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2015 (8) TMI 870 - AT - Income TaxDisallowance of the long term capital loss - Since loss is arising out of transactions between related parties and in the absence of explanation on how the value of ₹ 0.064 per share was determined, the loss claimed by the assessee was disallowed BY AO and CIT(A) - Held that:- As noted by the CIT(Appeals), the assessee has purchased shares at the rate of ₹ 10 per share from outside and also from company directly, when the net worth of the company was in negative. Later the same was sold to the wife of the Managing Director of the assessee company for a meagre amount of 6 paise per share. The assessee has not brought on record any evidence, even before us to establish that the loss was incurred by the assessee on genuine reason and as such, the same cannot be said to be genuine loss. The sale of shares of such lowest price is shocking conscious of the Bench and all human probability shows a prudent person never to sell the shares at such a sale price, as held in the cases of Sumati Dayal v. CIT (1995 (3) TMI 3 - SUPREME Court) and CIT v. Durga Prasad More (1971 (8) TMI 17 - SUPREME Court). Accordingly, we are inclined to say that this loss cannot be considered as capital loss so as to allow the claim of the assessee in the absence of any proper explanation to sell the share such low price. - Decided against assessee. Disallowance of advances written off - Held that:- In the present case, the assessee was not able to establish that the loan was advanced during the normal course of business carried on by it. There is no evidence to show that the assessee was carrying on money lending business and merely because, the assessee advanced the money to its sister concern, it cannot be said that the assessee is carrying on money lending business. Therefore, non-recovery of that loan cannot be treated as business loss. This is not an advance given to M/s. Sita-Gita.Com Ltd. in ordinary course of business of the assessee. In other words, though it was treated as an advance, it was not gone into the computation of income while computing the income of the assessee. At best, it could be advanced in the capital field. Being so, the loss of capital cannot be allowed as an expenditure, when it became bad and thereafter, written off. Advance of loans to a sister concern or a subsidiary company cannot be said to be for the purpose of business. It is true that, the assessee is entitled to write off of debt in a year in which the assessee feels that debt becomes irrecoverable. However, it cannot be said that it is an advance made in normal course of business of the assessee and also the assessee has not produced any evidence to show that the loan was advanced in the normal course of business. Hence, the mandatory conditions of sec.36(2) have not fulfilled for a claim of bad debt. In our opinion, these conditions have not been fulfilled by the assessee and therefore, we hold that the CIT(Appeals) is justified in confirming the addition made towards bad debt. - Decided against assessee.
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