TMI Blog2022 (6) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... al account and therefore, the loss suffered by the assessee is capital loss which is neither admissible u/s 36(1)(vii) nor u/s 37(1) - The order of the assessing officer was confirmed by the CIT(A), on the premise that putting surplus money as inter corporate deposit for earning of interest cannot be said to be incidental to business or during ordinary course of business and hence, the loss of investment by way of deposits by the appellant, cannot be claimed as revenue loss. The said order of the CIT(A) was also affirmed by the Tribunal in the further appeal filed by the appellant / assessee, by observing that if the provision written back is the excess provision than the money realized, then that would 100% be brought to tax apart from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the Tribunal ought to have allowed the loss as a capital loss in as much as loss on the sale of shares obtained in connection with settlement of debt, the assessee could not realise the entire debt? 3. According to the appellant/assessee, they are engaged in the business of manufacture and sale of automobiles. For the assessment year 2000-2001, they filed their return of income on 27.11.2000 admitting 'nil' income under normal provisions of the Income Tax Act (in short, the Act ) and Rs.24,35,60,175/- under Section 115JA of the Act. Upon scrutiny of the same, notice under section 143(2) came to be issued on 28.11.2001. In response, the representative of the appellant appeared before the assessing officer and submitted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs.7,78,78,809/- as on 31.03.1998. In view of such default committed by the said firm, the appellant made entries in the books of account for Rs.5,64,13,050/- for the assessment year 1998-1999 (financial year 1997-1998) towards the amount due from the said firm, which was arrived at after considering the value of shares of Bank of Rajasthan held by the appellant as security. Therefore, while filing the return for the Assessment year 1998-1999, the said amount of Rs.5,64,13,050/- was claimed as deduction under Section 28 of the Act. In the meanwhile, the shares of Bank of Rajasthan were vested with the appellant, as per the order dated 05.08.1999 passed by the High Court of Calcutta and the shares were delivered to the appellant during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the loss of this kind can be entertained, if it is incurred in the relevant previous year, the loss got crystallised during the assessment year 2000-2001 and therefore, the appellant was right in claiming the sum of Rs.480,71,436/- during the assessment year 2000-2001. However, the Tribunal erred in holding that the loss incurred by the appellant in respect of loan advanced to M/s.Bangur Finance Ltd is in the nature of capital loss and hence, not allowable under section 28 of the Act. It is also submitted that if the loss is not allowed as a deduction, the same would have to be considered as part of the cost of 4,68,630 shares of Bank of Rajasthan transferred to the appellant, pursuant to the order of Calcutta High Court dated 05.08.1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appellant / assessee, which was subsequently, enhanced to Rs.4,80,71,436/- during the course of assessment proceedings. The said claim was disallowed by the assessing officer as it was not satisfied the criteria laid down under section 36(2) of the Act, after having found that money lending and banking are not the principal activities of the assessee and they made the advance of surplus funds available with it for earning interest and they could not recover the principal and hence, the same was written off as irrecoverable. It was further noted by the assessing officer that the advances are transactions on capital account and therefore, the loss suffered by the assessee is capital loss which is neither admissible under section 36(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rightly speaking, it was not a case of any trading loss. It was the case of a mistake in passing entries in the books. As noted above, in the previous year, relevant to the assessment year 1966-67, the assessee despatched certain goods of the value of Rs.71,648/- to M/s.Mandya Paper Mills, Madras. Necessary entries were passed in the books by debiting the purchaser's account and crediting the sales account. The purchaser did not take delivery of those goods and on assessee's instructions those goods were sold by its own agent on its account in the previous year relevant to the assessment year 1967-68. The assessee received the sale proceeds and instead of reversing the entries made in the accounting year relevant to the year 1966-67 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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