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2016 (2) TMI 37 - ITAT CHENNAI

2016 (2) TMI 37 - ITAT CHENNAI - TMI - Disallowance of write off of the cost of investments in equity shares - whether allowable as revenue loss or capital loss? - CIT(A) deleted the addition - Held that:- In the present case, the assessee is holding the investment in shares in capital field and it was not treated as stock-in-trade, the realization of investment and loss arising out of it only in a capital field and it is only a capital loss. For this purpose, the ld. DR placed reliance on the j .....

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7;.9.53 crores received by the assessee from Central Government towards ASIDE was wrongly treated the amount received as a revenue receipt in its books and in view of the above observations, the assessee realised the mistake and rectified the same and filed revised return before due date of filing of return of income. Therefore, we find that the ld. CIT(A) has rightly deleted the addition made by the Assessing Officer and the order passed by the ld. CIT(A) on this issue stands confirmed. - Decid .....

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ect was unsuccessful, the assessee wrote off the expenses. The Tribunal held that as the assessee’s business was promotion of new ventures, the project expenditure was incidental to the business and hence could not be treated as preliminary or capital in nature and accordingly allowed the same. The order of the Tribunal was upheld by the Hon’ble High Court.- Decided against revenue. - I.T.A.Nos.351 and 610/Mds/2012 - Dated:- 8-1-2016 - Shri Chandra Poojari, Accountant Member and Shri Duvvuru RL .....

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off of the cost of investments in equity shares is allowable as revenue loss and also raised an additional ground with regard to deleting the addition made in respect of the ASIDE grant received from the Central Government for the assessment year 2007-08. For the assessment year 2008-09, the Revenue has also raised a ground with regard to deleting the disallowance of ₹.2,65,94,188/- being unsuccessful project promotional expenses written off. 2. Brief facts of the case are that the assess .....

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r section 143(2) of the Income Tax Act, 1961 [ Act in short] was served on the assessee. In response to the notice, the AR of the assessee appeared before the Assessing Officer and filed the details called for. After verifying the details filed by the assessee and considering the submissions during the assessment proceedings, the Assessing Officer has completed the assessment under section 143(3) of the Act by determining the assessee s income at ₹.15,98,97,068/- after making various addit .....

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essee s own case, the ld. CIT(A) decided the issue in favour of the assessee. With regard to second issue also, after considering the submissions of the assessee and considering the facts and settled rulings, the ld. CIT(A) decided the issue in favour of the assessee and allowed the appeal filed by the assessee. 4. Aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR has submitted that with regard to written off of the cost of investments in equity shares is not allowable as re .....

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reated the shares as investments, any diminution in the value of shares would be a capital loss and cannot be allowed as a revenue loss. 5. On the other hand, the ld. Counsel for the assessee strongly relied on the order passed by the ld. CIT(A), wherein he has followed the decision of the Tribunal in I.T.A. No. 2360/Mds/03 dt. 07.09.2006. 6. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The assessee is a public sector undertaking und .....

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es on unsuccessful projects are written off as revenue expenditures. On verification of details, the Assessing Officer has observed that the shares were allotted by the companies long back to the assessee and the above amount consists written off of cost of investments in equity shares of four companies, which have been wound up and there was no possibility of recovering the investment cost. Since the above amount was not realizable, the assessee has written off the expenditure and also converte .....

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all the four companies have become defunct and hence nothing was realizable from these companies. Therefore, the assessee has written off as revenue expenditure. By relying on the decision in assessee s own case in I.T.A. No. 2360/Mds/03 dated 07.09.2006, the AR of the assessee has strongly contended that when the profit on sale of disinvestment is to be treated as income and consequently, when the investments were written off, then the same should be allowed as business loss. The above order o .....

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pital loss. For this purpose, the ld. DR placed reliance on the judgement in the case of Spectra Shares and Scrips Pvt. Ltd. v. CIT [2013] 354 ITR 35 (AP). Accordingly, we reverse the order of the ld. CIT(A) on this issue and the ground raised by Revenue is allowed. 7. With regard to the additional ground raised by the Revenue relates to deleting the addition made in respect of the ASIDE grant received by the assessee, the assessee has received the grant of ₹.9.53 crores from Central Gover .....

