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2020 (7) TMI 501 - AT - Income TaxDisallowance of short term capital loss on sale of shares - HELD THAT - As assessee had filed various documents in the form of shareholders agreement agreement of Banakhat etc. before the ld. AO which was not discussed by the ld. AO in his order for arriving at a conclusion that loss of shares on sale is not allowable. We find adjudication of all these documents would assist in proper decision making process of the issue involved herein. Hence we deem it fit and proper in the interest of justice and fair play to remand this issue to the file of the ld. AO for denovo adjudication in accordance with law. In view of this decision from our side we refrain to give our opinion on various arguments made by the learned Counsel for the assessee and all those issues are left open. Assessee is also at liberty to furnish additional evidences if any in support of its contentions. Accordingly ground No.1 raised by the revenue is allowed for statistical purposes. Claim of deduction towards bad debts u/s.36(1)(vii) - MAT Computation - Assessee has not made any claim - assessee had voluntarily added back this sum in the return of income under normal provisions of the Act - HELD THAT - We find from the computation of income for the year under consideration that even without adding these bad debts of 2.27 Crores in the profit and loss account of the assessee the assessee would not fall within the ambit of provisions of Section 115JB in view of loss - as rightly pointed out by the ld. AO in his order that this would certainly have an impact in the carry forward of book loss which need to be reduced while computing the book profits u/s.115JB in future years. But at the same time we find that this is not an item that could be added back as per the list of items required to be added back pursuant to Explanation to Section 115JB(2) - It is not the case of the revenue that this claim of bad debt of 2.27 Crores is ingenuine or is not emanating from the business of the assessee company. As in the case of Apollo Tyres Ltd. 2002 (5) TMI 5 - SUPREME COURT had categorically held that the ld. AO is not empowered to disturb the net profit as per profit and loss account which has been prepared in accordance with part II and part III of schedule-VI of the Companies Act 1956 except in respect of specified items that could be disallowed and reduced as per Explanation to Section 115 JB(2) of the Act. In view of this we do not appreciate the addition to book profits made by the ld. AO. - Decided against revenue. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI
Issues Involved:
1. Deletion of disallowance of short-term capital loss on sale of shares. 2. Claim of deduction towards bad debts under Section 36(1)(vii) of the Income Tax Act. 3. Consequential impact of the above issues on computation of book profits under Section 115JB of the Income Tax Act. Issue 1: Deletion of Disallowance of Short-Term Capital Loss on Sale of Shares The primary issue was whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in deleting the disallowance of short-term capital loss on the sale of shares amounting to ?2,41,33,673/-. The assessee, a company incorporated in 1946, diversified into renewable energy in 2011 and purchased two companies, S.J. Green Parks Pvt. Ltd. and Euro Solar Power Pvt. Ltd., which had valid Power Purchase Agreements (PPAs). Due to insufficient financing, the assessee sold the shares of these companies in February 2012, resulting in a significant loss. The Assessing Officer (AO) disallowed the loss, arguing that the value of shares could not be determined by excluding the value of land, as the land was transferred to the assessee company by ESPL at book value after the sale of shares. The AO observed that the share sale consideration of ?50,000/- adopted by the assessee was not acceptable. The Tribunal found that the AO’s observations were factually incorrect and noted that the assessee had provided various documents, including shareholders' agreements and Banakhat agreements, which were not discussed by the AO. The Tribunal decided to remand the issue back to the AO for a denovo adjudication, allowing the assessee to provide additional evidence if necessary. Issue 2: Claim of Deduction Towards Bad Debts Under Section 36(1)(vii) The second issue involved the observation of the CIT(A) that the assessee had not made any claim of deduction towards bad debts amounting to ?2,27,62,719/-. The assessee had voluntarily added back this amount in the return of income under normal provisions to avoid litigation. The AO added back this amount while computing book profits under Section 115JB, reasoning that it would impact the carry forward of book loss. The Tribunal found that adding back the bad debts was not justified as it was not an item listed in the Explanation to Section 115JB(2). The Tribunal cited the Supreme Court’s decision in Apollo Tyres Ltd., which held that the AO cannot disturb the net profit as per the profit and loss account prepared according to the Companies Act, except for specified items. Therefore, the Tribunal dismissed the revenue’s ground on this issue. Issue 3: Consequential Impact on Computation of Book Profits Under Section 115JB The third issue was consequential and depended on the outcome of the second issue. Since the Tribunal dismissed the revenue’s ground regarding the bad debts, this issue was also dismissed. General Grounds The fourth and fifth grounds raised by the revenue were general and did not require specific adjudication. Pronouncement Delay Due to COVID-19 The Tribunal acknowledged the delay in pronouncing the order beyond 90 days due to the COVID-19 lockdown, citing the decision in the case of JSW Ltd. and the unprecedented situation caused by the pandemic. The Tribunal extended the time limit for pronouncement, aligning with the directives from higher judicial authorities. Conclusion The appeal of the revenue was partly allowed for statistical purposes. The Tribunal remanded the issue of short-term capital loss back to the AO for denovo adjudication and dismissed the grounds related to bad debts and consequential computation of book profits. The order was pronounced by placing the details on the notice board on 08/07/2020.
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