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TMI Blog2020 (7) TMI 398X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee to the tune of Rs. 32,25,000/-, for diminution in the value of investment in Gujarat Instruments Ltd., is permissible under Section 46(2) of the Act as capital loss in view of decision in CIT VS. JAI KRISHNA, 231 ITR 108 is perverse? 2. Facts leading to filing of this appeal briefly stated are that assessee is engaged in the business of manufacture of field instrumentation. The assessee filed the return declaring loss of Rs. 7,40,96,877/- on 29.10.2001, which was processed under Section 143(1) of the Act on 22.03.2002. Thereafter, a notice under Section 143(2) of the Act as well as a questionnaire dated 26.12.2003 along with notices under Section 143(2) and 142(1) were issued. The assessing officer by an order dated 18.03.2004 inter alia held that the assessee is a promoter of M/s Gujarat Instruments Ltd., and is an associate Company. It was further held that the assessee had not furnished any details of investment / finance provided to M/s Gujarat Instruments Ltd., from time to time and has also not explained the circumstances, which led to liquidation of the said company and how the funds provided by the assessee were utilized. It was also held that no details have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also pointed out that the assessee had failed to explain the commercial expediency. It is also urged that bad debt should occur during the course of business to claim benefit under Section 36 of the Act. It is also submitted that even though tribunal remanded the matter to the assessing officer, yet it erred in recording a finding that assessee is entitled to capital loss on the ground that the assessee had invested in equity shares, even though, neither nature of investment was disclosed nor any particulars were furnished. It is further submitted that the tribunal should not have remitted the matter to the assessing officer by holding that assessee is entitled to avail of the benefit of capital loss. 5. Learned counsel for the assessee submitted that the burden to prove that the debt is a bad debt has been removed with effect from 01.04.1989. It is further submitted it is sufficient if the debt is be written off as bad debt in the accounts of the assessee. It is further submitted that the assessing officer's remand report was called for and after 01.04.1989, there was no need to establish the aspect of irrecoverability of debt after 01.04.1989. It is also pointed out that d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness relations are not established and the fact that loss incurred by the assessee has been incurred during the course of business has also not been proved. 7. We have considered the submissions made on both the sides and have perused the record. Section 36(1) (vii) of the Act post 01.04.1999 is reproduced below for the facility of reference: 36. Other deductions : (1) the deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in S.28- (i) to (vi)..................... (vii) subject to the provisions of sub-s,(2), the amount of any bad debt or part thereof which is written off as irrecoverable in the accounts of the assessee for the previous year. 8. The Supreme Court taking note of the aforesaid provision held that after 01.04.1989 it is not necessary for the assessee to establish that the debt in fact had become irrecoverable and it is enough if the bad debt is written off as irrecoverable in the accounts of assessee. On the basis of the aforesaid decision, the Central Board of Direct Taxes has issued Circular No.12/2016 dated 30.05.2016, by which it has been clarified that cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarded as on capital account." Perusal of the above submission reveals that the assessee had given advances to M/s Gujarat Instruments Ltd. To meet certain expenditure incurred by it on its day to day business activities, which have certainty a capital nature. With regard to claim of bad debts of Rs. 1,29,51,620/-, it is seen that the assessee has failed to substantiate its claim that is on account of supply made and fulfilled the conditions laid down in Section 36(1)(vii) for allowing as bad debts. Assessee has not made any fresh submission on addition of Rs. 32,25,000/-, In view of the above facts and circumstances, I am of the opinion that the assessing officer has rightly disallowed Rs. 3,50,81,381/- on account of written off due from M/s Gujarat Instruments Ltd. And Rs. 32,25,000/- on account of diminution in value of investment in M/s Gujarat Instruments Ltd . 11. Thus, from the order passed by the Commissioner of Income Tax (Appeals) also it is evident that he has not recorded a specific finding that the assessee had written off the debt in the books of account. However, the tribunal in para 15 (vii) has held as under: (vii) The assessee had taken a view that the loans, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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