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M/s Kiduja India Limited Versus Addl. Commissioner of Income Tax-3 (2) , Mumbai

2017 (9) TMI 798 - ITAT MUMBAI

Loss on account of “Securities written off” disallowed - claim of bad debts - Held that:- The undisputed facts of the case are that the writing off of this amount was not in challenge but the year in which the amount was to be written off and the year in which it has to be allowed by the authorities. We find merit in the contention of the ld.AR that the writing off of the said amount in neither of the assessment year i.e. 2010-11 or 2011-12 is tax neutral as is clear from the computation of tota .....

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ble in one year or other year is immaterial. In the present case, also in both the assessment year the income of the assessee is not assessable to tax at all. We also find that the assessee has decided to write off when it finds that the further investment in the said securities would be loss making propositions considering the adverse market conditions. Moreover, it is the assessee who can take decision to write off of the amount which became bad in particular year and the revenue cannot dictat .....

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R RAJESH KUMAR, A. M: This is an appeal filed by the assessee against the order of ld.CIT(A)-8, Mumbai dated 27.2.2015 for the assessment year 2011-12. 2. Grounds of appeal taken by the assessee are as under : 1. On the facts and under the circumstances of the case and in law, the Learned CIT(A) erred in confirming the action of the Assessing Officer of not allowing the loss on account of Securities written off of ₹ 1.20 Crores in AY 2011-12 2. On the facts and under the circumstances of t .....

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ook profit calculated under the provisions of section 115JB, which is bad in law. 3. Only issue raised in all the grounds of appeal is against the confirmation of addition by ld.CIT(A) as made by the AO by not allowing the loss on account of Securities written off to the extent of ₹ 1.20 Crores for the reasons that the same was not bad debts and not allowable as the same was not part of the income in any of the earlier years and also that the Securities written off did not belong to AY 201 .....

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penditure of ₹ 1.20 crores under the head Securities written off which has been on account of withdrawal of capital commitment by the assessee in Kotak India Growth Fund-II . The assessee ordinary course of business entered into an agreement dated 20.3.2008 with Kotak Mahindra Trusteeship Services Ltd. As per the agreement, the assessee agreed to contribute and commit a sum of ₹ 40 crores to the fund in terms of agreement and initial drawdown ₹ 1.20 Cr being 3% of total capital .....

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s there were every possibility of losing the money and incurring further losses, had the assessee contributed to this fund further. As per the terms of the agreement if the amount as per second drawdown notice dated 7.11.2008 was not paid within default cure period ending on 27.10.2009 then the assessee s contribution of ₹ 1,20,00,000/- was to be forfeited and which was ultimately forfeited. Accordingly the AO issued show cause notice to the assessee as to why the said claim was allowable .....

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sessment u/s 143(3) vide order dated 27.4.2014 by assessing the total income at NIL under the normal provisions of Act and ₹ 4,29,71,535/- under the provisions of section 115JB of the Act. 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A). Before the FAA, the assessee filed detailed submissions which have been incorporated in the para 4 of the appellate order and the ld.CIT(A) after considering the submissions of the assessee rejected the claim of t .....

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the total capital commitment i.e. ₹ 1,20,00,000/-. As per the second drawdown notice dated 7th Nov.2008, Kotak India Growth Fund-Il required the assessee to pay 10% of its capital commitment to the fund being ₹ 4,00,00,000/-. The drawdown date for this was 15th December, 2008 and not later than 17.30 IST at Mumbai. The assessee company did not pay this amount by 15th Dec.,2008. Subsequently vide letter dated 31.03.2009 'Kotak India Growth Fund-II extended the due date of second D .....

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eon calculated at the rate of then prevailing Kotak Prime Lending Rate (PLR) + 300 basis points per annum from May 1, 2009 till actual payment/realization ( Default Amount ) 7. If the Default Amount is not paid within the Default Cure Period, your contributions to the Fund made thus far (i.e: towards subscription of the partly paid Units of the Fund) shall, together with such Units, stands forfeited. The investment Manager may deal with the same in any manner it deems fit, including through a sa .....

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ot produced the details of any correspondence made with the Kotak India Growth Fund-Il for getting the Revised due date extended or to enforce· its rights, if any, beyond the revised due date . It also did not produce any document or correspondence to support its claim that the rights were intact in Kotak India Growth Fund beyond 27th October, 2009. In view of the above, all the rights of the assessee have ended on 27th October, 2009, as the amount of ₹ 1,20,00,000/- was forfeited b .....

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and costs are accrued, that is, recognized as they are earned or incurred (and not as money is received or paid) and recorded in the financial statements of the periods to which they relate; As the claim of the expenditure of ₹ 1,20,00,000/- by the assessee does not relate to F.Y. 2010-11, the case of appellant is distinguishable from the decisions relied on by the AR in respect of book profit u/s 115JB. The Income Tax Act is annual in its structure. Each 'previous year' is a disti .....

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M.Ziaddin v CIT 203 ITR 136; Vipin v CIT 251 ITR 782; Bakshi v CIT 255 ITR 38, Balchand V/s CIT 10 ITR 507; Govindram v CIT 23 ITR 68; Kotak Mahindra Finance Ltd. v DCIT 265 ITR 114. Therefore, having regard to the above facts, the disallowance of ₹ 1,20,00,000/- made by the AO to the normal profit as well as book profit is affirmed as the said claim does not relate to financial year 2010-11 relevant to the assessment year 2011-12. 6. The ld. AR vehemently submitted before us that the deci .....

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findings of the AO which was confirmed by the FAA that the same should have been written off in the assessment year 2010-11. The ld. AR also submitted that the security written off in the assessment year 2011-12 were as per law and the provisions of the Income Tax Act, 1961 and the assessee was fully entitled to claim the said set off as the assessee continued its efforts to recover the money till the current year. Ultimately when failed in its efforts wrote off as provided in the terms of agre .....

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ases Pvt Ltd. dated,06.05.2008 reported in ITR no.229/1988 and the decision of the jurisdictional High Court in the case of CIT V/s Adbhut Trading Co.Pvt Ltd reported in (2011) 338 ITR 94 (Bom). 7. On the other hand the ld. DR argued that the claim of the assessee by way of writing off the security was not admissible in the assessment year 2011-12 as the same became and forwarded to the assessment year 2010-11 and opening to the current year. The ld.DR strongly defended the orders of authorities .....

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ent and dealing in shares and securities. During the course of ordinary business the assessment investment in the commitment capital funds of Rs. ₹ 4,00,00,000/- to M/s Kotak India Growth Fund-II and as per the terms and agreement the assessee also contributed ₹ 1,20,00,000/- at the rate of 3% of the total capital commitment. Due to adverse market conditions, the assessee decided to withdraw from the said investment and business understanding which resulted into forfeited of ₹ .....

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particular previous year and not as per the whims and fancies of the assessee. The undisputed facts of the case are that the writing off of this amount was not in challenge but the year in which the amount was to be written off and the year in which it has to be allowed by the authorities. We find merit in the contention of the ld.AR that the writing off of the said amount in neither of the assessment year i.e. 2010-11 or 2011-12 is tax neutral as is clear from the computation of total income f .....

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