TMI Blog2020 (7) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... HNA [ 1997 (2) TMI 65 - GUJARAT HIGH COURT] and it was held that a person who gets nothing on account of liquidation of a company and suffers loss, his loss has to be treated as capital loss by virtue of Section 46(2) of the Act. The tribunal has followed the aforesaid decision and has held that the assessee is entitled to benefit under Section 46(2) of the Act in respect of an amount of ₹ 32,25,000/- for diminution of value of investment made in Gujarat Instruments Ltd. We concur with the view taken by Gujarat High court. In view of preceding analysis, the impugned order passed by the Income Tax Appellate Tribunal is modified and the finding that the assessee is entitled to the benefit of capital loss is set aside. The matter is remitted to the assessing officer who shall decide the same in the light of law laid down by the Supreme Court in the case of T.R.F [ 2010 (2) TMI 211 - SUPREME COURT]. - I.T.A. NO. 134 OF 2011 - - - Dated:- 9-6-2020 - Mr. Justice Alok Aradhe And Mr. Justice Hemant Chandangoudar For the Appellants : Sri K V Aravind, Adv. For the Respondent : Sriv Vinay Giri, Adv. JUDGMENT This appeal under Section 260A of the Income Tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an appeal. The Commissioner of Income Tax (Appeals) by order dated 23.11.2009 upheld the disallowance in respect of writing off the debts. It was further held that investment made for equity shares of M/s Gujarat Instruments Ltd., cannot be written off as a revenue loss and the same is a dead loss and therefore, is not allowable. Being aggrieved, the revenue as well as the assessee preferred appeals. The tribunal vide order dated 26.10.2010 inter alia held that writing off bad debt as irrecoverable in the accounts of the assessee is sufficient in view of law laid down by Supreme Court in 'T.R.F LTD. VS. CIT', 323 ITR 397 and the assessee was entitled to write off an amount of ₹ 3,50,81,381/- as bad debt. It was also held that the aforesaid amount should be treated as capital loss under Section 46(2) of the Act in view of the decision in the case of 'CIT VS. JAI KRISHNA', 231 ITR 108 (GUJ). Being aggrieved, the revenue is in appeal before us. 4. Learned counsel for the revenue while inviting our attention to the order of assessment has pointed out that the assessing officer has not adhered to the manner of requirement of writing off the bad debt. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account of assessee. It is also submitted that the decision rendered by the Supreme Court in T.R.F supra was subsequently explained in VIJAYA BANK supra. While inviting the attention of this court to the order passed by Commissioner of Income Tax (Appeals), it is pointed out that assessee had advanced a sum of ₹ 2,21,29,761/- as loan and advances and had further advanced a sum of ₹ 1,29,51,620/- to sundry debtors. It was also pointed out that the assessing officer had accepted that the investment made by the assessee in the sister concern is by way of equity shares and day to day business activity cannot be treated to be capital in nature as the appellant had made supplies to its sister concern. It is further submitted that an amount of ₹ 2.2 Crores advanced by the assessee to its sister concern should have treated as business loss. In support of aforesaid submissions, reliance has been placed on decisions in the cases of 'BADRIDAS DAGA VS. CIT', (1958) 46 ITR 10 (SC), ' CIT VS. MYSORE SUGAR CO. LTD.', (1962) 46 ITR 649 (SC), ' S.A.BUILDERS LTD. VS. CIT', (2007) 158 TAXMAN 74 (SC), ' T.R.F. LTD. VS. CIT', (2010) 190 TAXMAN 391 (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the fact remains that the Supreme Court has interpreted the provision of law, which was incorporated by the Legislature with effect from 01.04.1989, therefore, such an interpretation would relate back to the date when such a provision came into existence. 9. In the backdrop of aforesaid well settled legal position, facts of the case in hand may be examined. From perusal of the order dated 18.03.2004 passed by the assessing officer, it is evident that assessing officer has not examined the fact whether or not the assessee has entered an amount of ₹ 35,081,381/- as written off as bad debt. In the appeal, the remand report was called for by the Commissioner of Income Tax (Appeals) and the assessing officer has submitted the following report, which is reproduced in para 25.3 of the order passed by the Commissioner of Income Tax (Appeals): Ground No.12 13:- This ground relates to the disallowance of ₹ 3,50,81,381/- on account of written off due from M/s Gujarat Instruments Ltd. And ₹ 32,25.000/- on account of diminution in value of investment in M/s Gujarat Instruments Ltd. In it's submission filed before your honor, assessee has submitted that T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of T.R.F. Ltd. Vs. CIT reported in (2010) 323 ITR 397 (SC) comes to its rescue. The Hon'ble judiciary had, in its wisdom, ruled that 'in order to obtain a deduction in relation to bad debts, it sinot necessary for the assessee to establish that the debt, in fact, has become irrecoverable; it is enough, if the bad debt is written off as irrecoverable in the accounts of the assessee.' The assessee had precisely in its books of account written of as irrecoverable. 12. Thus, from perusal of aforesaid paragraph also it is evident that the tribunal also has not recorded a specific finding by assigning reasons that in the books of account the debts have been written off. Only in a single sentence, it is stated that the assessee had in its books of account written off its debt as irrecoverable. 14. The issue with regard to loss of shares in a company, which went under liquidation was considered by Gujarat High Court in CIT VS. JAI KRISHNA supra and it was held that a person who gets nothing on account of liquidation of a company and suffers loss, his loss has to be treated as capital loss by virtue of Section 46(2) of the Act. The tribunal has followed the af ..... X X X X Extracts X X X X X X X X Extracts X X X X
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