Loss of Investment written off as Bad Debt and Same can’t Claim as Business Loss: ITAT upholds Order of CIT(A) against Ceramin India [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal ( ITAT ) has held that Loss of investment written off as bad debt and same can’t claim as a business loss and upheld order of CIT(A) against Ceramin India Private Limited.

The assessee is a company engaged in the business of trading in minerals & processing related to ceramics. It filed its return of income declaring total income at Rs.1,44,86,260 under normal provisions and book profit of Rs.1,42,80,309/- under the provisions of section 115JB of the Income Tax Act,1961.

The AO observed from the profit and loss account that the assessee company had claimed an expenditure of Rs. 36,46,500/- towards ‘bad debts written off’ under the head ‘other expenses’. The AO noted that out of the three advances, the advance given to Mr. Prbir Ghosh is a capital advance and the remaining two advances pertain to trade advances/material advances.

Since the expenditure claimed with respect to bad debts written-off were not offered as income in the previous years, the Assessing Officer made addition of Rs.29,30,000/- out of the expenditure claimed at Rs. 36,46,500/- towards bad debt written off under the head other expenses on the ground that assessee does not fulfill the conditions prescribed u/s.36(2) of the I.T.Act.

A Coram of ITAT bench consisting of Shri Rama Kanta Panda, Accountant Member and Shri Laliet Kumar, Judicial Member held that when the assessee is not entitled to  claim the same as bad debt, the assessee cannot claim the same as business loss as per his sweet will. The law is well settled on this aspect and business loss, if any, can be claimed by the assessee in the year of incurring of the expenditure and not as per his sweet will.

The Tribunal upheld the order of the CIT(A) sustaining the addition of Rs.29,30,000/- and the appeal raised by the assessee on this issue is dismissed. Shri Aashik Shah, CA appeared on behalf of the assessee and Shri Kumar Aditya appeared on behalf of the revenue.

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