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TMI Blog2013 (2) TMI 818X X X X Extracts X X X X X X X X Extracts X X X X ..... f appeal, the assessee has raised the following grievance:- "For that in the facts and circumstances of the case, the ld. A.O. erred in treating compensation loss on non lifting of materials of Rs. 51,00,000/- as speculative loss. The action of the A.O. was wholly unreasonable, uncalled for and bad in law. The ld. CIT(A) was unjustified in confirming the action of A.O." 3. The relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed loss of Rs. 51,00,000/- which was paid to Global Alloys Pvt. Ltd. as compensation for not lifting the ordered materials. The Assessing Officer noted that neither the assessee was into any trading business nor was it related ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate being difference between the market rates of the materials and the rates agreed herein. 8. That, in case the Purchaser fails to lift the materials as agreed herein and also the rates of the materials decrease during the subsistence of this indenture, then the purchaser shall be liable to bear and pay the compensation to the seller which shall be equivalent to the amount calculated at the rate being difference between the rates agreed herein and the market rates of the materials. 9. That, in the event of breach of any of the terms' of this indenture, the I, suffering party shall serve a written notice to the defaulting party by notifying to remedy the breach within 15(fifteen) days time and the suffering party shall be with an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delivery of material under present agreement is never a breach of contract but is a part of contract under clause 7 and 8 of this contract and either appellant or the seller could loose or gain depending upon whether the price of the material decreases or increases in future. Therefore, the loss or gain to either parties of this highly speculative contract on account of non delivery of material is a speculative business loss or gain arising directly from the terms and conditions of the business contract rather than any compensation received or paid for breach of this contract. The purchase contract of 200MT of 'Silicon Magnum' and 50MT of 'Ferro Silicon' did not result into a delivery but was settled by appellant by paying Rs. 51 lakh with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rival contentions and having perused the material on record, we are inclined to confirm and approve very well reasoned and erudite order of the CIT(Appeals) on this aspect of the matter. It is a situation in which there could not have been any possibility of actual delivery of the goods because even at the point of time when delivery was to take place, the factory was not even likely to come back to the possession of the assessee. The factory was given on lease and as such the purchases cannot be said to have been made for bonafide actual user purposes. As learned CIT(Appeals) has painstakingly analyzed the various contract provision - namely clause 7 to 9, these clauses have inbuilt speculation element embedded in the agreement. The f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PD Klin (proposed expansion of steel unit). An advance of Rs. 1,10,00,000/- was given to Tata Steel Ltd. in FY 2004-05 and 2005-06 and after cancellation of booking, a sum of Rs. 50,00,000/- was received in FY 2005-06 and Rs. 34,00,000/- in current financial year, i.e. FY 2008-09 in full and final settlement. The said loss which arises on the event of capital expenditure for expansion of Steel Unit, cannot be allowed as revenue expenditure, since the same has been incurred in respect of proposed acquisition of capital asset and cannot be treated as expenditure incurred wholly and exclusively for the purpose of business". 9. Aggrieved, assessee carried the matter in appeal before the CIT(Appeals) but without any success. Learning CIT(Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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