The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled in favor of Hindustan Times, allowing the write-off of currency loss due to fire as a trading loss under Section 28 of the Income Tax Act, 1961.
The assessee submitted that during the year under consideration, the assessee received a sum of Rs 13,00,000/- as advance towards sale of scrap, which was lying in its stores on the ground floor. A major fire broke out in the store where such scrap and cash were kept by the assessee, resulting in damage to the scrap and currency kept in the said premises.
The AO disallowed the claim on the ground that the assessee had not filed supporting evidence in relation to the aforesaid claim. The AO also held that no income was offered by the assessee in terms of Section 36(2) of the Income Tax Act with regard to the said currency burnt in fire and hence the same when written off would not be eligible for deduction under Section 36(1)(vii) of the Income Tax Act.
Mr. Anuj Garg representing the revenue that no income was offered in terms of section 36(2) of the Act with regard to currency burnt in fire, is totally misconceived as apparently no income at all could be offered thereon. The entire issue being looked into from the perspective of provisions of Section 36(1)(vii) of the Income Tax Act by the revenue , per se, is not correct in the instant case.
The assessee had filed additional evidence under Rule 29 of the Income Tax Appellate Tribunal Rules, 1963 in the form of record of cross-examinations during the civil suit proceedings initiated against the assessee by the scrap dealer in C.S. ( OS ) No. 904/2007 and also evidencing the fact that the scrap dealer had given an advance of Rs 13, 00,000/- for removal of scrap.
Mr. Rohit Jain representing the assessee submitted that the advance received from scrap dealer which was remaining on the liability side was written back to income by the assessee in Asst Year 2019-20 and offered to tax thereon.
The AO was instructed to verify this from the ITR of Asst Year 2019-20. Upon confirming that the sum of Rs 13,00,000/- was indeed an advance from the scrap dealer and lost in a fire, the two-member bench, comprising Sakti Jit Dey ( Vice President ) and M. Balaganesh ( Accountant Member ), determined that the loss qualifies as a trading loss under Section 28 of the Income Tax Act. As a result, the raised ground by the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
