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The Peerless General Finance & Investment Co. Ltd. Versus Commissioner of Income Tax, Kolkata-I

2015 (10) TMI 1011 - CALCUTTA HIGH COURT

Loss incurred through forfeiture of share application money - whether pertained to capital account in disregard of the fact that the acquisition of shares, stocks, bonds, debentures and debenture stock is integral part of the assessee’s ordinary business opereation as a non-banking financial company ? - Held that:- As we find that none of the authorities – the Assessing Officer, CIT(A) and the Tribunal had occasion to deal with the provisions contained in the Residuary Non-Banking Companies (Res .....

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n the Residuary Non-Banking Companies (Reserve Bank) Directions, 1987 which shall be dealt with by the Assessing Officer in its order. - ITA No. 247 of 2005 - Dated:- 14-9-2015 - Soumitra Pal And Ishan Chandra Das, JJ. For the Appellant : Mr. S Bagchi, Adv Mr. G R Sharma, Adv For the Respondent : Mr. R N Bandyopadhyay, Adv Mr. Aniket Mitra, Adv ORDER The Court : This appeal, arising out of an order dated 4th April, 2005 passed by the Income Tax Appellate Tribunal for the assessment year 2000-200 .....

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the assessee s ordinary business opereation as a non-banking financial company ? It appears from the facts that the appellant, a non-banking financial company, for the financial year 1999-2000, relevant assessment year 2000-2001, had written off a sum of ₹ 5,56,24,296/- which included part payment of ₹ 5.30 Crores paid towards the purchase of shares of M/s. Essar Oil Limited and forfeited on account of the appellant s failure to pay the further call money. The assessee company had d .....

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A.O. s order. It is apparent from the order that the AO has treated the said amount as capital loss as the appellant, being a residuary non-banking finance company had shown the investment as asset. No further reason was given in the assessment order. I have also perused the ratio of decision cited by the ARs.In my view, the said decision is squarely applicable in the instant issue. The appellant had advanced the said sum for acquiring shares of M/s. Essar Oil Limited but forfeited the same due .....

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sad cited in 256 ITR 772. Similar view was held by Chennai Tribunal reported in 74 ITD 469/69 TTJ (Chennai) 410 in the case of New Finance and Investment Pvt Limited. In my view, treating the forefeited part payment as capital loss will not be justified as per law. The AO is accordingly directed to treat the same as bad debt or business loss. The revenue, being aggrieved, preferred appeal before the Tribunal. The Tribunal allowed the appeal by holding, inter alia, as follows : We have heard the .....

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e assessee has not made the part payment towards purchase of shares in the course of its carrying on business activities of purchase and sale of shares. Therefore, it is an investment and hence the Ld.C.I.T.(A) was not justified in holding the loss as bad debt. In this view of the matter, we are of the considered opinion that the A.O. was perfectly justified in treating the said loss as capital in nature. While holding so, we direct the A.O. to allow set off of this loss against the capital gain .....

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