TMI Blog2022 (12) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... ll. The law is well settled on this aspect and business loss, if any, can be claimed by the assessee in the year of incurring of the expenditure and not as per his sweet will. In this view of the matter, the order of the ld.CIT(A) sustaining the addition of Rs.29,30,000/- is upheld and the grounds raised by the assessee on this issue are dismissed. Direction of the ld.CIT(A) to bring to tax the amount received by the assessee on the basis of the award by the Arbitration Court - As we find first of all the same is not emanating from the assessment order. Further, the ld. DR could not bring on record any evidence to show that the ld.CIT(A) has given any enhancement notice, which is required as per law to be issued to the assessee before making an enhancement. Thirdly, the amount was already shown by the assessee in the balance sheet as receivable from Mr.Prabir Ghose and therefore, once the arbitrator gives the award for refund the same cannot be brought to tax in the hands of the assessee. We, therefore, set aside the order of the ld.CIT(A) on this issue and the grounds raised by the assessee on the second issue are allowed. - ITA No.1975/Hyd/2018 - - - Dated:- 26-10-2022 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 384(Calcutta) 4. However, the AO was not satisfied with the arguments advanced by the assessee. He referred to the provisions of section 36(2) and noted that any debt written off to be eligible for deduction should have been part of total income of the year under consideration or of an earlier previous year. However, the assessee does not fulfil the criteria. He noted that out of three advances written off, two debts written off, i.e. M/s. Neo Mining Minerals Pvt.Ltd M/s.Uni Sai Minerals relate to advances for purchase of raw materials, i.e. trade advances. However, the bad debt written off in the name of Mr. Prabir Ghosh of Rs.29,30,000/- was not allowable as the advance given is for transfer of lease of china clay mines situated at Jankarpalli village, Rengali Sub-division, Sambalpur District, Orissa with an area of 100 acres, which is capital in nature. Since the capital loss is not an allowable deduction against the business income, the Assessing Officer disallowed bad written off of Rs.29,30,000/- and added to the total income. 5. Before the ld.CIT(A), the assessee made elaborate arguments. It was submitted that the assessee company had written off bad debts amounti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has not offered the corresponding income to tax. It was submitted that as per the award of the arbitrator, the aforesaid amount of Rs.29,30,000/- was adjusted for the following reasons: Cost of 8000 Metric ton( MT ) of china clay lifted at the rate of Rs.300 per MT amounting to Rs.24,00,000/- Balance towards wear and teat of machinery used for extraction of clay for the period 2007-2009. 6. It was submitted that during the intervening period from date of agreement till the date of cancellation of agreement, the appellant had used machinery available onsite for extraction of china clay in the mine as per terms of agreement. Hence, the arbitrator has reduced the compensation to the extent of cost of china clay extracted and wear and tear of machinery used in such extraction and awarded the balance compensation. It was submitted that the difference of Rs.29,30,000/- between the advances given to lessor (Rs.84,30,000) and the award granted by the Arbitrator (Rs.55,00,000) represents the cost of materials extracted by the assessee in the said mine using the machinery available on-site. Since the same was not recoverable, it was charged off as an expense in the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he following reliefs: i. Refund of Rs.75,00,000/- received by the Respondent; ii. Refund of Rs.7,00,000/- towards purchase of land from different private land owners. Iii Refund of Rs.3,00,000/- towards the expenses to be incurred in the matter of transfer of the lease hold rights/sale iv. Refund of Rs.75,000/- towards expenses incurred for the processing at Collectorate and DDM office at Sambalpur v. Claimant is entitled to interest @12% per annum from the date of respective payment till the date of payment. vi. The claimant also claimed present interest and future interest @12% per annum from the date of filing of the claim along with cost The Arbitration concluded that On the basis of the analysis made in the preceding paragraphs the irresistible conclusion, that can be drawn, is that the Respondent has received a total amount of Rs.85.75 lakhs on the following heads: a) Rs.75,000/-:For meeting incidental and miscellaneous expenses for processing the transfer application b) Rs.2,00,000/-: paid towards raising cost c) Rs.76,00,000/-:towards part of the consideration d) Rs.7,00,000/-: for purchase of adjoining lands Out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents have ben paid by M/s.RAK Minerals Private Limited. The subsequent agreement dated 01.06.2009 is also between Mr.Prabir Ghosh and M/s. RAK Minerals Private Limited which has confirmed in cluae(i) page 2 of the agreement that M/s.RAK Minerals Pvt.Ltd. have paid Rs.75 lakhs towards advance money. The balance Rs.50 lakhs has been paid for the expenses. The name of the appellant company does not figure in any of the agreements. Even in the balance sheet, such investment/purchase of mine has not been shown by the appellant company. That is to say, the appellant company has not acquired nor invested in acquisition of the mine. Hence, the question of payment of Rs.83,50,000/- to Mr.Prabir Ghosh by the appellant company, as submitted before me, is incorrect. b) Expenses/Payments have been taken into consideration in the Arbitration case. From the reading of arbitration order, all the expenses incurred by appellant company has been taken into consideration. This also includes amounts spend and amount of clay extracted from the mine. Hence the question of loss does not arise. c) Receipt of Rs.55 lakhs: the appellant company is awarded Rs.55 lakhs towards compensation/refund f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 37 of the Act. 6. On the facts and in the circumstances of the case and in law, the I.d. CIT(A) has erred in enhancing the income of the Appellant towards the compensation awarded amounting to INR 55,00,000. 7. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) h:ls erred in enhancing the income of the Appellant in violation of principles of equity and natural justice and in violation of statutory procedure laid down in section 251(2) of the Act for enhancement of income of the Appellant. 8. On the facts and circumstances of the case and in law, CIT(A) has grossly erred in directing the Ld. AO to tax the amount of INR 55,00,000 received from Mr. Prabir Gosh without appreciating the fact that the said receipt is 'capital in nature and is not subjected to tax. 9. On the facts and circumstances of the case and in law, CIT(A) has grossly erred in directing the Ld. AO to tax the amount of INR 55,00,000 received from Mr. Prabir Gosh without appreciating the fact that the Appellant has not claimed deduction of such amount in any of the previous years. Accordingly, the directions of CIT(A) to tax the said receipt would tantamount to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directing the AO to bring the same to tax is not in accordance with law. 14. The ld. DR on the other hand heavily relied on the order of the ld.CIT(A). Referring to the order of the ld.CIT(A), he submitted that he has given valid and justifiable reasons while sustaining the addition made by the AO of Rs.29,30,000/- and further directing the AO to bring to tax the amount of Rs. 55 lakhs in the hands of the assessee company on the basis of the award by the Arbitration Court. 15. We have heard the rival arguments made by both the sides, perused the orders of the ld. AO and ld.CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case to made addition of Rs.29,30,000/- out of the expenditure claimed at Rs. 36,46,500/- towards bad debt written off under the head other expenses on the ground that assessee does not fulfill the conditions prescribed u/s.36(2) of the I.T.Act. We find the ld.CIT(A) not only upheld the action of the AO, but also directed him to bring to tax the amount of Rs. 55 lakhs awarded by the Arbitration Court, the reasons of which have already been reproduced in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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