TMI Blog2023 (12) TMI 884X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Tribunal by the Revenue to contradict the finding given by the CIT(A). There is no challenge to this finding before us. Therefore, no question of law, let alone a substantial question of law, will arise as regards the proposed first question. Write off of the business/trade advances receivable from a sick company - ITAT allowed deduction - ITAT relied upon various decisions of co-ordinate Benches and reiterated the well settled legal proposition that Tax Authorities should not sit in the arm chair of a businessman and assume his role to decide the correctness of a commercial decision. The ITAT has also taken support from the decision of the Hon ble Supreme Court of India in the case of CIT v. Mysore Sugar Company Ltd. [ 1962 (5) TMI 3 - SUPREME COURT] to hold that unrecoverable trade advance is allowable as business loss and it would certainly be allowable as a deduction under the Act. ITAT has also considered the factual position that the shares of RCVPL being listed in the Bombay Stock Exchange, is a widely held Company in terms of the provisions of the Income Tax Act and thus, it cannot be said that the promoters of the assessee Company would be benefited by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness undertaking returned as long term capital gain under Section 50B of the Act as business income amounting to Rs. 71,79,88,311/-. The AO also made an addition on account of disallowance of trade debts written off at Rs. 33,90,29,284/- towards advances made pertaining to one Royal Cushion Vinyl Products Ltd. ( RCVPL ) a group Company and addition of Rs. 28,68,83,574/- as Bad Debts written off. An amount of Rs. 94,78,512/- was also treated as business income instead of capital gain as claimed by assessee. Accordingly, an Assessment Order dated 30th March 2016 under Section 143(3) of the Act came to be passed assessing the income of assessee at Rs. 67,27,89,090-/-. 3. Aggrieved by the order of the AO, assessee preferred an Appeal before the Commissioner of Income Tax (Appeals)-( CIT(A) ). The CIT(A), by an order dated 18th October 2016, partly allowed the Appeal of the assessee. The CIT(A) upheld assessee s claim of income as capital gains arising from slump sale against business income as stated by the AO and also allowed the claim made by the Revenue as bad debts written off. The CIT(A), however, dismissed the Appeal of assessee on the issue of disallowance of the write off o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO held that the gain arising from transfer of business is assessable as business income under Section 28(iv) of the Act. 7. The CIT(A) agreed with the contentions of the assessee and directed the AO to assess the gain as long term capital gain. The CIT(A) after perusing the business transfer agreement dated 9th October 2012 came to a factual finding that the business was transferred as a going concern on a slump sale basis and it was not mere transfer of assets. The CIT(A) also took into consideration that for the transfer, the consideration paid was at 11 times Appellant s Earning Before Interest, Depreciation, Tax and Amortization ( EBIDTA ) for Financial Year 2011-12. The CIT(A) also noted that the corresponding debtors, inventory and creditors were also transferred. 8. The CIT(A), referring to the provisions of Section 28(iv) of the Act, which the AO felt the transaction was covered under, correctly came to a conclusion that the consideration is received in terms of money whereas Section 28(iv) of the Act refers to the value of any benefit or perquisite whether convertible in money or not and Courts have held that where the consideration is monetary, Section 28(iv) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d was demanding money against the supplies made. The ITAT has thus held that considering the weak financial position of RCVPL, as it has already been declared a sick company by BIFR, the assessee has taken a conscious commercial decision to write off the trade advance as not recoverable. 14. The ITAT relied upon various decisions of co-ordinate Benches and reiterated the well settled legal proposition that Tax Authorities should not sit in the arm chair of a businessman and assume his role to decide the correctness of a commercial decision. The ITAT has also taken support from the decision of the Hon ble Supreme Court of India in the case of CIT v. Mysore Sugar Company Ltd. 46 ITR 649 SC., to hold that unrecoverable trade advance is allowable as business loss and it would certainly be allowable as a deduction under the Act. The ITAT has also considered the factual position that the shares of RCVPL being listed in the Bombay Stock Exchange, is a widely held Company in terms of the provisions of the Income Tax Act and thus, it cannot be said that the promoters of the assessee Company would be benefited by decision taken by them. The ITAT has specifically noted the absence of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... servation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a per- son carrying on the business. 18. In the circumstances, we find that the matter is purely factual in nature. We do not find it jurisdictionally proper and necessary to substitute the view of the Tribunal with our view, especially since the same is based on facts. The Revenue is unable to indicate any question of law, leave aside any involving a substantial legal proposition. We do not find any error in the order of the Tribunal, impugned herein. The Appeal is thus without merit. Appeal dismissed. There will be no order as to costs. - - TaxTMI - TMIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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