Judgment :- (CHITRA VENKATARAMAN,J) 1. The present appeal is at the instance of the assessee in respect of the assessment year 1988-89. The assessee is a firm carrying on business in manufacturing and sales of fire works. While completing the assessment, the Assessing Officer disallowed the claim of Rs.9,60,704/- comprising of Rs.4,75,307/- as disputed debts due from debtors and Rs.4,85,397/- towards time barred debts. 2. It is seen from the order of the Assessing Officer that at the time of hearing, the assessee admitted that the time barred debts claim could not be claimed as deduction in the year under consideration. As regards the disputed amount due from the debtors to the tune of Rs.4,75,307/- was concerned, it represented rebates and discounts asked for by the parties. The assessee contended that even though there were correspondences in this regard by the assessee, there was no scope for recovery and hence, it claimed deduction for the said amount. The said claim was rejected by the Officer on the ground that the same was not written off so in the Books of Accounts and hence, the said claim could not be allowed under Section 36 of the Income Tax Act, 1961. Thus, the entire amount of Rs.9,60,704/- was added as income. 3. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who pointed out that the assessee had no satisfactory evidence to furnish that the amount had become irrecoverable and the amounts were not written off in the books of accounts. In the absence of details available, the appeal filed by the assessee was rejected by the Commissioner of Income Tax (Appeals). 4. Aggrieved by the same, further appeal was preferred by the assessee before the Income Tax Appellate Tribunal. The Tribunal however rejected the claim of the assessee following the order of the Tribunal dated 27.2.2004 passed in ITA.Nos.2391 and 2392 of 1992, preferred by the Joint Receivers of the firm in which the appellants were partners, wherein the Tribunal had taken the view that the assessee had not written off the said amount as bad debt in the books of accounts and hence, the claim could not be sustained. Aggrieved by the same, present appeal by the assessee. 5. Aggrieved by the same, present appeal by the assessee. 5. It is seen from the orders of the Tribunal dated 27.2.2004 passed in ITA.Nos.2391 and 2392 of 1992, that the said appeal before the Tribunal was preferred by the Joint Receivers of the assessee company. The Tribunal rejected the assessee's contention therein on the ground that under Section 36(vii) of the Income Tax Act a claim on irrecoverable loan could be allowed as a deduction only if the same had been written off in the books of the accounts of the assessee. On the admitted fact that the assessee had not written off the said amount as irrecoverable in the accounts, the claim was rejected. The assessee however made an alternative plea that its claim be considered as a trading loss. The Tribunal viewed that in order to consider the said claim as trading loss, the assessee must show that the loss occurred in the course of business or trade. The inability to recover the amount could not be considered as a trading loss. In the light of the view thus taken by the Tribunal in the order dated 27.2.2004 passed in ITA.Nos.2391 and 2392 of 1992, the assessee's contention as regards the bad debt was rejected. 6. Evidently, the said decision was not taken on appeal before this Court by the Joint Receivers. The appellant herein is one of the partners of the firm. Having lost the appeal before the Tribunal, he has now preferred this appeal before this Court. It is seen from the order of the Tribunal that the Revenue raised a preliminary objection as regards the maintainability of the appeal. The Tribunal held that the assessee herein was entitled to maintain the appeal in terms of Section 247 of the Income Tax Act. Thus having entertained the said appeal, the Tribunal followed its earlier order dated 27.2.2004 passed in ITA.Nos.2391 and 2392 of 1992, in the appeals preferred by the Joint Receivers of the assessee's firm. 7. The Tribunal held that the assessee herein was entitled to maintain the appeal in terms of Section 247 of the Income Tax Act. Thus having entertained the said appeal, the Tribunal followed its earlier order dated 27.2.2004 passed in ITA.Nos.2391 and 2392 of 1992, in the appeals preferred by the Joint Receivers of the assessee's firm. 7. As far as the merits of the present appeal is concerned, learned counsel for the assessee submitted that even though the assessee had not written off in the accounts the amount due from the debtors as required under Section 36(vii) of the Income Tax Act, nevertheless, the claim could be considered under the other provisions available under the Act viz., Section 28 of the Income Tax Act as trading loss. Hence, the Tribunal should have adverted to its contention under Section 28 of the Act to grant the relief. 