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TMI Blog2020 (9) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... profit or non trading profit are questions do involve a question of law to be drawn from the facts. In the instant case, the assessee made investment in the shares of WOS for the business purpose i.e., for the enhancement of business activity of the assessee in global market which primarily related to business operation of the assessee. WOS suffered losses and therefore the assessee wrote off the assessment as business loss. The investment was made for the purpose of extension of business activity and not with a view to creating capital asset in the form of holding shares. It is also pertinent to note that the assessee never acquired any capital asset or expenditure of enduring benefits to WOS and there is no relinquishment or transfer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 28 of the Act under the facts and circumstances of the case? (iii) Without prejudice whether the Tribunal was justified in law and in facts in not holding that the amount of 8,37,500 $ paid as additional amount which is other than as common stock in the subsidiary company ought to have been allowed as revenue expenses under the facts and circumstances of the case? (iv) Whether the Tribunal was justified in law in not appreciating that the appellant in compliance of the Accounting standard 13 i.e., Accounting for Investments has written off the permanent fall in the value of investment made in M/s. Ace International Inc., by debiting the profit and loss account for the financial year 2003-04 under the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee submitted that the loss arising from investment made in Wholly Owned Subsidiary (hereinafter referred to as WOS for short) set up for the business purposes is a business loss. It is further submitted that the assessee has incurred expenditure wholly and exclusively for the purpose of business and the loss arising from WOS outside India being an expenditure made by the assessee for the purpose of business is entitled for write off under Section 37(1) of the Act. It is further submitted that the authorities failed to appreciate that expenditure incurred was in the nature of business activity and the actual business carried on by the assessee and the assessee had set up its WOS in USA only for the purposes of marketing, bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COMMERCE ENTERPRISES (P) LTD , 118 ITR 606 (ORISSA), RAJASHTHAN FINANCIAL CORPORATION VS. CIT , 65 ITR 112 (RAJ), BRIGHT ENTERPRISES PVT. LTD. VS. CIT IN ITA NO.224/2013 DATED 24.07.2015 (PUNJAB AND HARYANA), SAHARA GLOBAL VISIION PVT LTD VS. ACIT IN ITA NO.2514/DEL/2014 DATED 30.08.2018 (DELHI-TRIB) and COSMOS INDUSTRIES LTD VS. DCIT IN ITA NO.3730/DEL/2015 DATED 31.12.2018 (DELHI-TRIB). 4. On the other hand, learned counsel for the revenue submitted that assessee had made a capital investment i.e. purchase of shares and therefore, the same could not be treated as incidental to the business of the assessee. It is submitted that any expenditure incurred for acquisition of a capital asset is a capital expenditure and cannot be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts. [See: COMMISSIONER OF INCOMETAX vs. RAI BAHADUR JAIRAM VALJI , (1955) 35 ITR 148 (SC), P.H.DIVECHA VS. COMMISSIONER OF INCOME-TAX (1963) 48 ITR 222 (SC), KETTLEWELL BULLEN CO. LTD. VS. COMMISSIONER OF INCOME-TAX (1964) 53 ITR 261 (SC), GILLANDERS ARBUTHNOT AND CO. LTD. VS. COMMISSIONER OF INCOME TAX , (1964) 53 ITR 283 (SC) and COMMISSIONER OF INCOMETAX VS. BEST CO. (P,) LTD. , (1966) 60 ITR 11 (SC)]. The aforesaid tests laid down by the Supreme Court in the aforesaid decisions were referred to with approval in KARAMCHAND THAPPER AND Bros. (P.) LTD. AND OBEROI HOTEL (P) LTD. supra. 6. The Bombay High Court dealt with the issue viz., where an assessee made an investment in its 100% subsidiary for business purpose, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of marketing assessee s products and for promoting its business in US and Latin America. It has further been stated in the note that looking to the stringent norms of product liability in US market, the assessee decided to have a separate Wholly Owned Entity in the US having limited liability. The approval for aforesaid purpose was obtained from the Reserve Bank of India. The assessee therefore, invested funds in equity for meeting the revenue expenses of Wholly Owned Subsidiary Company s balance sheet. However, WOS could not perform upto company s expectations and therefore, it was decided to wind up WOS operations in USA. While granting approval for closure of WOS, RBI permitted the company to write off the whole of investment made in W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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