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Facts
The assessee, engaged in construction and real estate, sought to write off advances given for business purposes that became irrecoverable. The Assessing Officer denied this deduction, and the CIT(A) upheld the denial.
Held
The Tribunal held that the advances lost during the course of normal business activities are allowable as general business deductions under Section 37(1), even if specific conditions of Section 36(2) and Section 36(1)(vii) are not met.
Key Issues
Whether advances given for business purposes, which become irrecoverable, are allowable as business loss under Section 37(1) despite not meeting specific conditions of Section 36.
Sections Cited
143(3), 36(1)(vii), 36(2), 37(1), 28
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
(िनधा�रणवष� / Assessment Year: 2014-15) M/s SAB Industries Ltd. ACIT SCO No. 49-50, Sector 26 Central Circle-II, बनाम/ Vs. Chandigarh. Chandigarh. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AACCS-5078-H (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri Ashwani Kumar (CA) and Ms. Deepali Aggarwal (CA)- Ld. ARs ��थ�कीओरसे/Respondent by : Dr. Ranjit Kaur, (Addl. CIT) – Ld. Sr. DR सुनवाईकीतारीख/Date of Hearing : 25-03-2025 घोषणाकीतारीख /Date of Pronouncement : 21-04-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2014-15 arises out of an order of learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] dated 22-06-2018 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Act on 08-07-2016. The sole grievance of the assessee is confirmation of disallowance of Rs.22.97 Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
The assessee is stated to be engaged in construction and real estate. The assessee had outstanding balance against M/s MTM Consulting Group for Rs.22.45 Lacs and it had given advance of Rs.0.52 Lacs to Shri Dinesh Kumar Yadav for fabrication. The assessee claimed write-off of the same u/s 36(1)(vii). However, since the debts were not taken into account while computing income of this year or earlier year as mandated u/s 36(2), Ld. AO denied deduction thereof. The assessee stated that advances were given for real estate business purpose and the same were no longer recoverable. The said claim would be allowable u/s 37(1). The assessee made advances to MTM consulting group to arrange properties for the company. The same could not materialize and the payee was able to refund the advances partially. The balance advance remained unrecovered despite various requests of the assessee. Since the advance was no more recoverable, the management decided to write-off the advances as non-recoverable which would be allowed as trading loss u/s 37(1) r.w.s. 28 of the Act. However, Ld. AO rejected the same on the ground that the assessee was not engaged in money-lending. The Ld. CIT(A) confirmed the stand of Ld. AO against which the assessee is in further appeal before us.
It emerges that the aforesaid advances were given by the assessee during the course of its regular business activities. Any money lost during normal business activity would be nothing but business loss for the assessee which would be covered under general provisions of Sec. 37(1) since the assessee do not fulfil the conditions of Sec.36(2) and its claim is not maintainable under specific provisions of Sec.36(1)(vii). Nevertheless, the advances have been lost in the course of normal business activities and therefore, the same would be allowable as general business deductions as claimed by the assessee during the course of assessment proceedings. Therefore, we direct Ld. AO to allow the deduction thereof.
In another ground of appeal
, the assessee seeks correct TDS credit as per Form 26AS. It would suffice on our part to direct Ld. AO to verify the same and grant correct TDS credit as available to the assessee.
5. The appeal stand allowed. Order pronounced on 21-04-2025.