TMI Blog2019 (6) TMI 541X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has commented that by giving those advances to the subsidiary the assessee was doing charity at the cost of revenue. This we find is unsustainable proposition. It is settled law that Revenue should not sit in the shoes of businessmen and decide what is appropriate for the business of the assessee. No infirmity in the order of CIT(A). Disallowance for delay in payment of contribution received from employees towards PF and ESIC - AO disallowed impugned payments on the ground that these payments were not made within stipulated time under respective Act - HELD THAT:- These payments were made before the due date of filing of return. Learned CIT(A) has decided the issue in favour of the assessee by referring to Hon'ble Jurisdictional High Court decision in the case of CIT Vs. Hindustan Organics Chemicals Ltd. [ 2014 (7) TMI 477 - BOMBAY HIGH COURT] and CIT Vs. Ghatge Patil Transport Ltd. [ 2014 (10) TMI 402 - BOMBAY HIGH COURT] . - I.T.A. No. 7036/Mum/2016 - - - Dated:- 3-6-2019 - Shri Shamim Yahya (AM) And Shri Sandeep Gosain (JM) For the Assessee : Shri Prakash Jotwani For the Department : Shri Ashim Kumar Modi O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s loss. The Assessing Officer was not satisfied by this treatment. He held that non-recovery of dues from subsidiary company amounting to ₹ 2,53,15,947/- is a capital loss and such loss is not admissible under the head income from business . He also observed that advances to subsidiary lacked nexus with the assessee s business. He observed that the assessee was just doing charity at the cost of revenue. Accordingly he disallowed the assessee s claim. 4. Upon assessee appeal learned CIT(A) deleted the disallowance by observing as under :- 5.1.6 In deciding the issue in appeal under this ground the following undisputed facts have to be taken into consideration: I. The appellant (AHRIL) is into the business of hospitality and runs a resort in Goa. This is evident from clause III (A) of its Memorandum of Association and refusal of its financial statements. II. The appellant had already been providing casino gaming service to its customers/guests prior to creation of a special purpose vehicle, APCCP, which is a Joint-Venture Company (JVC) formed with CAI CASINOINVEST GMBH of Austria (CAII), which is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing the most basic hospitality services such as food/beverage catering on-board the casino ship MV Caravela also shows that the subsidiary/JVC was nothing but an extended limb of the hospitality business of the appellant. In fact, the jointly formulated holiday packages which included cruise excursion/casino experience for guests is a clear indicator that the hospitality business of the appellant was integrated with the specialised/casino business of the JVC created by the appellant. 5.1.8 Under the circumstances, the nexus between the main business of the appellant and the expenditure incurred by it in providing certain services or procuring facilities of the cruise ship, jetty etc. is self evident. To further certain the existence of nexus between the nature of expenditure incurred and the business of the appellant, certain questions may be posed and answered based on the facts available on record: i. Prior to creation of the joint-venture APCCP, was the appellant in hospitality business? - Yes. ii. Did the business of the appellant include food catering, leisure entertainment and Casino? - Yes. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,34,23,287 Other expenses (like interest and other items funded) 1,74,85,437 TOTAL 9,09,08,724 Less: Amount received during F.Y. 2010-1 1 (including ₹ 6.18 crores) (net of expenses incurred during 2010-11) 6,55,92,777 Balance amount due from the subsidiary not recoverable, written off 2,53,15,947 5.1.11 It is settled law that for any expenditure to be considered as capital expenditure, it should be incurred in connection to acquisition of an asset or benefit of an enduring nature. As can be seen from above, the outstanding expenditure of ₹ 2,53,15,947/- cannot be said to be in relation to any such asset or benefit of enduring nature. The gaming license fee paid to Government of Goa is a recurring expenditure for a limited period permission to engage in casino activity. Similarly, jetty fee paid is in nature of parking fees for docking the cruise ship before and after the cruise. Other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel and perused the records. Upon careful consideration we note that learned CIT(A) has found that advance was very much in line of the assessee s business. He also found due nexus between advances given to the subsidiary and assessee s business. He found that these advances to the subsidiary cannot be treated as advances which could derive benefit of enduring nature. Learned CIT(A) placed reliance upon several case laws for the proposition that advances to the subsidiary in line of assessee s business and non-recovery thereof should be allowed as business loss. Hence, learned CIT(A) deleted the advances. 6. We find that the above action of learned CIT(A) does not suffer from any infirmity. Appreciation of the facts by learned CIT(A) is correct. Assessee s advance to subsidiary which was also engaged in the hospitality industry was revenue in nature as mentioned hereinabove. Non-recovery thereof is liable to be allowed as revenue expenses. While disallowing assessee s claim the Assessing Officer has commented that by giving those advances to the subsidiary the assessee was doing charity at the cost of revenue. This we find is unsustainable proposition. It is settled ..... X X X X Extracts X X X X X X X X Extracts X X X X
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