8. Placing reliance on the decision of this Court in the case of C.I.T v. INDEN BISELERS – 181 ITR 69, which in turn applied the decision of the Supreme Court in the case of BADRIDAS DAGA v. C.I.T. - 34 ITR 10, learned counsel for the assessee submitted that even though the deduction is not admissible for the computation of the total income either as a bad debt or as an expenditure wholly incurred for the purpose of business, still, it can be allowed as a trading loss if it arises directly from carrying on the business and is incidental to the business. Thus, when the loss that had arisen herein is one during the course of business, the deduction ought to have been granted in this case even if the assessee not written off the same as bad debt as required under Section 36 of the Income Tax Act. 9. Learned counsel for the assessee also placed reliance on the decision of the Apex Court in the case of C.I.T. v. WOODWARD GOVERNOR OF INDIA P. LTD - 254 ITR 312, wherein the Apex Court considered the claim in the context of Section 37 of the Income Tax Act. 10. In the light of the above decision, learned counsel for the assessee prayed that the claim of the assessee, viz., to treat the bad debt as one of trading loss, be considered and deduction allowed. 11. 10. In the light of the above decision, learned counsel for the assessee prayed that the claim of the assessee, viz., to treat the bad debt as one of trading loss, be considered and deduction allowed. 11. Learned Standing Counsel for the Revenue, however, pointed out that when the Tribunal had already considered the claim in the assessee's appeal preferred by the Joint Receivers and when the admitted fact is that the assessee had not written off the time barred debt or shown that the assessee had no claim on the amount due from the agents, apart from not being written off in the books of accounts as bad debt, the question of considering the same as trade loss for the purpose of deduction does not arise. 12. Heard learned counsel for the assessee as well as learned standing Counsel appearing for the Revenue. 13. As far as the Revenue is concerned, there is no dispute raised and rightly so, as regards the maintainability of the appeal by the assessee. A perusal of the order of the Tribunal and that of the authorities below show that as far as the claim of irrecoverable loan amount which was claimed as time barred debt is concerned, evidently, the assessee had not claimed it as a deduction in the year under consideration as provided for under Section 36(vii) of the Income Tax Act. 14. As regards the rebates and discounts asked for by the parties relating to the transaction that the assessee had with the parties, it is seen from the contention taken by the Joint Receivers in the appeal filed before the Tribunal in ITA.Nos.2391 and 2392 of 1992, that the assessee took an alternative plea that the same be considered as a trading loss. The Tribunal rejected the plea of the assessee as regards the claim made on the strength of Section 36(vii) of the Act. However, as regards the alternative plea of the assessee to treat the claim as a trading loss, the Tribunal extended the same reasoning as available under Section 36 of the Act. We do not think the said line of reasoning has the support of any legal principle. 15. As rightly pointed out by the learned counsel for the assessee, in the case of C.I.T v. INDEN BISELERS – 181 ITR 69, this Court considered almost similar circumstances. We do not think the said line of reasoning has the support of any legal principle. 15. As rightly pointed out by the learned counsel for the assessee, in the case of C.I.T v. INDEN BISELERS – 181 ITR 69, this Court considered almost similar circumstances. The assessee therein had a contract for supply of iron ore to the State Trading Corporation. To facilitate transport, the assessee entered into an agreement with one Central Mining Corporation. The said Corporation undertook to ply all its trucks exclusively to the assessee. In consideration of the said services, the assessee undertook to pay the finance company from whom the Corporation got the lorries under the hire purchase scheme, a sum of Rs.21,240.30 towards insurance premium and advance payment for the vehicles. The assessee had the services of the Transport Corporation for two years. During the third year in 1963, there was no transport by the Corporation for the assessee. There was a default by the Corporation in paying the hire charges to the Finance Company. The assessee intervened and