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TMI Blog2018 (12) TMI 1811X X X X Extracts X X X X X X X X Extracts X X X X ..... 008-09 the assessee is entitled to claim the bad debts written off .Therefore, we direct the Assessing Officer to allow the claim of the assessee in normal computation as well as computation u/s 115JB of the Act. Disallowance of proportionate interest on borrowed loans, given as interest free loans to other parties - A.O noted that the assessee company borrowed funds by way of unsecured loan on which interest was claimed - HELD THAT:- As held in the case of CIT v. Hotel Savera [ 1997 (11) TMI 37 - MADRAS HIGH COURT] that for making the disallowance of interest or part of it, a finding that the borrowed fund was used for non-business purpose is essential. Since in the case of the assessee, the Assessing Officer has not given such finding and it is also not his case that the borrowed fund has been given to the parties named in the assessment order. AO was not justified in disputing the business necessity of the loan without bringing on record any material to support his bald statement. It is not the case of the Assessing Officer that the funds borrowed on which interest was paid was utilized for non business purpose or for giving the loan to the parties mentioned in the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owable deduction. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue is hereby upheld and grounds of appeal raised by the Revenue is dismissed. Long term capital loss and short term capital computation - admission of additional evidence - HELD THAT:- We note that before the ld CIT(A), the assessee had filed copy of purchase note and sale bill etc. of shares of M/s Galaxy Entertainment Corp. Ltd. These documents were sent by the ld CIT(A), to the AO, during the appellate proceedings. The AO in his remand report had objected to the admission of these documents. The ld CIT(A) admitted these documents stating that purpose of assessment proceedings is to assess the correct tax liability of the assessee in accordance with law.[ National Thermal Power Corporation Vs.CIT [ 1996 (12) TMI 7 - SUPREME COURT] . The ld CIT(A), considering the facts of the assessee`s case, directed the assessing officer to work out the long term capital loss and short term capital loss. We are of the view that there is no infirmity in the order of ld CIT(A) in directing the AO to compute the long term/short term capital loss. That being so, we decline to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) Ground No.2:That, on the facts and in circumstances of the case and in law, the ld. CIT(A) erred in deleting disallowance of claim of bad debt of ₹ 3,80,00,000/- without appreciating the fact that the assessee company could not establish that such loan was advanced in course of its money lending business activities and that is was engaged in money lending business activities. 3) Ground No.3:That, on the facts and in circumstances of the case and in law, the ld. CIT(A) erred in giving relief to the assessee company holding that its claim of long term capital loss of ₹ 5,92,14,631/- and short term capital loss of ₹ 46,56,642/- was correct, whereas the assessee company failed to establish genuineness of transactions of purchase and sale of shares and loss incurred in course of assessment proceedings and the relief given by the ld. CIT(A) was not on proper appreciation of facts and supporting documents of the assessee company. 4) Ground No.4: That, on the facts and in circumstances of the case and in law, the ld. CIT(A) erred in holding that the profit from sale of shares of TCG Urban Infra Holding Limited (TUIHL) was capital gain and indexation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A/Doubtful debts and their write back and closing balance of earlier years and their treatment in income tax computation F.Y A.Y Provision made in P/L A/c Provision written back in P/L A/c Closing balance as per balance sheet Treatment in the computation of income of relevant Assessment Year 02-03 03-04 129,303,414 - 129,303,414 Disallowed in the computation of income 03-04 04-05 96,848,997 - 226,152,411 04-05 05-06 - 25,194,727 200,957,684 Excluding from the computation of income 05-06 06-07 - 19,794,583 181,163,101 06-07 07-08 - 86,571,163 94,491,938 07-08 08- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) Swapan Bhattacharya ₹ 5,00,000 Total: ₹ 11,65,34,248 The assessing officer therefore, worked out the proportionate interest payment on aforesaid interest free advances to the tune of ₹ 1,47,55,057/- and disallowed the same. 11. