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2020 (11) TMI 468 - AT - Income TaxNature of loss - capital loss or trading loss - Material (silver) loan taken by assessee - At time of return of Material, price has gone high and resulted in loss - HELD THAT:- In the present case the loan was not obtained by the assessee under the normal prevailing market practices. Generally, the loans are obtained in cash which are subject to interest and repayable over a certain period of time as agreed between the parties. In the case on hand the assessee has taken a material loan in the form of silver with the understanding that it has to return the silver only to the parties concerned at the end of the agreement. The agreement in question came to an end in the year under consideration. The loan liabilities whether material loan/cash loan was utilized for the purpose of the business activities of the assessee. In the present case the assessee was able to carry on its business activities with the assistance of the material loan without which it was not possible for it to carry on the business. Therefore in our considered view such business loss has been incurred in the course of the business and therefore the assessee is eligible for deduction under the provisions of section 37/28 of the Act as the case may be. Transaction as a colourable device to reduce its tax liability by making the book entry of the impugned loss - Regarding the physical delivery of the material loan to the parties, we note that the assessee before us has filed insurance receipts which is placed on record justifying that the assessee has taken the insurance for the transportation of the silver. Indeed the quantity of the silver was huge and therefore the assessee must have utilized services of some transporters. Items of silver being precious items, the argument of the assessee cannot be neglected in totality. However, there are other clinching evidences supporting the material loan transaction including the agreement, payment of interest which cannot be ignored. Even for the sake of assuming, the material loan has not been returned by the assessee on the termination of the agreement, but the assessee has revalued its current liability at the market rate and any loss thereon as a result of revaluation has to be allowed to the assessee being arising in the course of the business activities. All the transactions having impact on the reduction of tax liability cannot be regarded as colourable device. As such Revenue needs to see the transaction in its entirety as decided in BANYAN AND BERRY [1995 (12) TMI 12 - GUJARAT HIGH COURT]. Also relying on MCDOWELL & COMPANY LTD. AND OTHERS [1976 (10) TMI 103 - SUPREME COURT]we hold that the impugned transaction cannot be regarded as colourable device merely on the reasoning that there is reduction in the tax liability in the hands of the assessee. - Decided against revenue.
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