paid the instalments to the Finance Company on behalf of the Corporation. During the year ending 31st March 1963, a sum of Rs.2,19,431/- was outstanding from the Corporation to the assessee. due to difficult financial position of the Corporation, the assessee could not recover any amount from the Corporation. There was no transport of iron ore also during this period. The assessee claimed that the said amount of Rs.2,19,431/- as bad debt, business expenditure or alternatively, loss, be deducted from the total income. In considering the claim, this Court pointed out as follows: "Under section 28 of the Income Tax Act in computing the income chargeable to Income Tax, a loss other than capital loss, which is merely incidental to the trade, is allowable on ordinary principle of commercial trade though it may not be allowable under any of the specific clauses either under section 36 or under section 37 of the Income Tax Act." 16. In so holding, this Court referred to the decision of the Supreme Court in the case of BADRIDAS DAGA v. C.I.T. - 34 ITR 10 holding that: "When a claim is made for a deduction for which there is no specific provision under section 10(2), whether it is admissible or not will depend on whether, having regard to accepted commercial practice and trading principles, it can be said to arise out of the carrying on of the business and be incidental to it. The loss for which a deduction is claimed must be one that springs directly from the carrying on of the business and is incidental to it, and not any loss sustained by the assessee even if it has some connection with his business. If that is established, then the deduction must be allowed, provided that there is no provision against it, express or implied, in the Act. " 17. The decision of the Apex Court in the case of C.I.T. v. WOODWARD GOVERNOR OF INDIA P. LTD - 254 ITR 312, is a case relating to loss suffered on account of fluctuation in the rate of foreign exchange. The Apex Court granted relief as an item of expenditure under Section 37(1) of the Income Tax Act, 1961. In dealing with expression 'any expenditure' as used in Section 37 of the Income Tax Act, the Apex Court pointed out that the expression covers both expenses incurred as well as an amount which is really a 'loss' even though such amount has not gone out of the pocket of the assessee. In so holding, the Apex court referred to the decision in the case of MADRAS INDUSTRIAL INVESTMENT CORPORATION LIMITED v. C.I.T. - 225 ITR 802, and held that Section 37 enjoins that any expenditure not being expenditure of the nature described in sections 30 to 36 laid out or expended wholly and exclusively for the purposes of the business should be allowed in computing the income chargeable under the head 'profits and gains of business'. In sections 30 to 36, the expressions 'expenses incurred' as well as 'allowances and depreciation' have also been used. The Apex Court pointed out that the expression 'expenditure' as used in Section 37 of the Income Tax Act, 1961, cover an amount which is really a 'loss' even though the said amount has not gone out from the pocket of the assessee. 18. The Apex Court pointed out that the expression 'expenditure' as used in Section 37 of the Income Tax Act, 1961, cover an amount which is really a 'loss' even though the said amount has not gone out from the pocket of the assessee. 18. In the background of the law declared by the Apex Court in the case of BADRIDAS DAGA v. C.I.T. - 34 ITR 10; in the case of C.I.T. v. WOODWARD GOVERNOR OF INDIA P. LTD - 254 ITR 312, and that of this Court in the case of C.I.T v. INDEN BISELERS – 181 ITR 69, given the fact that the assessee had taken an alternative plea that the claim has to be considered as a trading loss, the question is whether the Tribunal is justified in considering one aspect of the claim alone. 19. It is no doubt true that in the order passed by the Tribunal in ITA. Nos. 2391 and 2392 of 1992, the Tribunal rejected the claim on the reasoning similar to that of claim arising out of bad debt. In the order of the Tribunal now under consideration before us, except for following the said decision, the Tribunal had not adverted to the alternate plea in the manner in which it ought to have been considered. 20. In the circumstances, we feel that proper course would be to set aside the order of the Tribunal in this regard and direct the Tribunal to consider the claim of the assessee in respect of sum of Rs.4,75,307/- as to whether the said claim can be considered as a trading loss in the light of the decisions of the Apex Court as well as this Court as referred to above. 21. In the result, the order of the Tribunal is set aside and the Tax Case appeal is allowed. No costs.