Advances written off not allowable unless the same were for the purpose of business
The
AO has noted that during the course of assessment proceedings, the
assessee-company had vide a letter dated 4/3/2002 voluntarily offered
for taxation by disallowing a sum of Rs. 15,54,260/-. In view of the
said voluntary offer, the impugned amount was added back to the income
of the assessee. When the matter was carried before the first appellate
authority, it was held that the impugned amount was offered for taxation
and
it was not a case of mistaken impression of law, therefore, in the
absence of any other material, the action of the AO was upheld. The
explanation of the assessee was that the said amount was paid for supply
of materials/services. As per the said explanation, the assessee could
not avail the services. The assessee was also not in a position to
recover the advances. This explanation of the assessee was not supported
by any cogent evidence. Merely writing of an amount do not by itself
qualifies for deduction unless and until it is proved beyond doubt that
the expenditure/claim wholly and exclusively for the purpose of the
business. The case of CIT v. Abdul Razak & Co. [1981] 136 ITR 825
was decided by the Hon'ble Court on the facts of the case because in
that case the assessee was engaged in the business of Commission Agency.
The assessee has advanced the amount to the principle which was written
off. On those facts, the Hon'ble Court has held that the written off of
the amount was allowable as a business loss. On the contrary, the
assessee has not placed any supporting evidence through which it could
be established that the said write off was for the purpose of the
business. Rather, assessee himself had offered the said amount for tax
during the course of assessment proceeding, hence the view taken by the
Revenue Authorities for this disallowance is hereby confirmed. This
ground is dismissed.
ITAT AHMEDABAD BENCH `D'
Mitsu Ltd.
v.
Assistant Commissioner of Income-tax
IT Appeal Nos. 3088 & 3119 (Ahd.) of 2003
[ASSESSMENT YEAR 2000-01]
Date of Pronouncement- 23.01.2013