TMI Blog2013 (2) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the agreement. The factum of actual non delivery or impact of non delivery could be relevant only in the cases in which genuine business transactions are involved. On the facts of the present cases, these aspects are not really relevant. In view of these discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(Appeals) and decline to interfere in the matter. Nature of expenditure - loss on cancellation of booking of 100 TPD Klin, proposed expansion of steel unit - Held that:- We find that in the case of CIT-vs.- Anjani Kumar Co. Ltd. (2002 (7) TMI 44 - RAJASTHAN HIGH COURT) was in seisin of a situation in which advance was paid to acquire land for expansion of business but since lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action of the A.O. was wholly unreasonable, uncalled for and bad in law. The ld. CIT(A) was unjustified in confirming the action of A.O. 3. The relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed loss of ₹ 51,00,000/- which was paid to Global Alloys Pvt. Ltd. as compensation for not lifting the ordered materials. The Assessing Officer noted that neither the assessee was into any trading business nor was it related to business activity of the assessee. In the absence of suitable explanation by the assessee, and on these facts, the Assessing Officer treated the loss of ₹ 51,00,000/- as speculation loss as the transaction was settled wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decrease during the subsistence of this indenture, then the purchaser shall be liable to bear and pay the compensation to the seller which shall be equivalent to the amount calculated at the rate being difference between the rates agreed herein and the market rates of the materials. 9. That, in the event of breach of any of the terms of this indenture, the I, suffering party shall serve a written notice to the defaulting party by notifying to remedy the breach within 15(fifteen) days time and the suffering party shall be with an option to terminate this indenture at its sole discretion by claiming compensation, if any, to the defaulting party . I find that the element of speculation is embedded in clause 7 and 8 of this agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epending upon whether the price of the material decreases or increases in future. Therefore, the loss or gain to either parties of this highly speculative contract on account of non delivery of material is a speculative business loss or gain arising directly from the terms and conditions of the business contract rather than any compensation received or paid for breach of this contract. The purchase contract of 200MT of Silicon Magnum and 50MT of Ferro Silicon did not result into a delivery but was settled by appellant by paying ₹ 51 lakh with some discount to the counter party as per clause 8 of the contract between appellant and the counter party. Therefore, this loss of ₹ 51 lakh to appellant is a speculative loss u/s. 43( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter. It is a situation in which there could not have been any possibility of actual delivery of the goods because even at the point of time when delivery was to take place, the factory was not even likely to come back to the possession of the assessee. The factory was given on lease and as such the purchases cannot be said to have been made for bonafide actual user purposes. As learned CIT(Appeals) has painstakingly analyzed the various contract provision - namely clause 7 to 9, these clauses have inbuilt speculation element embedded in the agreement. The factum of actual non delivery or impact of non delivery could be relevant only in the cases in which genuine business transactions are involved. On the facts of the present cases, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of booking, a sum of ₹ 50,00,000/- was received in FY 2005-06 and ₹ 34,00,000/- in current financial year, i.e. FY 2008-09 in full and final settlement. The said loss which arises on the event of capital expenditure for expansion of Steel Unit, cannot be allowed as revenue expenditure, since the same has been incurred in respect of proposed acquisition of capital asset and cannot be treated as expenditure incurred wholly and exclusively for the purpose of business . 9. Aggrieved, assessee carried the matter in appeal before the CIT(Appeals) but without any success. Learning CIT(Appeals) noted that out of an advance of ₹ 1,10,00,000/- to Tata Steel Ltd., he was refunded only ₹ 84,00,000/- and that loss of adv ..... X X X X Extracts X X X X X X X X Extracts X X X X
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