TaxTMI 
TaxTMI 
2025 (6) TMI 1322
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....s. 562639." 2. Brief fact of the case are that assessee is a private limited company, manufacturing refractories. It filed the return of income on 16.10.2017 reporting an income of Rs 7,95,04,900/- The return was selected for scrutiny and order u/s 143(3) was passed on 24.12.2019 assessing total income of Rs. 8,69,91.330/-. Ld. CIT(A) confirmed the additions so made, while dismissing the appeal. Assessee is in appeal on the two issues amongst others and for the relief granted by ld. CIT(A), Revenue is not in appeal for the same. 3. We first take up ground no.1 in respect of addition of Rs. 20 lakhs which were claimed as bad debts under the head 'other administrative expenses' in its profit and loss account. In this respect, assessee brought out the facts on record by submitting that it is running a factory at village Gudri Tahsil-Boharibandh, District-Katni (MP). The factory required further land for expansion purposes and therefore assessee entered in to an agreement with one Shri Raja Jagwani for purchase of a piece of land (khasra no. 95) which was contiguous to the factory land (khasra no. 96 and 97) and therefore, of much value to the assessee. An advance payment of Rs 20 la....
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....one must consider the expenditure in relation to business. Since all payments reduce capital in the ultimate analysis, one is apt to consider a loss as amounting to a loss of capital. But this is not true of all losses. Because losses in the running of the business cannot be said to be of capital. The questions to consider in this connection are: for that was the money laid out was that to acquire an asset of enduring nature or was it an outgoing in the doing of the business? If money be lost in the first circumstances it is loss of capital but if lost in the second circumstances it is revenue loss. In the first it bears the character of investment but in the second, to use a commonly understood phrase, it bears the character of current expenses". 4.2. On the strength of above, it was submitted that assessee acquired the land not for investment purposes but to run the factory in more productive way. Since assessee could not acquire the said land, it suffered the loss on account of not being able to carry out the expansion of the factory. The amount which was advanced for acquiring the land was for the purpose of business expediency and expanding the business. Thus, it is ought to ....
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....rief in relation to the above substantial question of law is that assessee claimed deduction of Rs. 622.01 lakhs in computing the taxable income. This amount was considered not recoverable by the assessee and was written off while computing income under the head "profits and gains of business or profession". Hon'ble Court examined whether the expenditure incurred or the deduction claimed arose in carrying on business of assessee or incidental to it. Hon'ble Court noted the fact that commercial expediency required assessee to incur expenditure or give advances or give ICDs cannot be dismissed lightly. According to the Hon'ble Court, list of allowances enumerated in section 30 to 37 are not exhaustive. According to it, an item of loss or expenditure incidental to business may be deducted in computing profits and gains even if it does not fall within any of these sections, for the tax is on profits and gains computed on ordinary commercial principles. In order to arrive at profits and gains, account must necessarily be taken of all losses incurred by the assessee. It was thus, held that business losses, though they fall outside the purview of sections 30 to 37 are allowabl....
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....business loss. 10. Section 28 of the Act imposes a charge on the profits or gains of business or profession. The expression "Profits and gains of business or profession" is to be understood in its ordinary commercial meaning and the same does not mean total receipts. What has to brought to tax is the net amount earned by carrying on a profession or a business which necessarily requires deducting expenses and losses incurred in carrying on business or profession. The Supreme Court in the matter of Badridas Daga v. Commissioner of Income Tax, reported in 34 ITR page 10, has held that in assessing the amount of profits and gains liable to tax, one must necessarily have regard to the accepted commercial practice that deduction of such expenses and losses is to be allowed, if it arises in carrying on business and is incidental to it. 11. On the basis of the aforesaid decisions, it can be concluded that even if the deduction is not allowable as bad debts, the Tribunal ought to have considered the assessee's claim for deduction as business loss. This is particularly so as there is no bar in claiming a loss as a business loss, if the same is incidental to carrying on of a business.....
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....lating to disallowance of prior period expenses of Rs. 4,62,639/- which includes ECGC expenses of Rs. 4,91,140/- pertaining to insurance premium and Rs. 71,499/- for TCS-ION services. The invoice in the first case is dated 29.03.2016 which was received by the assessee only on 06.04.2016. Accordingly, assessee made a corresponding accounting entry in the books of accounts for financial year 2016-17 relevant to Assessment Year 2017-18, since the said liability was not known earlier and arose in this year on account of receipt of this invoice on 06.04.2016. In the second case, the bill was dated 31.03.2016 but was received on 21.05.2016. Ld. Assessing Officer held that since assessee follows mercantile system of accounting and the disclosures have been made of these expenses as per item 13(d) of Form 3CD, the same are not incurred during the year, not falling within the parameters of section 37(1). He thus, disallowed the same to make the addition. 8.1. Contention of the assessee is that these payments made by the assessee and accounted in its books of accounts for the relevant year are genuine payments, fact of which is not in dispute. It was also submitted that these expenses cryst....