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TMI Blog2016 (6) TMI 647X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered in the background of each case. There can be no dispute with the proposition that if the loss is incidental to the business, it should be allowed. However, it should be established by necessary facts that the loss is incidental to the business. We have before us a case where the assessee made advances to a controlled company and also incurred expenditure and debited these amounts to the account of the controlled company. This, in our opinion, may be prudent business practice or it might have arisen because of the assessee’s anxiety to save its controlled company from facing financial crunch. But, this by itself affords no nexus between the assessee’s business and the loss. In our view, the loss cannot be allowed as business loss u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dated:- 31-5-2016 - MR. JAYANT PATEL AND MR. B. SREENIVASE GOWDA JJ. For the Appellant: Sri. S. Parthasarathi, Adv. For the Respondent: SRI. K.V. Aravind, Adv. JUDGMENT JAYANT PATEL J., The appellant assessee has preferred the present appeal by raising the following two substantial questions of law : a) Whether in law, the Tribunal was justified in upholding the disallowance of business loss under Section 28 of the Act even though it was conclusively established that the initial advances were made on account of business expediency to M/s. Castle Breweries Ltd. and the non-recovery of these advances was due to the fact that M/s. Castle Breweries Ltd. was declared as a sick company and later ordered to be w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 3 crores was not actually paid but was adjusted by a journal entry. Even if this means that the advance has been adjusted by journal entry against the facility fee payable by the assessee, the facility fee would have been allowed as a deduction in computing the business income of the assessee. The amount of ₹ 3 crores cannot, therefore, again be allowed as a deduction under the nomenclature of business loss. Be that as it may, it seems to us that the assessee has not established with facts as to how the claim can be allowed as business loss. It may be that Castle Breweries is controlled and managed by the assessee but for that reason alone it cannot be said that the amount standing to the debit of Castle Breweries can be allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r there was connection between the assessee s business and the loss but such is a question of fact to be considered in the facts of each case. The Tribunal has further observed that the nexus is not established and therefore, the loss is not allowed as a business loss under Sec. 28 of the Act and the disallowance is confirmed. 5. However, the learned Counsel appearing for the appellant assessee contended that the finding of fact recorded by the Tribunal of not proving of the nexus is contrary to the record, that the Tribunal has not properly appreciated the documents and the material produced on record and therefore, it becomes a question of law to be agitated in the present appeal. 6. In our view, whether the nexus is established o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to ascertain from the facts of the case as to how much interest bearing borrowings was utilized to acquire shares in the companies. It is also necessary to see as to whether any interest bearing borrowed funds were used in making the advances and expenditure in the case of Castle Breweries. This factual exercise has to be carried out by the Assessing Officer after giving due opportunity to the assess of being heard. The Assessing Officer may make the disallowance of interest u/s.14A only if it is found that interest bearing borrowed funds were used to acquire shares in the companies or for making advances to Castle Breweries. We, therefore, restore this issue to the file of the Assessing Officer with the above directions. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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