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| The Tax Publishers2020 TaxPub(DT) 1301 (Nag-Trib) : (2020) 206 TTJ 0420 INCOME TAX ACT, 1961
Section 36(1)(vii)
Loss due to fraud and embezzlement that had been occurred to assessee was very much irrecoverable and in the practical context, had to be allowed even though there were legal proceedings pending against all the defaulters.
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Business deduction under section 36(1)(vii) - Allowability - Loss due to fraud and embezzlement - Denial on the ground that there were legal proceedings pending against all the defaulters
Assessee claimed deduction of loss due to fraud and embezzlement. AO disallowed deduction on the ground that since there were legal proceedings pending against all the defaulters, therefore, possibility of recovery could not be ruled out and therefore, loss claimed by assessee did not fall within the ambit of bad debts under section 36(ii).Held: The question had to be viewed in the larger context of business necessity or commercial expediency and no abstract or pedantic view could be taken in the matter. It was not disputed that assessee took legal recourse by filing FIR and various legal actions before Higher Forum including termination of service of guilty employees. The loss that has been occurred to assessee because of those factors which was very much irrecoverable and in the practical context, had to be allowed since it had been incurred by the assessee for facilitating carrying on of business.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. :
IN THE ITAT, NAGPUR BENCH
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