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2011 (5) TMI 571 - HC - Income TaxTrading loss in business of purchase and sale of flats disallowed - Held that:- The transaction between the assessee and PCL where assessee paid a sum of Rs. 44.50 lacs to the PCL on 12.03.1982 was one where perhaps money had been lent to enable PCL to bid. At that stage contrary to what the assessee had sought to portray there was no intention to purchase commercial space in the proposed building as the plot which PCL sought to bid for was nowhere on the scene. Therefore, the expense was certainly not incurred for the purposes of the assessee's business notwithstanding the fact that it may or may not have earned income or profits. If the test of prudence is applied from the point of view of a businessman, and not that of the revenue, the assessee fails to pass the test as that a prudent businessman would not have committed his money for purchase of commercial space at a stage when there were no rights acquired by PCL. By their own admission PCL was a company which had at the relevant point a share capital of Rs 24000/- No prudent businessman would have committed such a large sum of money without ensuring that the vendor had something tangible offer in its hands, in the instant case PCL being the vendor. The suit filed by PCL is still pending adjudication. It is not understood as to why the assessee would suddenly choose to claim a deduction in the assessment year 1989-90 based on a letter of PCL dated 14.12.1988 followed by a legal opinion received from its lawyer when the amount stood forfeited on 04.05.1985. Admittedly the assessee has made no demands to recover the amount from PCL - Decided against the assessee
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