TMI Blog2022 (10) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... tted that the amounts were outstanding for more than six years and the details of debts written off giving the names of the debtors and the amounts were submitted during the course of assessment proceedings - HELD THAT:- Only contention of the assessee is that the said debts were outstanding for last more than six years but the assessee has not been able to show as to any correspondence made with the parties for recovering the said amount. There was no efforts made by the assessee to recover the said amount and simplicitor saying that the amount was less than Rs.1 lakh cannot be held as bad debt. In the common parlance of business each and every rupee matters and the businessman always try to recover even if it is not filing any legal action as such. But here intention of recovering the said debts were not shown by the assessee before the Assessing Officer or before the CIT(A) as well as before us. Thus, ground no.3 is dismissed. Long Term Capital Loss in respect of equity shares of subsidiary company - HELD THAT:- No reason why a shareholder who in distribution of assets has not received any deemed consideration in satisfaction of his rights and interests in the holding and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oetz (I) Ltd. [ 2006 (3) TMI 75 - SUPREME COURT ] was not at all considered in its true spirit in the present assessee s case. Therefore, ground is allowed. - ITA No.1316/Ahd/2016 - - - Dated:- 24-8-2022 - Shri P.M. Jagtap, Vice President And Ms. Suchitra Kamble, Judicial Member For the Appellant : Shri Yogesh G. Shah, AR For the Respondent : Shri Alokkumar, CIT DR ORDER PER SUCHITRA KAMBLE, JUDICIAL MEMBER : This appeal is filed by the assessee against the order dated 02.02.2016 passed by the CIT(A)-2, Vadodara for the Assessment Year 2007-08. 2. The assessee has raised the following grounds of appeal: 1 The learned CIT(A) erred in law and on facts in not allowing the amount of Rs.1,36,72,000/- as bad debts as well as business loss//loss incidental to business and by holding it to be a capital advance in respect of advance (given to a subsidiary company) written off. It is submitted that it be so held now and the deduction as claimed be allowed. 2. The learned CIT(A) erred in law and on facts by disallowing the plant shifting charges of Rs.36,60,000/- by holding it to be in the nature of capital expenditure assessee. It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07 declaring total income at Rs. Nil. Notice under Section 143(2) of the Income Tax Act, 1961 was issued on 07.08.2008 and notices under Section 142(1) of the Act dated 07.09.2009 and 14.09.2009 were also issued to the assessee. The Assessing Officer observed that the assessee has written off advance given to subsidiary company, namely Gujarat Textronic Limited (GTL) amounting to Rs.1,36,72,000/-. The assessee furnished its reply vide letter dated 14.12.2009. After taking into consideration the same, the Assessing Officer made addition of Rs.1,36,72,000/- in respect of advance to subsidiary company written off and treated the same as loss of capital. The Assessing Officer also made addition of Rs.36,60,000/- towards expenditure incurred on plant and machinery charges. The Assessing Officer disallowed the claim of the assessee relating to bad debt amounting to Rs.1.06,00,000/-. The Assessing Officer further disallowed Rs.1,59,85,645/- in respect of Long Term Capital Gain loss. 4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. As regards ground no.1 relating to bad debt, the Ld. AR s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to note that though the assessee has stated that the intention of the assessee to give advances to its subsidiary for making capital and subsidy but the intention was to control the operation of the GTL and to oversee that the manufacturing cost of the yarn clearer remained below its import cost which has to be economical/cost effective for the assessee. Thus, the advances were intended to have a smooth running of manufacturing activities of the assessee company taking into account the cost effectives while investing in the equity shares of GTL. Thus, the same cannot be stated as advance given for acquisition of capital and hence it was rightly treated as bad debt as well as business loss/loss incidental to business by the assessee when GTL became defunct and it was impossible to recover the amount on its liquidation. Thus, ground no.1 is allowed. 8. Ground no.2 is not pressed by the Ld. AR and hence dismissed. 9. As regards to ground no.3 related to bad debts written off of Rs.69,33,446/-, the Ld. AR submitted that the amounts were outstanding for more than six years and the details of debts written off giving the names of the debtors and the amounts were submitted during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ism fails. It does not observed about consideration as being not determinable. In the present assessee s case, consideration is NIL as the investee company is wound up and no amount is realized for the shareholders to be paid back to them. 13. The Ld. DR relied upon the assessment order and the order of the CIT(A). 14. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the share of Gujarat Textronics Ltd. which is a subsidiary of the assesse was written off as in liquidation and its index cost of acquisition was worked out at Rs. 1,59,85,643/- by the assessee company. The Revenue at no point of time disputed that the assessee company was having share of Textronics Ltd. Since the Investee company was wound up, no amount can be realized for the shareholders to be paid back to them. The Hon ble Gujarat High Court in case of CIT vs. Jay Krishna Harivallabhdas (Supra) held that once a conclusion is reached that extinguishment of rights in shares on liquidation of a company is deemed to be transfer for operation of section 46(2) read with section 48, it is reasonable to carry that legal fiction to its logical concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Term Capital Loss. Ground No. 4 is allowed. 15. As regards ground no.5 relating to non-granting exemption from the tax payable on Long Terms Capital Gain (LTCG) earned on transfer of land, Ld. AR submitted that there was sanctioned scheme of Board of Industrial and Financial Reconstruction (BIFR) which was passed on 16.08.2005. The Ld. AR submitted that the LTCG earned thereon was offered for taxation in the particular year. The assessee had incurred huge loss in the past which resulted in erosion of its net worth and, therefore, the assessee s case was referred to BIFR for rehabilitation. The assessee has filed E-return which does not allow the assessee to claim any such exemption in the written form itself. The assessee wrote letter to the Assessing Officer to grant exemption in respect of the said LTCG while assessing the return of the assessee. The Assessing Officer disregarded the BIFR sanctioned scheme and the assessee s request and went on to assessee the aforesaid LTCTG on transfer of land to tax as per the provisions of the Act. The CIT(A) also ignored these facts and simplicitor confirmed the addition. The Ld. AR further submitted that the CIT(A) on similar facts allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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