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TMI Blog2017 (4) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ountant Member and Amarjit Singh, Judicial Member For The Revenue : Shri Vishwas Munde-CIT-DR For The Assessee : Shri Ruturaj Gurjar PER RAJENDRA, AM Challenging the order dated 24/08/2012 of the CIT (A)-18,Mumbai the Assessing Officer (AO)has filed the present appeal. Assessee-company, engaged in the business of trading and manufacturing of surgical implants, filed its return of income on 9/09/2008, declaring total income of ₹ 71.83 lakhs. Later on, a revised return of income was filed on 30/09/2009. The AO completed the assessment on 27/12/2011, u/s.143 (3) of the Act, determining its income at ₹ 2.28 crore. 2. Effective ground of appeal is about deleting the disallowance of ₹ 1.55 crore made by the AO under the head advance and loans given by the assessee to its 100% subsidiary. During the assessment proceedings, the AO found that the assessee had written off a sum of ₹ 1, 55,78,489/-,being amounts advanced to its 100%wholly owned subsidiary (WOS) is a working capital loan. He directed the assessee to justify the claim. After considering the same, the AO observed that the loans and advances given by it to the WOS, a foreign compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he tune of ₹ 22.43 lakhs and advance of ₹ 1.33 crores, that the advance had been given for business exigencies, that the expenditure in question was fully revenue in nature, that the financial help to the subsidiary was in assessee s own business interest, that the loan and advances given by the assessee to the subsidiary were wholly incidental to its business, that incurring of losses by WOS could not form basis of adverse inference against the assessee. The assessee relied upon certain case laws and argued that the loss claimed by it u/s. 28 r.w.s. 37(1) of the Act should be allowed. 3.1. After considering the submission of the assessee and the assessment order, he referred to the cases of Chenab Forest Co.(96ITR568); V.S. Dempo Co. Ltd. (206ITR291);Colgate Palmolive India Ltd. (2011/TIOL/758/ITAT/Mum) and Business India (ITA/160/Mum/2005) and held that the assessee had advanced the money in the course of business, that the amount paid by the assessee to WOS had to be allowed as business loss u/s. 37 of the Act, that the assessee was required to make advances in normal course of business as per Clause-10 Part- B of MOA. He firther held that facts of the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in some advances had to be made. In its return, the assessee declared a net loss of ₹ 1,72, 669/-which included ₹ 40,977/- in respect of bad debts. The AO disallowed bad debts amounting to ₹ 27,959/-and the disallowance was confirmed by both the appellate authorites. The Tribunal held that the deductions claimed on account of bad debts were not permissible u/s.36(2)(i)(a)of the Act,that the claim could not be allowed u/s.37 also for the reason that the claim was covered by the special section 36 and the principle generalia specialibus non derogant applied. On a reference, the Hon ble J K High Court held as under: .. if section 28 is read along with section 29, the computation of income as contemplated by section 28 has to be in accordance with the provisions contained in sections 30 to 43, which means that it should also be in accordance with section 37 if the case falls under section 37. In the present case, out of sections 30 to 43, the only section which could be made applicable was either section 36 or section 37. Sections 28 and 29 read together do not show that if a case comes under section 36; the applicability of section 37 will be taken out, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was given up represented a loss of capital, or must be treated as a revenue expenditure. XXXXX To find out whether an expenditure is on the capital account or on revenue, one must consider the expenditure in relation to the business. Since all payments reduce capital in the ultimate analysis, one is apt to consider a loss as amounting to a loss of capital. But this is not true of all losses, because loosed in the running of the business cannot be said to be of capital. The questions to consider in this connection are: for what was the money laid out? Was it to acquire an asset of an enduring nature for the benefit of the business, or was it an outgoing in the doing of the business? If money be lost in the first circumstance, it is a loss of capital, but if lost in the second circumstance, it is a revenue loss. In the first, it bears the character of an investment, but in the second, to use a commonly understood phrase, it bears the character of current expenses. The amount was an advance against price of one crop. The Oppigedars were to get the assistance not as an investment by the assessee company in its agriculture, but only as an advance payment of price. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Investa Industrial Corporation Ltd. [1979] 119 ITR 380 (Bom). The alternative argument and which was canvassed without prejudice need not detain us. 7. The Commissioner and the Tribunal concurrently found that the Camelot was fully owned subsidiary of the assessee and engaged in the manufacturing of tooth brushes exclusively for the sole client, namely, the assessee. Shares purchased of Camelot were also sold by the assessee to one Ramesh Sukharam Vaidya for a consideration of ₹ 45,00,000. The Assessing Officer held that the sum of ₹ 5,50,00,000 which was invested by the assessee in the equity of Camelot on March 17, 2003, and which have been used to repay the loan to the assesseecompany, amounting to ₹ 5.50 crores, before March 1, 2003, would demonstrate that the purpose of investment was to give a long-term enduring benefit to the assessee. Merely because it was made in the normal course of business, it cannot be termed as anything but long-term investment. This conclusion of the Assessing Officer was challenged in the appeal before the first appellate authority and the Commissioner concluded that the main reason for setting up Camelot was to manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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