Assessee is  engaged in business of purchase and sale of cigarettes and for introducing and identifying manufacturer of Cigarettes, MSPV, Australia, was contacted and for said purpose certain sums were remitted to said company. Supplier  did not supply any goods nor returned money back and, out of total sum outstanding, assessee could recover only Aus., $ USD 10,000 and balance amount could not be recovered, assessee claimed expenses under head Trade Advance-Irrecoverable/written off in its profit and loss account.  Assessing Officer disallowed said amount under section 36(2) and added to income of assessee. Held that  since there was a direct and proximate nexus between business operation and loss of advance amount which had been written off by assessee, same is   allowed to be written off under section 37(1) as business loss. (AY.2010-11)