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2015 (3) TMI 852 - HC - Income TaxDeduction of the losses - Tribunal directing AO to allow deduction of the losses at ₹ 111/- per NCD as a business loss - JISCO made certain arrangements with UTI in July 1994 according to which the allottees of NCDs could surrender all the NCDs to UTI after the application was made and UTI agreed to pay the balance allotment money (Rs.389/- per NCD) to JISCO and secure the NCD registered in its name - Held that:- The findings of the AO and CIT regarding the NCD funding not being at arms’ length are unsustainable, because UTI on redemption, was entitled to full redemption money @ ₹ 500 each debenture on redemption though actually they had paid @ ₹ 389 only. The ITAT’s discussion reveals that material was led to establish that UTI earned a substantial annual gain of about 25% on the transaction. Furthermore it was held that on the other hand, the assessees too benefitted because after losing the initial application money on each debentures they were entitled to one dividend warrant which enabled them to an equity share of ₹ 200/- (in the case of JISCO NCDs) and based on a pre-determined formula in the second instance (Medicare) though the market price of the shares on those dates was higher. A chart indicating the gains by the assessees too was furnished by the learned counsel. When JISCO came out with the NCDs right issue several other companies i.e., Apolo Tyres, Usha Ispat Ltd, Dhunseri Tea Industries Ltd., Sri Ram Industrial Enterprises etc. had floated similar right issues with almost identical terms and conditions. In the case of Apolo Tyres the buyback was done by Om Financial and Investment Consultancy Services Ltd. whereas in the case of Usha Ispat, Dhunseri Tea and Sriram Industrial Enterprises the buyback was done by UTI, DSP Financial Consultancies Ltd. and Sri Ram Financial Services Ltd. respectively. In the case of the assessee the buyback was done by UTI, a Central Government undertaking. Having once accepted the decision of the ITAT, in the same fact situation, - in fact in the same common order, the revenue cannot legitimately agitate a position contrary to the one it accepted in Nalwa - especially because Nalwa Investments is one of the share-holder companies of JISCO, which had sought and was allotted NCDs at ₹ 111/- per NCD and later transferred the allotments to UTI, which paid the balance amount. Its initial claim for capital loss was changed to business loss, and finally accepted by the ITAT. Another good reason for this Court to reject the revenue’s contention is that in all the cases (Abhinandan, JELCS and Medicare) the assessees are investment companies, whose business includes share acquisition and transfer. The balance sheet and share inventories of Abhinandan and JELCs clearly reflected - as on 31.03.1994 and as on 31.03.1995, the value of shares of JISCO and several other companies. Having treated those and other shares as distinct from assets, but rather as part of the share inventory, it could not be said that the NCDs and the resultant DWs were to be treated otherwise. Here, the court is conscious that the assessees did claim initially to have incurred capital loss; however, they later corrected their stand and claimed business loss. We are of the opinion that the earlier stand of the assessees could not have shackled them to that position, preventing them from asserting the true character of the amount. Nor is the revenue bound to treat the position of the assessee as the gospel truth, or pin it to one or the other stand. In view of the above discussion, we hold that the assessee companies suffered business loss on their sale and such loss was business loss that constituted allowable deduction. - Decided in favour of the assessee.
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