TaxTMI 
TaxTMI 
2011 (7) TMI 1250
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....being disposed by way of this consolidated order for the sake of convenience. 2. Brief facts of the case are that, the assessee, an individual, is in the business of export of garments. It filed its return of income on 31st October 2005, declaring total income of ` 12,06,940, for assessment year 2005-06 and on 31st October 2006, declaring total income of ` 30,20,600 for assessment year 2006-07. The Assessing Officer, in both the cases, disallowed business loss claimed on account of write-off of bad debt. Certain other disallowances were also made. Aggrieved, the assessee carried the matter in first appeal, wherein the Commissioner (Appeals) granted part relief. Being aggrieved, the Revenue is in appeal before the Tribunal on the issue of....
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....ss of money lending. It is further observed by the A.O. that the appellant initially explained that the advance given was for purchase of land but later on submitted that the same was for the procurement of raw material, development of website, advance to employees, business requirements, etc. as discussed in Para-4.2.1 of the assessment order for the A.Y. 2005-06 and Para-4.1 of the A.Y. 2006-07. However, the A.O. did not accept this contention of the appellant due to the following reasons:- i) The accountant stated the advances to be for the purpose of purchase of land whereas the written submission made by the assessee speaks about the advances for the purchase of material for export of garment business of the assessee. Thus, th....
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....d Departmental Representative, Mr. G.P. Trivedi, relied on the order of the Assessing Officer and submits that the loss is a capital loss and has wrongly been allowed by the Commissioner (Appeals). He submits that the assessee's submissions before the Assessing Officer were that the advances become irrecoverable and no other details were filed. He pointed out that the assessee has not filed any supporting evidence like details of bank cheques number, address of the parties, etc. He submits that the advances were given in the years 1991, 1992, 1993 and 1994 and it is not demonstrated as to how the advances have become bad in this particular year. He referred to Page-3 of the assessment order and submits that no evidence has been adduced to d....
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.... that Civil Suit should be filed for providing that an advance is not recoverable and for this proposition, he relied on the judgment of Hon'ble Calcutta High Court in A.W. Figgis & Co. v/s CIT, (2002) 254 ITR 63 (Cal.). He points out that the advances were given for supply of material and, hence, a loss which is incurred for the same would be a revenue loss and not a capital loss. In support of his contentions, he relied on the judgment of Hon'ble Jurisdictional High Court in I.B.M. World Trade Corporation v/s CIT, (1990) 186 ITR 412 (Bom.). He further submits that the assessee is not enduring any benefit due to write-off of this loss and it is not the case of the Assessing Officer that by incurring this expenditure, the assessee is ca....
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....ther words, the loss claimed is directly incidental to his business operations, and (iv) loss claimed is on account of write-off of advances made as discussed above, in his books of account for the relevant assessment year." ii) The Commissioner (Appeals) has given a factual finding that the loss in question directly relates to the business operations. He observed that reimbursement of expenditure incurred at Bangalore in connection with purchase of technology from Sunsoft Technologies P. Ltd. is directly connected to purchase of material or for processing of material required for export business and is in revenue field as no capital asset was acquired. At Para-4.3.4, the Commissioner (Appeals) held as follows:- "4.3.4 ....
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..../s CIT, 111 ITR 263 (SC) has held that loss is deductible where there is a direct and proximate nexus between the operation and the loss or where the loss is incidental to it, as, without the business operation and doing all that is incidental to it, no profit can be earned." iii) We do not find any infirmity in the aforesaid findings of the Commissioner (Appeals). Hon'ble Jurisdictional High Court in I.B.M. World Trade Corporation (supra) held that where the assessee advanced money to a landlord for construction of factory shed as well as the residential plant, for leasing them to the assessee and the landlord became insolvent making the amounts irrecoverable, it was held that the assessee was entitled to a deduction by way of busin....