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M/s. United Breweries Ltd., Versus The Deputy Commissioner Of Income-Tax, Central Circle-2 (3) ,

2016 (6) TMI 647 - KARNATAKA HIGH COURT

Disallowance of business loss under Section 28 - adavnce on business expediency - Held that:- Simply meeting or reimbursing the expenditure of the controlled company, without anything more, does not afford any nexus between the business of the assessee and the loss. The fact that Castle Breweries was being controlled and managed by the assessee does not take its case any further. We have also perused the authorities cited on behalf of the assessee. Those cases were rendered on their own facts. W .....

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e account of the controlled company. This, in our opinion, may be prudent business practice or it might have arisen because of the assessee’s anxiety to save its controlled company from facing financial crunch. But, this by itself affords no nexus between the assessee’s business and the loss. In our view, the loss cannot be allowed as business loss u/s.28 of the Act. - Decided against assessee

Addition u/s 14A - expenses incurred by the appellant towards interest and others on the loa .....

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s been so ordered by the Tribunal. Hence, it can be said that the Tribunal has exercised the discretion where rights of both sides are kept open for admissible deduction under Sec.14A. When such a discretion is exercised and the rights of the appellant –assessee is also kept open to satisfy the Assessing Officer, it cannot be said that any substantial questions of law would arise for consideration, as sought to be canvassed.

In our view, at the stage of enquiry under Sec.14A, it is op .....

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RI. K.V. Aravind, Adv. JUDGMENT JAYANT PATEL J., The appellant - assessee has preferred the present appeal by raising the following two substantial questions of law : a) Whether in law, the Tribunal was justified in upholding the disallowance of business loss under Section 28 of the Act even though it was conclusively established that the initial advances were made on account of business expediency to M/s. Castle Breweries Ltd. and the non-recovery of these advances was due to the fact that M/s. .....

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.Anand, the learned Counsel appearing fo r the respondent. 3. As such, on the first question, the reasoning recorded by the Tribunal are at paragraph 8, which reads as under : 8. We have carefully considered the facts and the rival submissions as well as the paper books submitted by the assessee. In the agreement dated 1.3.1998, it was agreed by the assessee and Castle Breweries (then known as Jupiter Breweries) that the assessee shall have the right to use the brewery facilities of Jupiter and .....

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oner of Income-tax (Appeals) has found that this amount of ₹ 3 crores was not actually paid but was adjusted by a journal entry. Even if this means that the advance has been adjusted by journal entry against the facility fee payable by the assessee, the facility fee would have been allowed as a deduction in computing the business income of the assessee. The amount of ₹ 3 crores cannot, therefore, again be allowed as a deduction under the nomenclature of business loss. Be that as it m .....

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y nexus between the business of the assessee and the loss. The fact that Castle Breweries was being controlled and managed by the assessee does not take its case any further. We have also perused the authorities cited on behalf of the assessee. Those cases were rendered on their own facts. Whether there was connection between the assessee s business and the loss is a question of fact to be considered in the background of each case. There can be no dispute with the proposition that if the loss is .....

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h. But, this by itself affords no nexus between the assessee s business and the loss. In our view, the loss cannot be allowed as business loss u/s.28 of the Act. The disallowance is confirmed and the appeal is dismissed. 4. The aforesaid shows that the Tribunal has considered the question as to whether there was connection between the assessee s business and the loss but such is a question of fact to be considered in the facts of each case. The Tribunal has further observed that the nexus is not .....

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n our view, whether the nexus is established or not, is to be examined in the facts of each case. It is essentially a question of fact, for which the Tribunal is the ultimate fact finding authority. However, the attempt to contend that the Tribunal has not properly considered the material on record, in our view, will also fall in the arena of re-appreciation of facts, which cannot be undertaken to upset the finding of fact in an appeal before this Court, which is limited to only a question of la .....

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Bombay in ITO v. Daga Capital Management Pvt. Ltd., (2009) 312 ITR (AT) 1, is applicable to the facts of the present case. In this order, it has been held that section 14A is applicable even where the motive in acquiring the shares was to obtain controlling interest in the companies. The finding of the Commissioner of Income-tax (Appeals) cannot, therefore, be upheld as it is contrary to the decision of the Special Bench. We, accordingly, uphold in principle the applicability of section 14A. How .....

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wance of interest u/s.14A only if it is found that interest bearing borrowed funds were used to acquire shares in the companies or for making advances to Castle Breweries. We, therefore, restore this issue to the file of the Assessing Officer with the above directions. The ground is treated as partly allowed. 9. The aforesaid shows that the Tribunal after holding in principle the applicability of Sec. 14A, has further directed the Assessing Officer to ascertain from the facts of the case as to h .....

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