9911796707
TMI Blog2018 (11) TMI 1235X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in law and on facts in treating the loss incurred on capital contribution in joint venture with R A Business Solutions amounting to Rs. 6,69,00,000/- as short term capital loss and directing the AO to adjust the same against the capital gain of Rs. 9,17,91,201/- as per section 70(2) of the Act. 2. The Ld. CIT(A) has erred in law and on facts by not appreciating that the capital contribution made for joint venture does not fall within the definition of section 2(14) of the I. T. Act and as such the said loss cannot be held as short term capital loss. 3. The Ld. CIT(A) has erred in law and on facts by not applying the decision of Hon'ble High Court of Karnataka in the case of CIT vs Vinoda Rao (68 Taxman 96) wherein it has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss incurred is not revenue expenditure' when the appellant has not claimed it as revenue expenditure but claimed as loss on account^: of settlement of advances as incidental to the business and admissible u/s 28 of the Act. On that count also, the ground no.2 deserves to be dismissed." 4. The grounds of appeal of the assessee and the cross objections filed by the assessee are interconnected to the identical issue therefore for the sake of convenience both are adjudicated together by this common order. The brief fact of the case is that the assessee has filed return of income declaring income of Rs. Nil on 28th September, 2012. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 23rd Septemb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. However the assessing officer has stated that no income from the joint venture was generated by the assessee and the amount of Rs. 7.35 crores was never passed through the P & L a/c. The assessing officer has held that investment made by the assessee in joint venture is capital contribution of the assessee therefore loss incurred on capital contribution is not a revenue loss. Consequently by treating the same of the nature of capital loss the assessing officer has rejected its claim as revenue loss. 5. Aggrieved assessee filed appeal before the ld. CIT(A) . The ld. CIT(A) has allowed the appeal of the assessee. Relevant part of the findings of the ld. CIT(A) is reproduced as under:- "4.2(a) I have carefully considered the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of capital expenditure is not an allowable expenditure." The appellant claimed the loss of Rs. 6.69 crores on revenue account which has been denied by the A.O. I agree with A.O. to the extent that this loss cannot be on revenue account as the contribution of the appellant in the venture was capital contribution. (b) Vide letter dated 20/2/2015 the appellant had made an alternative claim at para 2.7.2 & 2.7. 3. "2. 7.2 If this is considered as loss attributable to capital asset (Project cost), the loss becomes a "short term capital loss". The loss relating to short term capital asset is to be set off against gains from the long term capital assets and/or gain from any other short term capital asset, in the same assessment year as provid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss can be set off against the income in respect of any other capital asset. The A.O. is directed to adjust the short term capital loss against the capital gain as per section u/s.70(2) of the Act. Accordingly, ground of appeal 2 & 3 are partly allowed". 6. We have heard the rival contentions and perused the material on record carefully. We have heard the rival contentions and perused the material on record carefully. On scrutiny, it was discerned to the assessing officer that the assessee company had entered into joint venture agreement with R.A. Business Solutions of Bangalore and as per the agreement the assessee was supposed to invest Rs. 15 crore and M/s. R.A. Business Solution was supposed to invest Rs. 7.15 crores. The assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile computing income in the hands of the assessee. We have noticed from the findings of the ld. CIT(A) that this alternative claim was also made before the assessing officer however the same has not been considered by the assessing officer at the time of finalization of the assessment for the year under consideration. It is clear from the findings of the assessing officer and the Ld. CIT(A) that assessing officer has himself treated the revenue loss claim of the assessee as capital loss. After considering the above facts and circumstances, we do not find any infirmity in the decision of the ld. CIT(A) directing the assessing officer to adjust the short term capital loss against the capital gain as per section 70(2) of the act as the Depar ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
