TaxTMI 
TaxTMI 
2024 (1) TMI 54
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....2. The appellant reserves the right to add, amend or alter any of the ground/s of appeal." 2. Controversy involved in the present appeal lies in a narrow compass, i.e., sustainability of the disallowance of an amount of Rs. 27.67 lacs (approx.) that was advanced by the assessee company towards the purchase of property, i.e., stock-in- trade but was written off on becoming irrecoverable. 3. Shorn of unnecessary details, the assessee, a real estate developer had advanced an amount of Rs. 39 lacs to Ashutosh Gupta, S/o. Dr. G.C. Gupta, resident of Gudiyari, Raipur, a commission agent, for the purchase of land at Village: Baldakacher, District: Baloda Bazar. Although the assessee company, thereafter, had purchased land and executed a registered deed for a value of Rs. 11,32,876/- (out of Rs. 39 lacs) but the balance of land could not be transferred in its name due to the sudden demise of Shri Ashutosh Gupta in an accident. As the legal heir of Shri Ashutosh Gupta (supra) declined to refund the balance amount of Rs. 27.67 lacs (supra) to the assessee company, the latter filed a police complaint for recovery of the said amount, Page 60-61 of APB. 4. As the aforementioned amount ....
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.... Surgical Company Ltd. vs. ACIT 153 taxman 491 (Madras) (2006). In view of above, the claim is held to be rightly disallowed and hence, the disallowance of Rs. 27,67,124/- is sustained and the ground of appeal No. 2 is dismissed." 6. The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 7. We have heard the ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 8. As is discernible from the record, the assessee company had, on 06.05.2014, executed a Memorandum of Understanding (MOU) with Shri Ashutosh Gupta, as per which it had agreed to purchase 64 acres of land for agricultural purposes or plantation of trees at Village: Baldakachar, Tehsil: Kasdol, Dist. Baloda Bazar at an average rate of Rs. 2 lacs per acre, Pages 14-17 of APB. In lieu thereof, the assessee company had advanced an amount of Rs. 39 lacs to Shri Ashutosh Gupta in three tranches, viz. (i) 04.06.2014: Rs. 7 lacs; (ii) 11.07.2014: Rs. 20 l....
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.... that the said amount, having been rendered as irrecoverable, was rightly claimed by the assessee as a deduction in its profit & loss account. Our aforesaid view is fortified by the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Mysore Sugar Co. Ltd. (1962) 46 ITR 649 (SC). In the said case before the Hon'ble Apex Court, the assessee, which was engaged in manufacturing sugar, had, inter alia, advanced money to the sugarcane growers, which, thereafter, was to be adjusted against the price of sugarcane that was to be supplied by them to the assessee company. However, due to crop failure, as the advance given by the assessee company to the aforementioned company was rendered irrecoverable, the assessee had claimed the same as a loss while computing its business income. The Hon'ble Apex Court deliberating on the allowability of the assessee's claim for deduction of the irrecoverable advances that were given in the normal course of its business, which, though was disallowed by the A.O, had observed, that as the same was a revenue loss for the assessee, therefore, it was rightly claimed as a deduction. For the sake of clarity, the relevant observations of the Hon'ble Suprem....
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....trade transaction of an advance against goods.........." The second case, Charles Marsdon & Sons. Ltd v. The Commissioners of Inland Revenue (1), is under the Excess Profits Duty in England, and the question arose in the following circumstances: an English Company carried on the business of papermaking. To arrange for supplies of wood pulp, it entered into an agreement with a Canadian Company for supply of 3000 tons per year between 1917-1927. The English Company made an advance of E. 30,000 against future deliveries to be recouped at the rate of E. I per ton delivered. The Canadian Company was to pay interest in the meantime. Later, the importation of wood pulp was stopped, and the Canadian Company (appropriately called the Ha Ha Company) neither delivered the pulp nor returned the money. Bowlatt, J. held this to be a capital expenditure not admissible as a deduction. He-was of opinion that the payment was not an advance payment for goods, observing that no one pays for goods ten years in advance, and that it was a venture to establish a source and money was adventured as capital. The last case, to which we need refer to illustrate the distinction made in such ca....