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Tax Publishers Lucky Exports v. DCIT [ITA No. 771/Del/2014, dt. 28-9-2020] : 2020 TaxPub(DT) 3876 (Del-Trib) Allowability of bad debts under section 37(1) or 28(1) *Facts:* Assessee firm had given advances to various parties for execution of export orders. Since these had become bad they were written off. The assessing officer and Commissioner (Appeals) did not allow the same citing that these were not bad debts. On higher appeal Assessee canvassed that these ought to have been allowed if not under section 37(1)(vii) then as expenses/losses incidental to business under section 37(1) or simply as losses under section 28(1). Held in favour of the assessee that they were entitled to the deduction of the advances which became irrecoverable. *Editorial Note:* A number of decisions including Badridas Daga v. CIT (1958) 34 ITR 10 (SC) : 1958 TaxPub(DT) 179 (SC) have been cited in this verdict. Even otherwise the decision of TRF Ltd. (2010) 323 ITR 397 (SC) : 2010 TaxPub(DT) 1481 (SC) points to the benefit of the assessee as even under section 36(1)(vii) all that the law warrants post 1-4-1989 for a bad debt to the claimed is write off in the account of the customer. These were then advances not necessarily fitting into bad debt but more so into section 37(1) or section 28(1) as simple business losses.

Tax Publishers

Lucky Exports v. DCIT [ITA No. 771/Del/2014, dt. 28-9-2020] : 2020 TaxPub(DT) 3876 (Del-Trib)

Allowability of bad debts under section 37(1) or 28(1)

Facts:

Assessee firm had given advances to various parties for execution of export orders. Since these had become bad they were written off. The assessing officer and Commissioner (Appeals) did not allow the same citing that these were not bad debts. On higher appeal Assessee canvassed that these ought to have been allowed if not under section 37(1)(vii) then as expenses/losses incidental to business under section 37(1) or simply as losses under section 28(1).

Held in favour of the assessee that they were entitled to the deduction of the advances which became irrecoverable.

Editorial Note: A number of decisions including Badridas Daga v. CIT (1958) 34 ITR 10 (SC) : 1958 TaxPub(DT) 179 (SC) have been cited in this verdict. Even otherwise the decision of TRF Ltd. (2010) 323 ITR 397 (SC) : 2010 TaxPub(DT) 1481 (SC) points to the benefit of the assessee as even under section 36(1)(vii) all that the law warrants post 1-4-1989 for a bad debt to the claimed is write off in the account of the customer. These were then advances not necessarily fitting into bad debt but more so into section 37(1) or section 28(1) as simple business losses.