Law:

Section:

Section 28(i) of the Income-tax Act, 1961 - Business deduction/loss - Allowable as - Assessment year 1961-62 - One of activities of assessee was acting as principal broker for supply of jute to jute mills - Assessee agreed to shoulder 50 per cent of loss arising from non-supply of raw material - Whether loss incurred by assessee under aforesaid agreement was deductible as business loss - Held, yes FACTS One of the activities of the assessee was acting as principal broker for the supply of jute to jute mills. The assessee entered into a contract with a Jute mill, called N, by which it agreed to shoulder the loss which N might incur on account of failure of the suppliers to supply raw jute to N. During the accounting year relevant for the assessment year 1961-62, six parties failed to supply raw jute to N at the stipulated rates. N purchased raw jute at higher rates and suffered loss on that account. The assessee later on entered into another agreement on 29-3-1961 with N, whereby it agreed to pay 50 per cent of the losses suffered by N on account of non-performance of the contracts by the said six parties; in case N realised any amount from the six parties the realisation was to be shared equally by the assessee and N. During the accounting year relevant for the assessment year 1961-62, the assessee paid the amount of loss in question to N and claimed deduction of the same as business loss. The Assessing Officer disallowed the assessee's claim. On appeal, the AAC as well as the Tribunal allowed the assessee's claim. On reference: HELD In the instant case, the real question was whether the amount was spent by the assessee in the course of carrying on business as a broker. On the facts of the case, it could not be urged that this was not a commercial transaction. Having regard to the nature of the business activities of the assessee and the nature of agency business, the amount of loss incurred during the course of such business activities must be allowed as deduction in computing the income of the assessee's business. If any amount was recovered subsequently, then that will have to be created as a revenue receipt of that year. Even if the payment by the assessee…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492