INCOME TAX ACT, 1961

Section 36(1)(vii) read with Section 37(1)

Business deduction under section 36(1)(vii) - Bad debts - Advance paid towards booking of commercial space by assessee engaged in real estate business -

Assessee made advances to one developer for booking commercial space in an upcoming construction project , which remained not refunded to assessee. Issue arose for consideration as to whether it was allowable under section 36(1)(vii) as bad debts or business loss under section 37(1). Tribunal had held that assessee was in business of real estate, therefore the loss was business loss. Held: Assessee was engaged in the business of real estate and financing. The object clause for incorporation of the company, widely worded and would cover within its fold range of activities such as erection, construction of buildings. It was in furtherance of such object that assessee had entered into a commercial venture by booking commercial space with a developer in the upcoming construction of commercial building, the payment being in the advance booking. The sum was not refunded. This was thus clearly a business loss. It was also noticed that in the later year when due to continued efforts, the assessee recovered a part of the said sum, the same was offered as business income.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

SUBSCRIBE FOR FULL CONTENT