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TMI Blog2020 (10) TMI 1184X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the appellant has credited the same to P&L account." 3. Facts in brief of the case are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has shown total income of Rs. 1,33,97,073/- after adding back the pre-operative expenses of Rs. 4,88,603/-. Against the total income arrived at, the assessee has reduced the same amount i.e. Rs. 1,33,97,073/- treating the same as "capital receipt writes back of advance against equity" and declared total income at Rs. Nil. The AO also noticed from the notes forming part of the accounts-Schedule H, Point 2, that during the previous year, Dubal Aluminium Company Limited (DUBAL) had sold its 20% stake in the company to Vedenta Almn Limited and had taken a decision not to recover the same from the company and the company had sought permission from Reserve bank of India for retaining the monies received from DUBAL. The permission from RBI was received in the current year and, accordingly, the monies received from DUBAL of Rs. 1,33,97,073/- as advance against equity have been written back to statement of profit and loss as an extraordinary item for the year 2012-13. It was in this backdro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tand should not be changed to disallow the expenses being capital in nature disregarding the allowance of capital receipts. Ld. counsel also drew our attention towards submissions of the assessee filed before the CIT(A), as reproduced in para 3 of the first appellate order, and submitted that the authorities below were not correct in holding the impugned amount as revenue receipt as the same was advanced by DUBAL as capital receipt and, therefore, same cannot be taxed as revenue receipt. Ld. counsel submitted that the impugned addition made may kindly be deleted by allowing the appeal of the assessee. 6. Ld. counsel of the assessee has placed reliance on the judgment of Hon'ble Bombay High Court in the case of Pr. CIT vs SAICOM Ltd., in Income tax Appeal No. 1692 of 2017 dated 21.1.2020 and submitted that section 41(1) does not apply since waiver of loan does not amount to cessation of trading liability and when the assessee has not claimed any deduction u/s. 36(1)(iii) of the Act, qua the payment of interest in any previous year. 7. Ld. counsel has also placed on the order of the Mumbai ITAT "J" Bench in the case of JSW Steel Ltd. vs ACIT order dated 13.1.2017 in ITA No. 923 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to be converted to equity upon achieving financial closure for the project. The same has been appearing in our Balance Sheet under the "Shareholder's Fund'. We also wish to state that we had submitted that the company has not started its commercial operation during A/Y 2012-13 and hence all the expenses were suo-moto disallowed for being capital in nature. Department has assessed us for A/Y 2012-13 and certified the same vide assessment order u/s. 143(3) of the Income Tax Act, 1961. The stand remains the same this year as we are still in pre-operational stage, Hence, for the same reasons, we have suo-moto disallowed the expenses and allowed the receipts as a nature corollary. Your goodself will appreciate that there should be consistency in law and Department's stand should not be changed to disallow the expenses being capital in nature disregarding the allowance of capital receipts. Therefore, we wish to state that it is crystal clear that capital receipt and capital expenses are not chargeable to tax. In this connection, the Supreme Court in the case of OT vrs. Karnal Cooperative Sugar Mills Ltd. [ 243 ITR 2], CIT vrs. M/s. Pormi Sugars and Chemicals Ltd. ( 306 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f by M/s, DUBAL and the same would not be recovered from the assessee company. From the copy of the letter from M/s, DUBAL it is seen that the impugned ' advance was used by the assessee company primarily for serving social needs around the project site and carrying out certain technical studies. In other words, the advance amount was spent by the assessee company on revenue expenses. Moreover, the assessee company itself credited this amount of advance In Its P&L account as Income. It is only -in the computation of income that this amount was deducted from the total Income. It is not understood how an item treated as income in the P&L account prepared as per the Companies Act would become a capital receipt for the purpose of Income Tax Act. In the written submission filed by the assessee reference has been made to certain case laws. It is found that these decisions are not applicable to the case of the assessee having been rendered on different sets of facts. Taking into account all the relevant facts, I find myself completely in agreement with the AO that the impugned amount of Rs. 1,33,97,073/- is taxable as revenue receipts in the hands of the assessee. Accordingly, the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount has been written off by DUBAL as recoverable from the assessee company and consequently, the assessee has written back the said amount to the statement of profit and loss account. 14. We are in agreement with the contention of ld. D.R. that from the letter dated 23.2.2012 of DUBAL, as reproduced by the AO in para 4.2.3 of the assessment order, which clearly reveals that the impugned amount was given by M/s. DUBAL and the same was used by the assessee primarily for serving social needs around the project site and carrying out certain technical studies. Thus, DUBAL extended the amount to the assessee company with the direction of specific utilisation and the assessee company was under obligation to follow such direction. From this, it is clearly gathered that initially the amount was given as revenue receipt with a condition that same may be converted into equity shares upon occurrence of financial closure of the project. But due to reason, best known to DUBAL and the assessee company, DUBAL took exist from the joint venture agreement and write off the said amount given to the assessee under joint venture agreement understanding. It is also not in dispute that as per Notes -H t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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