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2021 (11) TMI 312 - AT - Income TaxDisallowance of long term capital loss - CIT(A) confirmed the disallowance made by the AO by holding that no sale deed has been produced either before the AO or before the undersigned that transfer of the property had indeed taken placed in the year under consideration - HELD THAT - Even before us, the assessee failed to submit the sale deed, if any, issued by the authority to establish that the property had been transferred in the year under consideration. Mere considerations received and possession handed over without any documentary evidence for enjoyment of the property to the buyer is not sufficient, hence, the section 2(47)(vi) is also not applicable. As per the documents available, we find that the transaction was done in the financial year 2009-10 and till the date of hearing, the assessee is unable to rebut the finding of the assessing officer in regard to non-submission of the sale deed. As in the case of CIT Vs. Balbir Singh Maini 2017 (10) TMI 323 - SUPREME COURT has settled the issue in respect of the transfer of the property where the registered sale deed has not been executed in favour of the prospective buyer. We uphold the order of the CIT(A) in confirming the AO's action in disallowing the assessee's claim of long term capital loss - As it is clear from the order of AO that the assessee can offer income under the head long term capital gain in the year in which the land is duly transferred in all respects as per the above cited decision to the proposed buyer to which the assessing officer can decide the issue as per law in the respective year. Disallowance u/s 14A rwr 8D(2)(iii) - HELD THAT - We do not accept the contention of the assessee that no administrative/ managerial expenses incurred by the assessee for earning exempt income. Assessee earned dividend income which is exempt u/s 10(34)/10(35). The findings given by the CIT(A) are not in accordance with rule 8D(2)(iii). The disallowance can be made under this rule only on 0.5% of the average value of investments which yield exempt income. The assessee has received dividend from the investments as quoted in the above table and the average value of these investments is ₹ 53,03,543/- and 0.5% of the average value comes to ₹ 26,518/-. Therefore, the disallowance is to be restricted to ₹ 26,518/- and assessee gets relied of ₹ 51006/-, hence, this ground of assessee is partly allowed. Assessee claimed bad debts regarding receivables from C F agents - HELD THAT - On going through the financial statements, in the P L account bad debts/advances/deposits written off of ₹ 4,28,33,731/-, which includes 90,01,443/-, which is the disputed amount. The ld. CIT (A) has rightly allowed this issue after relying on the judgement TRF. LTD. 2010 (2) TMI 211 - SUPREME COURT we do not find any infirmity in the decision of CIT(A) in directing the AO to allow the claim of bad debts of ₹ 90,01,443/- and upholding the order of CIT(A) on this count, we dismiss the ground No. 02 raised by the revenue on this issue. Addition deposits/advances written off by the assessee - HELD THAT - To claim bad debts, the amounts must be treated as income but, the issue in dispute relates to advance/deposits which have never been considered as income of the assessee. Even if it is considered as expenditure u/s 37(1) of the Act, the expenditure must be crystalized during the impugned AY, but, the assessee failed to produce any documentary evidence to substantiate its claim that the parties to whom advances have been given as per pages 23 24 of the paper book that the parties were refused to pay back the advances. In support of our decision, we rely on the coordinate bench in the case of Elite International (P.) Ltd. 2017 (6) TMI 494 - ITAT MUMBAI - The case law relied on by the assessee cited supra as well as relied on by the ld. CIT(A) are not applicable to the case of the assessee. In view of the above observations, we set aside the order of the CIT(A) and restore that of the AO on this issue.
Issues Involved:
1. Disallowance of long-term capital loss. 2. Disallowance under Section 14A. 3. Allowance of bad debts. 4. Disallowance of write-off of deposits/advances. Detailed Analysis: 1. Disallowance of Long-Term Capital Loss: The assessee claimed a long-term capital loss (LTCL) of ?24,76,342, which the AO disallowed on the grounds that the land transfer did not occur in the assessment year 2010-11, as no sale deed was produced. The CIT(A) upheld the AO's disallowance, stating no sale deed was presented to prove the transfer. The ITAT, after considering the rival submissions and the material on record, confirmed the disallowance, citing the Supreme Court's decision in CIT Vs. Balbir Singh Maini, which mandates a registered sale deed for the transfer of property under Section 2(47) of the Act. The ITAT concluded that mere receipt of consideration and handing over possession without documentary evidence is insufficient to claim LTCL. 2. Disallowance under Section 14A: The AO disallowed ?12,83,188 under Section 14A, comprising ?12,05,664 under Rule 8D(2)(ii) and ?77,524 under Rule 8D(2)(iii). The CIT(A) deleted the disallowance under Rule 8D(2)(ii), noting that the assessee had sufficient own funds compared to the investments made. However, the CIT(A) upheld the disallowance under Rule 8D(2)(iii) for administrative expenses. The ITAT, after reviewing the submissions, restricted the disallowance to ?26,518, being 0.5% of the average value of investments that yielded exempt income, thus partly allowing the assessee's appeal. 3. Allowance of Bad Debts: The AO allowed only ?59,85,437 of the claimed ?1,49,86,880 as bad debts, disallowing ?90,01,443 on the grounds that the latter were relatively younger debts. The CIT(A) allowed the entire claim, referencing the Supreme Court's decision in TRF Ltd. Vs. CIT, which states that establishing that debts have become bad is unnecessary post the amendment to Section 36(1)(vii). The ITAT upheld the CIT(A)'s decision, noting no infirmity in allowing the claim of bad debts of ?90,01,443. 4. Disallowance of Write-off of Deposits/Advances: The AO disallowed ?97,96,233 written off as deposits/advances, stating these were not revenue items and had never been part of income in earlier years. The CIT(A) deleted the disallowance, citing that these were business-related deposits/advances written off, referencing ITAT Visakhapatnam's decision in DCIT vs. Friends Shoes Company. The ITAT, however, reversed the CIT(A)'s decision, noting that the assessee failed to provide documentary evidence that the parties refused to pay back the advances, and these amounts were never considered as income. Thus, the ITAT restored the AO's disallowance. Conclusion: Both the assessee's and the revenue's appeals were partly allowed. The ITAT upheld the disallowance of LTCL and restricted the disallowance under Section 14A. It confirmed the CIT(A)'s allowance of bad debts but reinstated the AO's disallowance of the write-off of deposits/advances.
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