Write-off of Rs. 8,002 on Non-Recoverable Employee Advances Allowed as Business Expense u/s 37: ITAT [Read Order]
The tribunal held that the amount, though not meeting Section 36(2), was business-related and too small to justify disallowance.
![Write-off of Rs. 8,002 on Non-Recoverable Employee Advances Allowed as Business Expense u/s 37: ITAT [Read Order]](https://www.taxscan.in/wp-content/uploads/2024/12/Business-Expense-Ahmedabad-Bench-of-Income-Tax-Appellate-Tribunal-Commissioner-of-Income-Tax-non-recoverable-employee-advances-Income-Tax-Income-Tax-Appellate-Tribunal-Taxscan-1.jpg "Write-off of Rs. 8,002 on Non-Recoverable Employee Advances Allowed as Business Expense u/s 37: ITAT [Read Order]")
The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)allowed the write-off of Rs. 8,002 on non-recoverable employee advances as a deductible business expense under Section 37 of the Income Tax Act,1961. Siwana Agri Marketing Ltd,appellant-assessee, filed its income tax return for AY 2017-18, declaring ₹31.91 lakh as income. After scrutiny, the Assessing Officer(AO) completed...
The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT)allowed the write-off of Rs. 8,002 on non-recoverable employee advances as a deductible business expense under Section 37 of the Income Tax Act,1961.
Siwana Agri Marketing Ltd,appellant-assessee, filed its income tax return for AY 2017-18, declaring ₹31.91 lakh as income. After scrutiny, the Assessing Officer(AO) completed the assessment, increasing the income to ₹97.85 lakh.
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The AO disallowed ₹65.86 lakh under Section 36(1)(iii), stating that interest-free loans of ₹5.48 crore were given despite significant interest expenses, without proof of business purpose. Another ₹8,002 was disallowed under Section 36(2) because the written-off amount was not earlier recognized as income.
The assessee argued that the loans were from interest-free funds and the write-offs were business-related. However, the Commissioner of Income Tax(Appeals)[CIT(A)] upheld the AO’s decision, citing a lack of evidence.
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The assessee appealed to the tribunal, arguing that the disallowance of Rs. 8,002 for sundry balance written off was incorrect and should be allowed in the Total Income calculation.
The assessee's counsel explained that Rs. 10,000/- was given to an employee as an advance, but it couldn't be recovered. The excess interest of Rs. 1,998/- was added back, leaving a balance of Rs. 8,002/-, which was written off. The counsel argued that this should be allowed as a business expense under section 37 of the Act.
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The two member bench comprising Siddhartha Nautiyal(Judicial Member) and Makarand V.Mahadeokar(Accountant Member) reviewed the submissions of both parties, the findings of the AO and CIT(A), and the relevant case laws.
The Rs. 8,002/- write-off was for non-recoverable advances given to employees, related to the assessee’s business. Although it did not fully meet the criteria under Section 36(2), it was considered a deductible business expense under Section 37. Given the small amount, the disallowance was not justified.
In short, the appeal filed by the assessee was allowed.
To Read the full text of the Order CLICK HERE
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