TMI Blog1994 (2) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... count the assessee-firm debited an amount of Rs. 80,000 as capital loss on machinery. On enquiry the ACIT found that the assessee had placed an order for purchase of machinery worth Rs. 10,09,000 with M/s. Godrej Boyce Mfg. Co. (P.) Ltd., at Bombay vide letter dated 17-7-1984. The said order was confirmed by the suppliers vide their letter dated 24-7-1984. The assessee was required to pay earnest money of Rs. 1,16,000 for confirmation of the order which was accordingly paid by the assessee. According to the terms of the order, the machinery was to be supplied in a period of 12 months. It appears that subsequently the assessee dropped its expansion plan and obviously the order for supply of machinery was cancelled as per telex message date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have erred in disallowing the loss of Rs. 80,000. According to the learned counsel it ought to have been allowed as business loss as it was incurred during the normal course of business. Alternatively, he argued that it was a capital loss and ought to have been allowed under section 71(3) of the Act. The learned counsel submitted that by advancing a sum of Rs. 1,16,000 to M/s. Godrej Boyce Mfg. Co. (P.) Ltd. for the purchase of machinery, the assessee had got a right to acquire a capital asset and the extinguishment of such a right resulted into capital loss. According to the learned counsel a capital asset is nothing but a bundle of rights and the learned authorities below erred in holding that the assessee did not get any right to acqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee to enforce its rights against the Godrej Co. for supply of machinery as per order placed by the assessee through its letter dated 17-7-1984. Thus this resulted contract did not create any interest in the property namely machinery which the Godrej Co. agreed to fabricate and assemble by various parts, components and machineries. It therefore cannot be gain said that the contract with the Godrej Co. brought into existence any property which can be termed as capital asset as defined in section 2(14) of the IT Act, 1961. Loss under the head 'capital gains' either long term or short term can be claimed if there is a transfer of a capital asset. As stated by us above the contract between the assessee and Godrej Co. did not create any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act. We agree with the Assessing Officer in this regard. Now let us deal with the case of the assessee whether it is a revenue or business loss. As per the provisions of section 29 of the Act 1961 profits and gains of business or profession are to be computed in the manner laid down in sections 30 to 43D of the Income-tax Act, 1961. We do not find any specific provision from sections 28 to 43D which could enable or entitle the assessee to claim the said loss of Rs. 80,000 viz., cancellation charges or damages deducted by the Godrej Co. There is a residuary provision contained in section 37 of the Act which enables the assessee to claim by way of deduction in respect of expenditure incurred wholly and exclusively for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to any limitation which the context may require, it signifies every possible interest which a person can clearly hold and enjoy. In that case the Hon'ble Supreme Court was concerned with the meaning of annuity in Wealth-tax Act, 1957. Thus it will be seen that on the facts of the case the abovementioned case has no relevance to the facts of the case under consideration. In the case of Tata Services Ltd. the Hon'ble Bombay High Court considered the meaning of the capital asset as well as transfer, and held that right to obtain conveyance of the immovable property is a capital asset and assignment is a transfer. Since the case decided by the Hon'ble Bombay High Court is in connection with the assignment of the right, we are of the opin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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