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TMI Blog2016 (4) TMI 384X X X X Extracts X X X X X X X X Extracts X X X X ..... s has to be short term capital loss. In these circumstances, in our considered view, there is no justification in declining the short term capital loss claimed by the assessee.- Decided in favour of assessee - I.T.A. No. 3833/Mum/2011 - - - Dated:- 31-3-2016 - Pramod Kumar AM and Pawan Singh JM For The Appellant : Nitesh Joshi For The Respondent : Jasbir Chauhan ORDER Per Pramod Kumar, AM: 1. By way of this appeal, the assessee appellant has challenged correctness of the order dated 14th March, 2011 passed by the learned CIT(A) in the matter of assessment under section of 143(3) of the Income Tax Act, 1961 for the assessment year 2002-03. 2. Grievances raised by the assessee, as set out in the memorandum of appeal, are reproduced below: 1. The learned Commissioner (Appeals) erred in confirming the disallowance of short term capital loss of ₹ 34,68,84,550 claimed by the appellant. 2. The learned Commissioner (Appeals) erred in holding that the loan of Euro 9 million due from Siemens Nixdorf Information Systems Limited was not a capital asset. 3. The learned Commissioner (Appeals) erred in holding that the transfer of loan will n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the valuation by Infrastructure Leasing Finance Limited, the assessee sold this debt to Siemens AG for a consideration of Euros 7,31,000. The assessee claimed a short term capital loss on this transaction of sale of book debt. However, the Assessing Officer declined the deduction on the basis of the reasoning that (a) the loan of Euro 90,00,000 to SNISL, i.e. assessee s right to recover Euro 90,00,000 from SNISL, was not a capital asset under section 2(14); (b) that the assignment of this debt, or the right to recover the money from SNISL, was not a transfer under section 2(47); (c) even going by the valuation report, what is recoverable is only Euro 7,31,000 and what is not recoverable cannot be transferred either; and (d) it is a sham transaction only with the tax motives since the advance to the SNISL was in the capital field and a capital loss is not allowed as deduction. Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. Learned CIT(A) confirmed the action of the Assessing Officer on the basis of the following reasoning: 2.6 I have carefully gone through the order of the Assessing Officer and also the submissions as made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the loan to the appellant company. Consequently, M/s. Siemens AG could recover higher or lower amount, out of the loan amount given to M/s. SNISL, India although it had purchased this loan of Euro 9 million for a sum of Euro 7,31,000 only from the appellant company. It could have been a business decision for M/s. Siemens AG to have purchased this loan from the appellant company at a such low value but the recovery of the loan is not definite and ascertainable because what amount will finally paid by the SNISL, India to M/s. Siemens AG is not determinate. On the other hand, the appellant company has recovered only Euro 7,31,000 against the Euro 9 million loan given to SNISL, India and it had right to assign its debt to anybody as it deemed fit to cut further losses. 5. The assessee is not satisfied with the stand so taken by the learned CIT(A) as well, and is in further appeal before us. 6. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 7. The first thing, which is in fact fundamental to the dispute before us, is whether or not an advance given by the assessee is a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sset, there was obviously no question of the short term capital loss. As a matter of fact, it was not even the case of the revenue, and rightly so- in our opinion, that the debt was not a capital asset. As regards learned CIT(A) s observation to the effect that a loan is a current asset and not a capital asset , we may only point out that the concept of current asset is alien to the law on taxation of capital gains, or, for that purpose, to the law on taxation of income. The expression capital asset is a defined expression under section 2(14) and, even though it may be more appropriate to describe an advance, a debt or a recoverable amount as a current asset from an accountant s perspective or from any other perspective, as long as such an advance, debt or recoverable amount satisfies the requirements of Section 2(14), it will have to be treated as a capital asset for the purposes of computation of capital gains. As regards the CIT(A) s observations that the assessee did not have a PE in India, that the assessee was not carrying out any business in India and that the assessee was not required to file a return of income in India, we are unable to see any relevance or basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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