TaxTMI 
TaxTMI 
2021 (12) TMI 760
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....3. 2.2 The learned AO has erred in concluding that advance written off will be loss of capital and it cannot be claimed as business expenditure under section 37 or as trading loss under section 28 of the Income tax Act, 1961. 2.3 The learned AO has erred in concluding that the advances written off cannot be treated as irrecoverable for the reason that the assessee is still trying to recover the money from Golden Gate Corporate Services India Pvt. Ltd. 2.4 The learned CIT(A) has erred in concluding that the write off of business advances cannot be considered as a trading loss or business expenditure for the year under consideration. 2.5 The learned AO and CIT(A) failed to appreciate that the company to which advances were made has been struck off from the list of companies by the Ministry of Corporate Affairs. 2.6 The learned AO and CIT(A) failed to appreciate that the business advances written off was advanced in the normal course of business. 2.7 The learned AO and CIT(A) erred in not appreciating that the claim of business advances written off satisfies all the ingredients laid down under section 37 and 28 of the Act. 2.8 The learned AO erred in stating allow....
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.... in the course of its business intended to conduct a conference during April, 2015 in Dubai. The assessee entered into an agreement with Golden Gate Corporate Services India hereinafter referred to as Golden Gate for making necessary arrangements in Dubai for conducting conference. Golden Gate is a domestic company providing services of event management and hotel room arrangements. The assessee paid advances to Golden Gate towards booking the conference hall, rooms for guests and their boarding and lodging arrangements in Dubai as per the agreement the assessee entered into with. As per the agreement the assessee advanced monies to Golden Gate to pay advances for booking accommodation and other facilities in Dubai. It is submitted that assessee had previous satisfactory dealings with Golden Gate for conducting similar conferences in August 2014 and February 2015 in Dubai. 2.3 The assessee paid advance payments of Rs. 1,42,03,233/ till 31st March 2015 and Rs. 40,00,000 on 7th April 2015 for booking hotels/accommodation and other arrangements for conference at hotel "Atlantis, The Palm" in Dubai for the events to be held on 15/04/2015. It is submitted that, the assessee was refused ....
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....aid out in section 36(2)(i) of IT Act,1961. Therefore, the amount of Rs. 1,47,81,233/ cannot be claimed as bad debt written off. c. Further, an advance is placed in the balance sheet and it does not form part of P&L account. Therefore any advance written off will be loss of capital for the assessee and it cannot be claimed as business expenditure u/s 37 of IT Act, 1961 or trading loss u/s 28 of the IT Act, 1961. d. Furthermore from the assessee's submission it is seen that the assessee is still trying to recover the money from Golden Gate Corporate Services India and it cannot be said that money is irrecoverable to the assessee. e. Based on the above discussion, the amount of Rs. 1,47,81,233/- claimed under the head of bad debt written off is disallowed and added back to the income of the assessee". Assessee had filed alternate submission to treat the expenses as a trading loss u/s. 28 of the Act. The Ld.AO after considering submissions of assessee held as under: "From the above submission filed on 14.12.2018 and 15.12.2018, it is seen that the assessee has changed its claim from being a bad debt written off as claimed in return of income to a business expenditure ....
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....e amount were filed after the end of FY 2015-16. As such it cannot be said that the amount of Rs. 1,47,81,233/- had become irrecoverable during year under consideration and that during the year under consideration the appellant had exhausted all remedies available to it to recover these amounts. In fact during the year under consideration the appellant had not even filed cases related to bouncing of all the cheques as the remaining cases were filed in subsequent years. So the claim of the appellant for allowing it trading loss during year under consideration needs to be rejected. As regards the reliance of the appellant on various decisions, the same is misplaced as in the appeal under consideration the appellant has failed to show that the amount had become irrecoverable during the year under consideration. So as such it cannot he considered as a trading loss or the business expenditure of the year under consideration. Considering above the grounds of appeal 1 to 5 of the appellant are dismissed." Aggrieved by the order of Ld.CIT(A), assessee is in appeal before us. 3. The Ld.AR submitted that all grounds raised relates to one issue. It is prayed that the disallowance may be de....
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....t section from the initial claim is justified and hence allowable. 4.4 U/s 37(1) of the I r Act, any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee) laid out or expended wholly and exclusively for the purposes of the business or profession shall be, allowed in computing the income chargeable under the head "Profits and gains of business or profession". 4.5 The assessee Company has paid trade advance which became irrecoverable and written off. The said expenditure is not covered in sections 30 to 36 of the Act. The expenditure incurred is not a capital expenditure. To find out whether an expenditure is on the capital account or on revenue, one must consider for what purpose was the money laid out? Was it to acquire an asset of an enduring nature for the benefit of the business or was it an ongoing in the doing of business? If money is lost in the first circumstance it is a loss of capital, but it lost in the second circumstance, it is revenue loss. In this case money was not paid to acquire an asset of enduring nature but for ongoing business activity, ie fo....
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.... On the contrary, the Ld.Sr.DR relied on the orders passed by authorities below. We have perused the submissions advanced by both sides in light of records placed before us. 6. From the documents placed in the paper book at page 179 onwards, we note that assessee proceeded under section 138 of N.I. Act against the Managing Director of Golden Gate Corporate Services. We note that the Ld.CIT(A) in his order recorded that there is an arrangement between assessee and the MD of Golden Gate Corporate regarding refund of Rs. 1,61,68,069/-. It is also recorded that partial payment of Rs. 15 Lakh was paid by Golden Gate to assessee upto 24.07.2015. Subsequently post dated cheques issued by the MD of Golden Gate bounced. 6.1 Admittedly the money advanced by assessee to Golden Gate was for the purposes of business. The Ld.AO rightly rejected the claim of assessee under section 36(2) as assessee had never taken into account the said advance in computing the income of assessee in any of the previous year which is the necessary condition laid down in section 36(2)(i). However, the Ld.AO did not verify the claim as a trading loss u/s. 28 of the Act. The Ld.CIT(A) admitted to the fact that asse....