TMI Blog2012 (5) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... justified in holding that the loss of Rs. 5.50 crores incurred upon sale of shares of 'CAMELOT' be allowed as a business loss without appreciating the fact that the investment in equity shares of 'CAMELOT' was not a business asset but was invested for the purpose of obtaining enduring benefit." 3. Briefly stated, the relevant material facts are like this. The assessee is engaged in the business of manufacturing and trading of oral care products. In the course of the assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction, on account of loss on sale of shares held in 'Camelot Investment Pvt Ltd.,' amounting to Rs. 5,50,00,000. As stated in the notes to accounts, the assessee has made investments in 100% owned subsidiary, i.e. Camelot Investment Pvt. Ltd. (Camelot, in short), and the said investment was made purely for business reasons. The stand taken by the assessee was that since investment was made in the course of and for the purposes of business, the loss on sale of such investment is required to be treated as business loss in nature. Reliance was placed on Hon'ble Madras High Court's judgment in the case of Indian Commerce and Industri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer concluded that purpose of the investment was to give a long term enduring benefit to the assessee and 'simply because this investment was made in the normal course of business, it does not divest itself of its inherent feature of being a long term investment'. He further observed that 'every asset or investment is made to further or facilitate the business of the company but that does not mean that every investment can be given the character of business asset from which an accruing loss can be classified and claimed as business loss, to suit the tax needs of the assessee company'. The judicial precedents relied upon by the assessee were discussed and distinguished. As regards Indian Commerce and Industries Co Ltd' decision (supra), the Assessing Officer noted that in the said case the assessee had to buy shares in a company to get more business from it, but the facts of this assessee's case are entirely different. With regard to Investa Industrial Corp Ltd's decision (supra), the Assessing Officer's objection was 'in this case also facts are completely different' inasmuch as 'a loan was given by a managing agency company to another company (not its wholly owned subsidiary) und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business operations of the appellant. At no point of time, the investments in Camelot was made or held with an intention to realize any enhancement in value thereof over a period of time or to earn dividend income. Rather the investments were made only to separately house an integral part of the business activity of the appellant, which essentially operated as a single unified business. Thus, relying on the principles laid down by Hon'ble Supreme Court in the case of Patnaik and Co Ltd (supra) and SA Builders vs CIT (supra), since the investment in Camelot was made by the appellant from a commercial perspective only in the course of business. Keeping in view the commercial expediency of the transaction, I hold that the loss of Rs. 5.50 crores, incurred upon sale of shares in Camelot, should be allowed as a business loss in the hands of the appellant, and the action of the Assessing Officer denying the deduction as business loss stands reversed. 5. Aggrieved by the relief so granted by the CIT(A), the Assessing Officer is in appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the grounds of commercial expediency. Similarly, the head under which dividend income is assessed to tax does not also affect determination of question whether the shares are purchased on account of commercial expediency or not. It is only elementary that dividend income, whether the shares are held as investments or as any other asset, is always taxable under the head 'income from other sources'. Therefore, nothing really turns on Assessing Officer's emphasis on the fact that the Camelot shares were shown as investments in the balance sheet and that dividend income from these shares is taxable as income from other sources. We have also noted that as long as shares are acquired on the grounds of business expediency, any loss on sale thereof is also required to be treated as an admissible business deduction. Hon'ble Supreme Court's judgment in the case of Patnaik and Co (supra) deals with a situation in which the assessee had subscribed to certain Government security but incurred a loss on sale of that security. The stand of the assessee was that the assessee had made the said investment with a view to promote its business interests and as subscription to the Government Loan was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing grievance: On the facts and circumstances of the case and in law, the ld CIT(A) erred in holding that the differential amount of Rs.4,38,12,912 representing the actual loan amount and the present value of the future liability was not capital account and not taxable u/s. 41(1) or any other provisions of the I.T.Act ignoring the fact that the assessee claimed deduction in respect of the sales tax in earlier years and gained by way of remission/cessation of sales tax liability to that amount which is assessable u/s.41(1) of the Act. 10. Facts in brief are as follows. Under 1983 and 1988 Deferred Scheme of incentives framed by the Government of Maharashtra to incentivize entrepreneurs to set up industries in relatively backward areas, various forms of capital subsidy was given to entrepreneur. As per this scheme, the assessee was entitled to defer the sales tax liability for a period of 7 years. Accordingly, the assessee had availed the benefit of the Sales Tax Deferral Scheme for its tooth powder and soap plant at Waluj, Aurangabad. The Assessing Officer noticed that the assessee opted for the repayment of total liability of Rs.7,97,06,177 on 1.1.2003 at the net present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee and the matter was not, as alleged by the Assessing Officer, simply remitted to the file of the Assessing Officer for re-adjudication. The grievance raised by the Assessing Officer is, therefore, ill-conceived and is dismissed as such. 15. Ground No. 3 is also dismissed. 16. In ground no. 4, the Assessing Officer has raised the following grievance: On the facts and circumstances of the case and in law, the ld CIT(A) erred in directing the AO that the amount of Rs.65,325 being reduction of 90% of foreign exchange gain has to be included for the calculation of deduction u/s. 80HHC. 17. So far this issue is concerned, the Assessing Officer has observed that the assessee company has not included the exchange gain of Rs. 65,325 in its total turnover whereas the same is clearly a part of the business turnover of the assessee company. In appeal, the CIT(A) gave relief by relying upon his order for the assessment year 2002-03. 18. Having heard the rival contentions and having perused the material on record, we find that the issue is now covered against the assessee by Special Bench decision in the case of ACIT vs Prakash L Shah (115 ITD SB 167). R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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