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TMI Blog2015 (9) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... ct in disallowing the claim of loss as capital loss even though Rs. 1,00,650/- could be alone attributable to the deposit relatable to dealership/distributorship? 4. Whether the Appellate Tribunal is correct in not considering the alternate claim of bad debt in the computation in terms of section 36(2) of the Act in view of no dispute on the non recoverability of the said amount comprised of deposit of Rs. 1,00,650/- relatable to dealership/distributorship and the balance of Rs. 8 lakhs referable to cylinder hire charges due to fraud/cheating on him?" 2. The brief facts of the case are as follows: The assessee/respondent was engaged in the manufacture of handloom silk and proceeded to venture into a new business in the distribution of LPG Cylinders. In this regard, it appears that the assessee had paid a sum of Rs. 9.00 lakhs to M/s.Jagmeeta Enterprises LPG Private Limited for getting dealership/distributorship of LPG manufactured by Birla Blue Flames Ltd. However, the distributorship business never commenced and the assessee wanted the money back from the said Jagmeeta Enterprises (LPG) Pvt. Ltd. Since the assessee came to know that there was no possibility of any recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be set-off against his income from the other business. On the fact and in the circumstances of the case, it appears clearly that the assessee is not entitled to set-off his loss against the profits from the other business as the payment made for distributorship of LPG, a business which never commenced, is not a business loss. It cannot also be claimed as bad debt because the conditions laid down u/s.36(2) are not fulfilled. The loss in question is clearly a capital loss which cannot be claimed as a deduction in assessment. Considering the facts and circumstances of the case, the loss of Rs. 9,00,650/- claimed by the assessee is rejected.". 13. The authorised representative for the appellant submitted that the disallowance made by the A.O. is incorrect and the addition of Rs. 9,00,650/- should be deleted as it is not in accordance with law. 14. I have carefully considered the submissions made on behalf of the appellant and also the facts of the case as discussed by the A.O. in the assessment order. For the purpose of acquiring another business, the appellant had made payment of a sum of Rs. 9 lacs, to M/s.Jagmeetha Enterprises (LPG) P. Ltd., Madras for getting dealership/distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a profit making asset to carry on LPG Distributorship business. Hence it cannot be said that the deposit was made of revenue account or that the loss thereof should be treated as business loss. Since in the present case loss incurred is squarely covered against the assessee on the anvil ratio decedendi of the aforesaid Apex Court decision, we decide this issue against the assessee and confirm the order of the ld. CIT(A)." 6. Aggrieved by the above-said order of the Tribunal, the assessee is before this Court. 7. Heard learned counsel appearing for the assessee and the learned Standing Counsel appearing for the Revenue and perused the materials placed before this Court. 8. Admittedly, the assessee had not commenced its distributorship business. The deposits made by the assessee was for the purpose of acquiring profit and securing dealership/distributorship. Originally, the assessee was in the business of manufacturing handloom silk and not in the business of LPG distributorship. Hence, the purpose of entering into such a new business must be considered to be for the purpose of securing an enduring benefit of a capital nature and hence, the deposit made in that regard cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e as to the true character of the deposit. One suggestion is that the deposit should be looked upon as the purchase price of goods paid to the company in advance and thus a mere trading expense; but this cannot be accepted. It would be a highly inaccurate statement of the effect of the agreement. The Rs. 50,000 was doubtless laid out with a view to earning profits in the business of organising agents in addition to the interest of 7 per cent., but it was not so laid out with reference to any particular transaction carried out in the course of such business. It was in one aspect a loan made to the company but it was not a loan made in the course of carrying on the business of organising agents or in the course of the business of a money-lender. It was not a recurring expenditure. On the other hand, it was contemplated that in whole or in part the deposit should be returned to the assessees by the receipt of deposit from selling agents; so that if the Rs. 50,000 does fall to be regarded as invested in a business of organising agents, it was invested with a prospect that it might be a temporary investment and not a permanent one in other words that the capital might later be withdrawn ..... X X X X Extracts X X X X X X X X Extracts X X X X
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