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2024 (3) TMI 31 - ITAT DELHINon-genuine Long term capital loss - attempt by assessee to somehow reduce tax liability by taking advantage of setting off of capital loss - no apparent commercial expediency in selling the shares incurring capital loss on these shares - HELD THAT:- We note that AO has not made proper enquiry in this regard. Similarly, the buyer has not been examined by the Revenue authorities. As submission of assessee that the value of shares of subsidiaries is not correct and that the value has been arrived at without giving assessee an opportunity to rebut. CIT (A) has passed an order in which he has tried to verify cursorily the claim of the assessee that the NAV of the shares of these companies has become negative. CIT (A) has embarked upon the valuation which the assessee contended that it is not based upon full details and assessee was not confronted also. In this view of the matter, in our considered view, there are shortcomings in the assessment order as well as in the order of ld. CIT (A) which need to be examined afresh. We refer to the decision of Kapurchand Shrimal [1981 (8) TMI 2 - SUPREME COURT] wherein it is held that it is the duty of the appellate authority to correct the lacunae in the orders of the authority below and remit the matter with or without direction unless prohibited by law. In the present case, as already noted that there are shortcomings and lack of proper enquiry by the AO and the assessee has further contended that ld. CIT (A) has arrived at the valuation of the shares without giving the assessee an opportunity in this regard and the documents relied upon by the ld. CIT (A) are incomplete. In such circumstances, we deem it proper to remit the issue to the file of AO. AO shall consider the issue afresh. Disallowance of prior period expenses - CIT (A) elaborately considered the issue. He noted that on the issue of disallowance the same has already been found to be double addition and in the order passed u/s 154, the AO has deleted the addition. As regards, previous year expenditure we note that ld. CIT (A) has examined in detailed the nature of expenditure and his reasoning for classifying it as prior period expenditure is credible. Expenditure on Gifts and presents - We find that this addition has been made on ad hoc basis without bringing out necessary details. Hence, in our considered view, orders of authorities below on this issue are liable to be reversed. Accordingly, we hold that entire expenditure in this regard is allowable. Misc. expenses - CIT (A) on this issue examined the details and gave a finding that none of the expenditure could be said as not pertaining to the purpose of business of the assessee. He also noted that AO has not made out any case by brining any evidence whatsoever on record to show that some or any of the expenditure was not for the purpose of the business. Hence, in absence of any material brought on record by the AO, ld. CIT (A) directed to delete the addition in this regard. Disallowance of advisory fee paid - As per provisions of Section 48 of the Act, expenditure incurred wholly and exclusively in connection with transfer has to be deducted from the full value of consideration received or accruing as a result of such transfer of the capital asset. Thus, the action of A.O. in disallowing entire payment made by the appellant to JMMS cannot be justified by any standard even if he feels that the same is not incurred wholly and exclusively in connection with this transfer - As entire payment is wholly and exclusively in connection with the transfer under reference of shares of the appellant in EHIRCL and therefore AO was not justified in making even part disallowance. Disallowance of upfront fee paid - CIT (A) correctly held that the expenditure is allowable as revenue expenditure. Addition on account of royalty payment - CIT(A) correctly deleted addition as it is a clear cut case of revenue expenditure. Not only that, it has been allowed in earlier years also by the AO in full as revenue expenditure. Therefore, royalty payment is directed to be allowed in full.
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