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2010 (7) TMI 671 - ITAT, HYDERABADDisallowance - Long term capital loss - Slump sale u/s 50B - where the assets and liabilities of an undertaking are sold as a group or lumped together, such a sale would qualify as a slump sale - On consideration of various stipulations and provisions stated therein the agreement, it is clear that the intention of the parties was to sell the subsidiary company i.e., VST NPL to GGCL and purchaser’s intention is to purchase the VST NPL for a consolidated price, which is nothing but slump purchase price - assessee sold the entire undertaking with all its assets and liabilities together with al licences, permits, approvals, registration, contracts, employees and other contingent liabilities also for a slump price - This kind of sale falls under the purview of sec.50B Regarding bad debts - To claim debt as bad debt and as a deduction, the debt should be in respect of business, which is carried on by the assessee in the relevant assessment year, should have been taken into account in computing the income of the assessee for the accounting year or should represent money lent in ordinary course of its business of banking or money lending - The debt arises out of investment activities of the assessee or associated with the capital field, not on account of revenue cannot be allowed as a bad debt - The assessee company neither a banker nor a money lender, the advance made by the assessee as an investment not to be said to be incidental to the trading activity of the assessee and merely money handed over to someone in the capital field and that person failed to return the same, that amount cannot be claimed as deduction as bad debt Regarding write off of the secondment charges and other expenses - These amounts are advanced to subsidiary company for the purpose of incurring the business expenses of the subsidiary companies and the consideration for the sale of the subsidiary company is worked out after considering the amount receivables - it is presumed that the amounts due were already considered while arriving at the sale price of the subsidiary company represents an advance made to the subsidiary company and not an expenditure Regarding irrecoverable amount spent on agronomy and marketing rights - Since the subsidiary company is sold, this amount which is not realizable, is claimed as expenditure - The assessee company is making a claim u/s 37(1) as expenditure or u/s 36(2) as a bad debt - This expenditure cannot be allowable under this provision where this expenditure is not an expenditure incurred for the purpose of assessee’s own business and also this is loss of capital and cannot be allowed as a bad debt - Accordingly all the appeal made by assessee is decided against the assessee
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