observing that the case law cited by the Assessing Officer i.e. decision in the case of Pragati Construction (supra) is on different issue. There was an agreement dated 01/4/2001 between both the parties. Clause- 5,6,7,12,19, and 28 of the agreement reproduced by the ld CIT(A) in her order. After considering the terms and conditions of the agreement, it has been held that M/s Saraswati Exports had agreed to pay commission to the appellant because the appellant had agreed to help and assist M/s Saraswati Exports regarding production, designing, col....
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....wati Exports. 5. Now the revenue is in appeal and assessee is in C.O. before us. The ld DR has vehemently supported the order of the Assessing Officer and argued that the assessee's claim is not covered U/s 36(1)(vii) of the Act as the assessee gave advances to M/s Saraswati Exports, which has not been accounted for in any earlier year in the income of the assessee. Therefore, it is not covered in bad debt. 6. At the outset, the ld AR of the assessee has argued that these advances were given for business purposes. The assessee has shown commission income received from the export business, which was exported through M/s Saraswati Exports. The ld CIT(A) had examined thoroughly this issue and he has drawn our attention on page No.9 of the ld CIT(A)'s order wherein both the partners of the firm had shown commission income on this business made through M/s Saraswati Exports at Rs. 3,31,26,906/- for A.Y. 2002-03 to 2004-05. There was dispute between the parties, the assessee has received post dated cheques but same had been dishonoured. The assessee filed case under the Negotiable Instrument Act, (in short N.I. Act), which has been decided against the assessee. Thereafter, he filed....
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....been accounted for in previous year as income. Therefore, order of the ld CIT(A) is not justified allowing the bad debt U/s 36(1)(vii) of the Act, but it is business loss as amounts were advanced for business purposes. 7.1 The assessee also claimed bad debt of Rs. 2,87,930/-, which was advanced to Shri Mohiuddin, who was designer and served the firm on remuneration basis. The advance was adjusted against the salary but suddenly he left the assessee's job and recovery could not be made out by the assessee, but there is no evidence with the assessee to demonstrate that Shri Mohiuddin was in employment and has expertise in designing carpet and also worked with the assessee. No income from this advance has been accounted for in the previous years. Therefore, we upheld the order of the ld CIT(A) for business loss to the tune of Rs. 1.45 crores and confirmed the addition of Rs. 2,87,930/- as advanced to Shri Mohiuddin and claimed as bad debt. Accordingly, revenue's appeal is dismissed on the sole ground and assessee's C.O. is partly allowed on the grounds discussed above. 8. The 4th ground of the assessee's C.O. is against restricting the disallowance from 15% to 10% under the head....