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TMI Blog2018 (1) TMI 928X X X X Extracts X X X X X X X X Extracts X X X X ..... owable to be as business expenditure if it was incurred on ground of commercial expediency.” So, in this case, investment in the OFCD by the assessee company in its subsidiary to utilize the license of ADIL for telecom is certainly a commercial expediency and is allowable u/s 37 of the Act as contended in the alternative. So, ground no.2 is determined in favour of the assessee company. Addition of guarantee payment - Held that:- Assessee company gave corporate guarantee facilities availed by the ADIL, its subsidiary, in favour of the DoT, and it is also not in dispute that ADIL suffered heavy losses exceeding share capital and consequently, the DoT terminated the licence of ADIL for Rajasthan and Haryana for 11 months and invoked the guarantee following which the bank has made a payment of 28,36,26,000/- and consequently, the assessee company has provided said amount to the bank which the bank provided to the DoT. The ratio of the judgment of Hon’ble Supreme Court in the case of CIT vs. Amalgamation (P.) Ltd. (1976 (3) TMI 31 - MADRAS High Court) is that, “loss incurred by the assessee on account of furnishing of guarantees to its subsidiary company is a business loss and as allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incurred on diminution in value of investments 2. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the order of the learned AO in disallowing the claim for loss on account of diminution in value of investment in Optionally Fully Convertible Debenture ('OFCD') in Aircel Digilink Limited ('ADIL') amounting to INR 2,475,556,000. Ground No. 3- Disallowance of payment made as guarantors 3. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the order of the learned AO in disallowing the guarantee payment of INR 283,626,000 by the Appellant to Department of Telecommunications ('DoT') under a guarantee given by the Appellant in the ordinary course of the Appellant's business. Ground No. 4- Treating certain receipts/ waivers as income instead of capital receipts 4. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the order of the learned AO in treating the amount of INR 52,934,650, being waiver of the amounts received on capital account, as income chargeable to tax in the year of waiver. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not a sum actually paid or incurred. Assessee company has claimed deduction of ₹ 5,29,34,650/- as capital receipt in computation of income. AO disallowed the same on the ground that the assessee company has failed to submit the agreement, copy of agreement or the receipt of this sum or the waiver of liability by the Swisscom and as such, the exact amount of the said receipt is not clear. 3. Assessee carried the matter by way of filing appeal before the ld. CIT (A) who has partly upheld the assessment order by partly allowing the appeal. Feeling aggrieved, the assessee company has come up before the Tribunal by challenging the impugned order passed by ld. CIT (A). 4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. GROUND NO.1 5. Ld. AR for the assessee company contended that this issue is covered in favour of the assessee company in case cited as CIT vs. Bharti Hexacom Ltd. - (2013) 221 taxman 323 wherein the assessee company was one of the party. 6. Undisputedly, the assessee company is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee against guarantee facilities. 11. Ld. AR further contended that the assessee company's intention for investing in OFCD in ADIL for furtherance of its business since ADIL is also engaged in same business i.e. telecom business and utilized telecom licence in the area for which the assessee company did not have any licence. When the assessee company as well as ADIL was having the same licence to run telecom business then certainly revenue expenditure has been incurred wholly and exclusively for the purpose of business. So, when the ADIL has suffered persistent losses and value of the investment comes down to zero, the assessee company had no alternative except to write off the loss incurred on account of nonrecoverability of any benefit qua funds placed at the disposal of ADIL. So, we are of the considered view that the funds invested was for commercial business expediency and are allowable u/s 37 of the Act being investment in the subsidiary company. 12. Hon'ble Supreme Court in S.A. Builders Ltd. vs. CIT, Chandigarh - (2007) 288 IT4 1 (SC) held that, "even when the expenditure has not been incurred under any legal obligation yet is allowable to be as business expenditure if it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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