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The Assistant Commissioner of Income Tax, Circle XV, Chennai Versus M/s. Max Value Housing

2016 (3) TMI 318 - ITAT CHENNAI

Addition made on account of bad debt - under section 36(2) [section 36(1)(vii) – SIC] or as business loss under section 28 - Held that:- if at all any loss incurred by the partner of the firm Mr. Khadeer Ahmed towards any transaction, then, he has to bear the loss and not by the assessee firm. General authorization given in the partnership deed to carry out “any other activity” is no longer res integra in the absence of specific authorization is required in acquisition of capital assset when lak .....

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f land, it cannot be said that any loss incurred in the course of business is a business loss or business expenditure. It is nothing but the assessee is trying to enjoy the benefit of section 36(1)(vii) of the Act through back door, which is not permissible under law. As per agreement for sale, it is only a money diversion from the accounts of MAX VALUE HOUSING to purchase the land by the individual Mr. M. Khadeer Ahmed and not for the assessee firm. Therefore, any loss incurred by the individua .....

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i Duvvuru RL Reddy, Judicial Member For The Appellant : Shri A.V. Sreekanth, JCIT For The Respondent : Shri S. Thyagarajan, C.A. ORDER PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) V, Chennai dated 25.03.2014 relevant to the assessment year 2008-09. The only effective ground raised by the Revenue is with regard to deletion of addition made on account of bad debt either under section 36(2) [sec .....

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9.2009. After considering the details filed by the AR of the assessee, the Assessing Officer has observed that the assessee has claimed the advance payment made towards purchase of land as bad debt. After considering the submissions of the AR of the assessee, the Assessing Officer has not accepted the claim of bad debt of ₹.82,00,000/- and added back to the income of the assessee. 3. On appeal, after considering the detailed submissions filed by the AR of the assessee, the ld. CIT(A) has d .....

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partner executed the said agreement in his capacity as partner of the assessee firm. It was further submitted that the assessee has actually engaged in civil contractor and not in the business of trading in land. Moreover, by filing detailed written submission, it was argued that any expenditure incurred towards acquisition of capital asset cannot be treated as revenue loss, but it is capital loss and the same cannot be claimed as an allowable deduction. It was further submitted that the advanc .....

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ulars in the form of paper book, supported the order passed by the ld. CIT(A) and prayed that the same should be confirmed. 6. We have heard both sides, perused the materials on record and gone through the orders of authorities below. We have also perused the paper book filed by the assessee. The Assessing Officer made the disallowance for the following reasons: This is the first year the assessee claims to be deviating from the actual business of civil contractors, to property developers. Howev .....

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ion (if more than one business or profession is carried on during the previous year, name of every business or profession , that the nature of business mentioned was Civil Contractor only for the previous year relevant to the assessment year under consideration. However, the assessee claims that the partnership firm was established with the main purpose of promotion/construction of residential apartments, houses/commercial complexes and any other activities, etc., but the Form 3CD does not refle .....

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ut 41 years, Managing Partner of MAX VALUE HOUSING having office at G1-B, Ground Floor, 63/27, Eldams Road, Alwarpet, Chennai 600 018, hereinafter referred to as the PURCHASER which expression shall unless repugnant to or inconsistent with the context mean and include their heirs, legal representatives, executors, administrators and assigns of the OTHER PART. It is very clear from the above that the purchaser is Mr. M. Khadeer Ahmed, son of Mukthar Ahmed, Managing Partner of MAX VALUE HOUSING an .....

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that the assessee firm has made any advance payment for purchase of the above land for the assessee firm. If at all it is required to be accepted since the firm not being legal entity, it cannot legally transact in its own name, why it was not purchased in the names of all three partners and moreover at least one of the other partners would have witnessed for the above purchase, whereas, in the agreement of sale, as per paper book page 59, Smt. K. Sujatha, wife of the vendor Shri K. Karuppaiah .....

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ership Deed, it is clearly mentioned that 13. Private debts, if any, incurred by the partners shall be paid out by the partners out of their own funds and this partnership business of M/s. Max Value Housing shall not be liable or responsible. That being so, if at all any loss incurred by the partner of the firm Mr. Khadeer Ahmed towards any transaction, then, he has to bear the loss and not by the assessee firm. General authorization given in the partnership deed to carry out any other activity .....

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