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3. On appeal to the ld. CIT(A), it is contended on behalf of the assessee that the writing off is necessitated upon failure of the foreign buyer It was further argued by the assessee before the ld. CIT(A) that when the goods were sold on C&F terms and that the goods reached the Custom station of Benapole inside Bangladesh, the party failed to pay for the goods after having acknowledged receipt of the goods at the Custom station, therefore, the assessee rightly claimed the value of the goods from the foreign buyer After making honest attempt, the assessee had written off the amount as bad debts in the books of accounts during the year royalty Therefore, it was rightly claimed as bad debts for this assessment year 2003-04 It is not disputed that the foreign buyer has acknowledged the receipt of the goods at Custom port of Bangladesh. It was further explained before the Id CIT(A) that the assessee made honest effort for recovery of the loss through insurance claim. However, the insurance company declined to pay the claim by their letter dated 22nd April, 2002 addressed to the assessee. Even assuming it is a trading loss, the loss got quantified, crystallized whenever the assessee exhausted their alternative remedy Therefore, on this ground also the loss ought to have been allowed for this assessment year only The assessee satisfied the provisions of Section 36(1)(vii) of the Act and made honest attempt to recover the debt against the export sales. After it has become bad, it was written off in the accounts for the relevant current previous year. Therefore, it is to be allowed and the deduction is allowable as bad debts and in that way, he distinguished the decision of Hon'ble Supreme Court in the case of Mahabir Commercial Co Ltd. v. CIT which is specifically on CIF contracts and the assessee relied totally on this decision Further, the Id CIT(A) found that there is no evidence on the side of the assessee to show what legal steps were taken against the buyer or its bank to recover its money. Therefore, the ld. CIT(A) rejected the claim of treating the same as bad debts.

6. Coming to CIF contracts, the word "CIF" stands for Cost, Insurance and Freight. A CIF contract is a type of contract wherein the price includes cost, insurance and freight charges Under a CIF contract, seller is required to insure the goods, deliver them to the shipping company, arrange for affreightment and send the bill of lading and insurance policy together with invoice and a certificate of origin to a bank The documents are usually delivered by the bank against the payment of price or against the acceptance of the bill This method protects the seller since he continues to be the owner of the goods until the buyer pays for them and obtains the documents. The interesting point to be noted here is that the property in the goods passes to the buyer on the delivery of documents In this case present before us, it is not disputed that the buyer got the delivery of documents. The buyer is equally protected and is pulled upon only against the documents and the moment he pays, ho obtains the documents which enables him to get the delivery of goods. If, in the meantime, the goods are lost, neither the buyer nor the seller is put to loss, whoever is the owner at the time of loss can recover it from insurer.

7. The buyer is bound to accept the bill and obtain the documents, otherwise he shall be liable for breach of contract. If on receiving the goods, the buyer finds that they are not according to the contract, he may reject them and recover the price paid and also claim for damages. On the other hand, the seller is required to deliver the shipping documents within reasonable time The shipping documents must include the policy of insurance and not merely the certificate of insurance The buyer has the right to reject the documents if he finds that the documents are not proper or are invalid or incompetent. Thus it is seen in a CIF contract that buyer has got to accept the documents and pay the price even if the goods are destroyed or lost. In that case, he has the remedy against the insurer to recover the loss. It is for this reason that a CIF contract since discovered as a contract for sale of goods. This however does not mean that a CIF contract is altogether divorced from delivery of goods, it contemplates the transfer of actual goods in the normal course, insurance policy and the bill of lading are equivalent of the goods. Now this explanation is very clear that the assessee has proved satisfactorily, i.e. the whole documents he relied clearly prove the completed wholesome CIF contract and the assessee has taken honest decision as contemplated on the part of the duty of the seller. The insurance is perfectly made. All requirements of CIF contract are satisfied. Therefore, the assessee cannot be faulted with transaction. Admittedly, the goods were lost at Benapole which is within Bangladesh and outside the territories of India As per the C&F terms, the goods were sold and that the goods reached the Custom station is not at all disputed. Therefore, this CIF contract is a sale of insured goods either lost or not lost. This will answer the issue that the assessee has taken all the precautions and executed all the conditions laid down for entering into CIF contract. Therefore, the assessee cannot be faulted with. When we answer this question, the assessee sold the goods and sale has become complete, then almost we have taken the decision that the issue should be decided in favour of the assessee. The decision of Hon'ble Supreme Court in the case of Mahabir Commercial Co. Ltd. (supra) where also the sale on contract was referred into, completely supports the assessee's contention. It is also proved that the assessee wrote off the bad debts only in the previous year relevant to the assessment year under appeal after exhausting all the possible methods to recover the amounts from the foreign buyer or the insurer. Therefore, the amount written off is under the honest intention that the amount is not at all recoverable. The goods were lost or destroyed in a fire at the Custom port in Bangladesh is also not disputed. Under the above circumstances, we are of the view that the amounts were due under the two of the invoices for goods sold on C&F terms and the goods were exported on C&F terms after fulfilling all the conditions for entering into C&F contract and the goods were covered by transit insurance arranged by the buyer as per terms of LC and under the above facts and circumstances, inspite of honest efforts taken by the assessee, the debts could not be recovered and in view of the honest decision of the assessee, the book debts were written off for the previous year relevant to the assessment year under appeal. Therefore, we have no hesitation to allow the claim of the assessee. We set aside the orders of the authorities below and allow the claim of the assessee in full.