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the amount as capital receipt. However, the Assessing Officer has not accepted the explanation given by the assessee and treated it as a revenue receipt since the assessee has treated the same as revenue receipt in the original return of income. Therefore, the Assessing Officer added the same to the total income of the assessee. 8. Before the ld. CIT(A), the AR of the assessee has argued that the amount received by the Central Government is only towards capital grant from the Ministry of Commerc .....

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e Central Government and not the income of the assessee company and hence it was questioned by Comptroller and Auditor General of India as to how the assessee company has originally treated it as revenue receipt. Subsequently, the assessee company has filed a revised return in which it was mentioned that the receipt is in the nature of capital and hence to be excluded from the Profit & Loss Account for the tax purposes. After considering the detailed explanation from the AR of the assessee, .....

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eard both sides, perused the materials on record and gone through the orders of authorities below. The assessee has received the grant of ₹.9.53 crores from Central Government towards ASIDE and wrongly treated the amount received as a revenue receipt in its books. Since the Comptroller and Auditor General of India noticed the mistake, subsequently, the assessee has rectified the mistake and filed the revised return within the due date of filing of return of income. When the matter was carr .....

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ot; of Central Government. Then, the grants released by the Central Governments will be disbursed to various companies through the assessee company. b. Comptroller & Auditor General of India and other audit agencies of Central Government have also mentioned that the receipts should be treated as capital receipts because it is not their income. It is to be treated as Corpus Fund and investments are to be made out of these credits. Whatever the revenue that is yielded from these companies only .....

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the assessee company has treated the grant from the Central Government as a revenue receipt, it realised its mistake and filed a revised return within the due date and rectified its mistake. In view of the same, the grant from the Central Government is treated as a Capital Receipt and not revenue receipt as held by the Assessing Officer. So the addition made by the Assessing officer is deleted. 12. There was mistake apparent on the books of accounts and the same was rectified in view of the obse .....

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enue in nature. In that case, through a notification the State Government of Andhra Pradesh extended certain facilities and incentives to all the new industrial undertakings which commenced production on or after 01.01.1969. Since all the incentives are production incentives in the sense that the company will be entitled to these incentives only after it goes into production. The scheme was not to make any payment directly or indirectly for the setting up of the industries. It is only after the .....

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rove its production activity, the incentive was given by the State Government. Therefore, the case relied on by the ld. DR has no application to the facts of the present case. 14. Further, in the case of CIT v. Ponni Sugars and Chemicals Ltd. (supra) also, the assessee was a cooperative society running a sugar mill and the eligibility condition in the schemes was that the incentive had to be utilized for repayment of loans taken by the assessee to set up new units or for substantial expansion of .....

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ller and Auditor General of India and other audit agencies of Central Government have observed that the grant of ₹.9.53 crores received by the assessee from Central Government towards ASIDE was wrongly treated the amount received as a revenue receipt in its books and in view of the above observations, the assessee realised the mistake and rectified the same and filed revised return before due date of filing of return of income. Therefore, we find that the ld. CIT(A) has rightly deleted the .....

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sessment year 2007-08 and we have decided the issue in favour of the Revenue hereinabove. Accordingly, for the assessment 2008-09 also, the ground raised by the Revenue stands allowed. 17. The next ground raised by the Revenue is with regard to disallowance of ₹.2,65,94,188/- being unsuccessful project promotional expenses written off. In the assessment order, the Assessing Officer has observed that the expenditure relates to earlier years and was not relevant to the current financial year .....

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is engaged in the business of promotion of industries in the State of Tamil Nadu, the unsuccessful project promotional expenses written off are in the revenue field and require to be allowed as business expenditure. After considering the submissions of the assessee, the ld. CIT(A) directed to delete the disallowance made by Assessing Officer. 19. The Revenue carried the matter in appeal before the Tribunal and the ld. DR has submitted that the Department has not accepted the decision of the Tri .....

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. We have heard both sides, perused the materials on record and gone through the orders of authorities below. We find that the issues is squarely covered by the decision of the Coordinate Bench of the Tribunal in assessee s own case for earlier assessment years in I.T.A. Nos. 1413/Mds/2000, 100/Mds/1999, 1669/Mds/2000, 936 & 937/Mds/2003 dated 04.09.2006, wherein the Tribunal has held as under: 9. The next issue relevant for the assessment years 1994-95 and 1999-2000 relates to the allowabil .....

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