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2007 (2) TMI 276 - AT - Income TaxWritten off irrecoverable inter-corporate deposits - claimed it as 'business loss or Revenue Loss' - Payments made to the shareholders for acquiring the shares of Indocan by way of Inter-corporate deposits - Held That:- The first component of the assessee's claim as a 'business loss' or alternatively, as a revenue expenditure u/s 37(1), which represents the payments made to the shareholders for acquiring the shares of Indocan. We fail to see the rationale behind this claim. Manifestly, it cannot be said that this payment had any direct and proximate nexus with, or that it was incidental to, the carrying on of the operations of the business of the assessee company as mentioned. We fail to comprehend as to how the payments made to the promoters for buying the shares of Indocan could be claimed as a revenue expenditure u/s 37(1). We, therefore, hold that the claim can neither be allowed as a 'business loss' nor as a revenue expenditure u/s 37(1) of the Act. The other component of the assessee's claim as a 'business loss', or alternatively, as a revenue expenditure u/s 37(1), claimed in AY 2001-02 and in AY 2002-03. It represents payments made by the assessee company and its associates to Indocan as ICDs because Indocan was in financial difficulties. The operations of the business of the assessee company are mentioned. Therefore, we have to hold that the payments of ICDs to Indocan had neither a direct and proximate nexus with, nor was it incidental to, the carrying on of the operations of the business of the assessee company as mentioned. Admittedly, it is not the business of the assessee company to make deposits as ICDs. We, therefore, hold that the claim can neither be allowed as a 'business loss' nor as a revenue expenditure u/s 37(1) of the Act. The nexus must be 'direct and proximate' and it should be with the 'carrying on of the operations of the business'. In the present case such a 'direct and proximate nexus' between the impugned payments aggregating sum and the 'carrying on the operations of the business' of the assessee company is totally absent as can be seen from the discussions. The ground is accordingly rejected - In the result, the appeal is rejected.
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