TMI Blog2011 (5) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 20-5-2011 - ORDER Per R.V.Easwar, President: This is an appeal by the revenue and the only effective ground is that the CIT(A) erred in allowing the claim for deduction of bad debts under section 36(1)(vii)of the Income Tax Act. 2. The appeal arises this way. The assessee is a public limited company engaged in the business of leasing and providing services. The assessment for the year under appeal was originally completed under section 143(3) on 11.03.2005 but it was set aside by the Commissioner under section 263 of the Act with directions to the Assessing Officer to redo the same afresh. A copy of the order of the CIT dated 2 1.12.2005 passed under section 263 is placed at pages 51 to 53 of the paper book, from w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore the Assessing Officer had no occasion to form an opinion as to the allowability of the same. It would appear that before the Tribunal the assessee put forth an argument that the amount written off as bad debt should be allowed alternatively as business loss. The Tribunal in paragraph 9 of its order opined that though it may be true that the assessee was in the business of investment in shares as also trading in shares but its conduct as far as the sale of shares to M/s. Potlurri Lease Hiring Purchase Pvt. Ltd. is concerned, it was treated in the books of account as investment and loss arising from the sale of shares was treated under the head long term capital loss and set off against the long term capital gains in the later yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... records of assessment year 1999-2000 that the loss on sale of shares on SMS Pharmaceuticals has been declared as long term capital loss. This shows that the transaction in respect of the purchase and sale of shares of SMS Pharmaceuticals are nothing but transfer of capital asset and not part of the business of the assessee company. This fact is evident from the assessment records of previous assessment years wherein the shares have been shown as investments. In view of the above, the claim of the assessee company that the said loss of Rs.95,00,000/- should be allowed as a business loss and thereby writing it off as bad debt under section 36(1)(vii) of the Income Tax Act cannot be allowable as the conditions laid down by section 36(1)(vii) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted all the facts in relation thereto in its letters dated 10.02.2005, 14.02.2005 and 21.02.2005. The Assessing Officer in the original assessment proceedings had accepted the assessee s claim of bad debt only after examining the facts placed on record. Thus the transaction was an ordinary business transaction carried out in the course of business of financing and investments and the sale proceeds receivable from M/s.Potlurri Lease Hiring Purchase Pvt. Ltd. was a business debt and since the same could not be recovered and was written off as bad debt in the assessee s books, it is allowable as bad debt under section 36(1)(vii) of the Act. On the basis of the above findings, the CIT (A) allowed the claim of the debt. 7. The revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 was carried forward to the subsequent years and it was set off partly in the assessment year 2000-01 and partly in the assessment year 2003-04 against the long term capital gains for these years. Thus despite claiming before the CIT(A) which claim has also been accepted by him, that the fact that the shares were shown as long term investments (non-trade) in the balance sheet does not mean that they were not held for the purpose of the business in shares said to have been carried on by the assessee, the assessee s conduct in claiming the loss on the sale of the same shares as capital loss in the return filed for the assessment year 1999-2000 clearly indicates that the claim is untenable and it should not have been accepted by the CIT(A). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss. If the shares were held as long term investments and described as non-trade investments, we fail to see how the same shares can be claimed to be stock-in-trade or a business asset. The conduct of the assessee in exhibiting the shares as long term investments (non-trade) in the balance sheet and its consistent claim that the loss on the sale of shares represented long term capital loss to be set off against the long term capital gains expose the fallacy in the assessee s stand before us and before the Assessing Officer in the second round of proceedings taken under section 143(3) read with section 263. The CIT (A), with respect, does not appear to have appreciated the gravity of the facts and the contradictory stand taken by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