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition. Aggrieved, the Revenue is in appeal before us. 12. The ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and is not being repeated for the sake of brevity. Whereas, ld Counsel relied on the submissions made before the authorities below: 13. We have given a careful consideration to the rival submissions and perused the material available on record, we note that ld CIT(A) called a proper remand report and counter submissions were made by the assessee, in response to the remand report which is given below for ready reference: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company in the F.Y 2000-01 and 2001-02 and has received back the principal amount and the balance of ₹ 54,91,696/- is on account of interest which has become irrecoverable and is provided as bad and doubtful debt in earlier year. As regard, the amount of ₹ 7,88,49,484/- of Elbee Securities Limited, as per assessee, this loan was good up to 31.03.2003 and interest was charged up to that period. However, this loan has been treated as bad and doubtful in earlier years hence no interest has been charged thereafter. As regard the loan of ₹ 10,00,000/- to Amalendu Chatterjee and loan of ₹ 5,00,000/- to Swapan Bhattacharya and the ld. Counsel has submitted that these are the advance given for business purpose. We note that in the remand report the A.O has submitted that there was no necessity of giving friendly loan of ₹ 11,65,34,249/- but has not disputed the correctness of the submission of ld. AR in respect of loan to TCG Urban Infrastructure Holding Pvt. Ltd., Smifs Securities Limited Elbee Securities Limited. Hence it is evident that the loan given to these parties was not interest free loan but due to change in circumstances the assessee has not char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t brought any evidence on record to prove that the said funds advanced became irrecoverable or details of legal suit/proceedings initiated for realisation of such debt. Mere non-payment of interest by loan debtor does not signify that debt became irrecoverable and should not be simply written off in Profit and Loss account. The primary onus lies on assessee to prove that the debt became irrecoverable and the debt liability and interest accrued liability was previously accepted by Debtor. The ld AO further noted that the assessee has not even brought on record that at the time of advancing of debt, it was carrying out money lending business activity. The sum not advanced in course of business is a capital loss. In absence of any evidence the claim of bad debts amounting to ₹ 3,80,00,000/- was disallowed and added back to the total income of the assessee. 18. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition. Aggrieved, the Revenue is in appeal before us.The ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer which we have already noted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 21. Ground Nos.3 4 relates to relief given to the assessee company for long term capital loss of ₹ 5,92,14,631/- and short term capital loss to the tune of ₹ 46,56,642/-. 22. The brief facts qua the issue are that during the assessment proceedings, the AO noted that the assessee computed loss on sale of unquoted shares. The AO observed that assessee has not submitted the required documents and information such as quotation, book value/breakup value of shares, valuation report of valuation of unquoted shares, and the reason/explanation on how the value of unquoted shares drastically fell, copy of bills to whom the same were sold, purpose of sale of unquoted shares on which no dividend was received etc. The AO was of the view that the shares were sold and the money was given to parties for mere accommodation purposes and to book artificial loss in order to set-off other income. As per AO, the assessee made the following share transactions: 1. Galaxy Entertainment Corp Ltd:In the month of March 2006, the assessee did transactions in huge quantity viz: 239626 shares at cost of ₹ 7,52,88,729/-. The aforesaid shares were sold after expiry of on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. The shares were purchased by the assessee on the stock exchange. The assessee company incurred long term capital loss of ₹ 5,92,14,631/- and the assessee company also incurred short term capital loss of ₹ 46,56,642/-. We note that before the ld CIT(A), the assessee had filed copy of purchase note and sale bill etc. of shares of M/s Galaxy Entertainment Corp. Ltd. These documents were sent by the ld CIT(A), to the AO, during the appellate proceedings. The AO in his remand report had objected to the admission of these documents. The ld CIT(A) admitted these documents stating that purpose of assessment proceedings is to assess the correct tax liability of the assessee in accordance with law.[ National Thermal Power Corporation Vs.CIT 229 ITR 383 ]. The ld CIT(A), considering the facts of the assessee`s case, directed the assessing officer to work out the long term capital loss and short term capital loss. We are of the view that there is no infirmity in the order of ld CIT(A) in directing the AO to compute the long term/short term capital loss. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue is hereby upheld and gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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