TMI Blog2001 (2) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... uction for income-tax purpose the loss should have arisen on the transfer of a capital asset effected during the year and that in this case the assessee had only written off as irrecoverable a loan advanced during the previous year relevant to the assessment year 1989-90. The CIT(A) ought to have upheld the disallowance of the claim as capital loss as in this case there was no transfer of a capital asset within the meaning of section 45." 2. The respondent-company advanced some amount to M/s. Fort William Co. Ltd., Calcutta and returned the interest received thereon in earlier years under the head 'other sources'. The amount of the advance of Rs. 7,50,000 or so was written off in the year of account relevant for the assessment year 1989- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as irrecoverable, was passed on 8-11-1989, i.e. in the year of account relevant for the assessment year 1990-91 and so the claim of loss under the head 'capital gains' is allowable for the assessment year 1990-91. He further observed as under: "On a consideration of the facts, I am of the opinion that the claim of the appellant has to be allowed. I would agree with the contention of the learned representative that the write off of the loan amounts to a capital loss. As regards the year in which it is to be allowed, I would agree with the learned representative that the correct assessment year is the assessment year 1990-91. No doubt, the appellant had written off the loan in its books during the accounting year relevant to the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount must be regarded as irrecoverable and so it must be allowed as a deduction as a loss under the head 'capital gains'. To a specific query from the Bench as to why it should not be held that there was no transfer of the said capital asset in terms of section 2(47) of the I.T. Act in view of the decision of the Apex Court in the case of Vania Silk Mills (P.) Ltd v. CIT [1991] 191 ITR 647, the Id. counsel pleaded that the said decision of the Apex Court is distinguishable and the case of the assessee falls within the ratio of another decision of the Apex Court, i.e. in the case of Kartikeya V. Sarabhai v. CIT [1997] 228 ITR 163. 4. We are of the view that the Revenue deserves to succeed for more than one reason. Firstly, the amount was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. We do not see how the assessee can accept the write back of a loan due to it in the books of the debtor-company. At any rate, no such evidence of acceptance has been referred to before us. 5. Secondly, the contention of the assessee that the relevant order of the BIFR dated 8-11-1989, on the basis of which the amount had been written off, falls in the year of account relevant for the assessment year 1990-91 does not also seem to be of much relevance because there is nothing in the said order which authorises the assessee to write off the amount of Rs. 7,50,000. On the other hand, going by the said order, it appears to us that it is not proved that the loan in question has become irrecoverable. In para 6 of the said order, a copy of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le warranting its write off. We are of the view that no such evidence is available on file, and on this ground also the write off of the amount is unwarranted and so we are of the view that there is no transfer of the capital asset within the meaning of section 2(47) of the Income-tax Act. 7. The next question is to consider the effect of a mere write off of a debt in the books of account of the assessee and whether such write off amounts to a transfer. Simply because a debt is written off in the books, it does not follow that the assessee has no right to recover it or that the concerned debtor has no liability to pay it. Even after the amount is written off, an assessee can file a suit for recovery. For this proposition we may refer to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the creditors as irrecoverable or as extinguished. All cases of extinguishments of rights in a capital asset are not cases of transfer within the meaning of section 2(47), as held by the Apex Court in the case of Vania Silk Mills (P.) Ltd. In this case, the Apex Court was considering the liability to capital gains tax in a case where machinery was destroyed by fire and insurance amounts were received in excess of the cost of machinery. The Apex Court held that extinguishment of rights on account of destruction or loss of an asset is not transfer within the meaning of section 2(47) on two grounds. Firstly, in such a case there is no transferee and secondly there is no asset existing after the transfer. We are of the view that the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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