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TMI Blog2015 (4) TMI 581X X X X Extracts X X X X X X X X Extracts X X X X ..... were rightly treated as a capital expenditure outlay and the failure to recover the amounts advanced had to be treated as a loss of capital and not a revenue expenditure allowable u/s. 37(1) of the I.T.Act, 1961." 2. The assessee company is a builder and developer. During the course of assessment proceedings, the Assessing Officer found that the assessee has debited an amount of Rs. 39,00,000/- under the head "sundry balance written off". On being questioned the assessee stated that the assessee company had advanced an amount of Rs. 21 lac to Mr. Nitin Purundare and Rs. 18 lacs to Mr. Shamim Ahmad for purchase of land and furnished the copy of MOU entered into by the assessee with these two parties. The Assessing Officer disallowed the claim of written off sundry balance on the ground that the advances were capital in nature as the advances were made for the land which were not in existence. 3. On appeal, the C(T)A has allowed the claim of the assessee being an allowable business loss as the same was on revenue account and loss suffered by the assessee in the normal course of business. 4. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , provision of private electricity and water supplies, club, shopping centre etc. and in pursuance thereto they were building dwelling units of different sizes and specifications. The assessee was desirous of purchasing the dwelling units being constructed by M/s. Gulmohar Estate Ltd. The assessee entered into similar type of three agreements to purchase of following properties:- (i) Property measuring 700 square feet for consideration of 11,47,500; (ii) Property measuring of 1960 square feet for consideration of Rs. 13,23,000/-; (iii) Property measuring 2900 square feet for Rs. 19,57,500/-. 16. The assessee, thus, agreed to purchase three number of dwelling units in designer housing complex being constructed by M/s. Gulmohar Estate Ltd. The assessee is not an individual so these flats could be considered with intent to use them for own residential purposes. It is not in dispute that the assessee is also in the business of constructing and developing buildings. In the balance sheet as on 31.03.1989, 31.03.1990 and thereafter, the assessee has been showing stock in trade in the form of land, agricultural land, flats and basement and building under construction. The assessee was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws, factories, warehouses, shops, cinema houses, bungalows, works and conveniences of all kinds and by consolidating or connecting or sub-dividing properties and by leasing, letting or renting, selling and otherwise disposing of the same on such terms and conditions as may be though fit. 3(b) To undertake building and structural construction works of all kinds and to work as builders, contractors, sub-contractors, and to sub-let all or any contracts from time to time and upon such terms and conditions as may be thought expedient. 3(c) To carry on the business as estate agents for buildings, land and other property and to arrange or undertake the sale and purchase of, assist in selling or purchasing lands, buildings, and other property whether belonging to the Company or not and to let any portion of any premises for residential, trade or business purposes, and to collect rents, and incomes and to supply to tenants and occupiers all conveniences, amenities etc." 18. The assessee company was the promoter and developer of New Delhi House and Mercantile House at New Delhi. The assessee is also the promoter and developer of Heritage City at Gurgaon, in respect of which the profit has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase was for a residence of its employees, including directors. We are not impressed by the aforesaid contention. The tribunal has referred to the nature of activities undertaken by the respondent-assessee, i.e., the assessee was a real estate company and was a contractor. The tribunal referred to the Memorandum of Association and mentioned other transactions of sale/purchase in which the assessee had treated immovable properties as stock-in-trade. The history for the business transactions undertaken by the assessee have been kept in mind. No doubt, the assessee also had rental income but this factum alone does not show and establish that the properties, which were being purchased from M/s Gulmohar Estate Limited, were to be treated as investment and not for the purpose of stock in trade. The tribunal thereafter in paragraphs 19 and 20 has observed as under:- "19. The ld. CIT(A) has rejected the assessee's claim of business loss merely by observing as under:- "6.3 It may also be mentioned here that the appellant has not claimed such written off as business loss either in the return of income filed or during the course of assessment proceedings or appellate proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question No uniform or abstract test can be applied to all the transactions carried on by any assessee. It depends on facts and circumstances of any given transaction. We, therefore, have to decide the controversy in the light of the facts relating to the property in question and the intention of the assessee with regard to that property. In the light of the facts relating to the transaction in question, we have already observed above that the transaction to purchase property from M/s. Gulmohar Estate Ltd. was related or incidental to the assessee's business. After taking into account the intention of the assessee, it is well settled that it is the intention of the assessee which would matter in deciding as to whether the property purchased were intended for carrying on business or to hold it as an investment coupled with the line of the business carried on by the assessee. In the present case, after considering the totality of the facts and circumstances of the case, we find that the assessee's intention to purchase three flats in housing complex by making total payment in advance was to do business of real estate or otherwise transaction was undertaken for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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