Indian Kanoon - Search engine for Indian Law

In Chenab Forest Co. v. CIT (1974) 96 ITR 568 (J&KK) a forest contractor advanced money to sub-contractor for cutting and moving the trees. But the forest contract was not renewed. Accordingly, portion of the advances became irrecoverable. It was clear that to carry on the business, it was essential that advances should be made. Without these advances, the forest lessee might not be able to carry on the business. The advances during the ordinary course of business would have been adjusted and recouped if the lease were renewed. Since there was no renewal, the non- recoverability was a result of the circumstances. Therefore, it was held Page | 4 that the assessee was entitled to deduction of irrecoverable advances under section 37.