THE ITO, WARD - 2(1), Vijayawada V. Sri S.Kanhyalal Ghanshyam Das, Vijayawada

ITA 215/VIZ/2013

• Counselvise Citation: 21525314 RSA 2013
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 03-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D MANOJ KUMAR
• Keywords: Capital asset; Capital receipt; Revenue expenditure; Capital expenditure

Judgement Text

ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 215 /VIZAG/ 20 13 ASSESSMENT YEAR : 2006 - 07 M/S. BALAJI EQUITIE S LTD. VIJAYAWADA VS. ADDL. CIT RANGE - 1 VIJAYAWADA (APPELLANT) (RESPONDENT) PAN NO.AABCB 5444R APPELLANT BY: SRI C. SUBRAHMANYAM, CA RESPONDENT BY: SRI D. MANOJ KUMAR, ADDL. CIT DATE OF HEARING : 05.12.2013 DATE OF PRONOUNCEMENT : 11.12.2013 ORDER PER SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER:- THIS IS AN ASSESSEES APPEAL AGAINST THE ORDER OF THE CIT(A), VIJAYAWADA DATED 31.3.2011. THE ISSUE INVOLVED IN THIS APPEAL IS WITH REFERENCE TO THE CLAIM OF UNRECOVERED RENTAL DEPOSI T OF ` .5,14,300/- AND ADVANCE PAID FOR OBTAINING NSE MEMBERSHIP OF ` .5,50,000/- AS BAD DEBT/BUSINESS LOSS. 2. BRIEFLY STATED, THE ASSESSEE IS A SHARE BROKERAG E COMPANY AND IN THE P&L ACCOUNT DEBITED AN AMOUNT OF ` .10,64,300/- UNDER THE HEAD UNRECOVERABLE DEPOSITS WRITTEN OFF. IT WAS SUBMITT ED TO THE ASSESSING OFFICER THAT THE EXPENDITURE REPRESENTS NON-RECOVERY OF REN T DEPOSIT PAID TO BUILDING OWNER WHICH WAS OCCUPIED BY THE ASSESSEE AT BOMBAY AND NON-RECOVERY OF ADVANCE MADE FOR PURCHASE OF NSE MEMBERSHIP. IT WA S FURTHER SUBMITTED THAT AS ASSESSEE COMPANY WAS UNABLE TO RECOVER THE SAID ADVANCES/DEPOSITS THESE WERE WRITTEN OFF IN THE BOOKS OF ACCOUNTS AS UNRECOVERABLE DEPOSITS. IT WAS FURTHER INFORMED THAT ASSESSEES HAVING AN OFFIC E AT NARIMAN POINT, MUMBAI AS PER THE STOCK EXCHANGE STIPULATION AND PA ID RENT DEPOSIT TO MR. ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 2 SYD RAHIM AT BOMBAY WHILE LEASING THE OFFICE FOR A PERIOD OF 3 YEARS. IN THE YEAR 2003, THE STOCK EXCHANGE RELAXED THE STIPULATI ON OF STAYING WITHIN THE RADIUS OF THE EXCHANGE AND ACCORDINGLY THE ASSESSEE SHIFTED THE ADMINISTRATIVE OFFICE TO HYDERABAD BY VACATING THE OFFICE AT MUMBAI. FURTHER, THE ASSESSEE MADE A CASE AGAINST THE HOUSE OWNER FOR RECOVERY OF THE RENTAL DEPOSIT AT VIJAYAWADA WHERE THE LEASE AG REEMENT WAS ORIGINALLY ENTERED AND INSPITE OF DECREE IN FAVOUR OF THE ASSE SSEE BY THE COURT, ASSESSEE COULD NOT RECOVER THE AMOUNT. ACCORDINGLY, THE ABO VE AMOUNT WAS WRITTEN OFF. WITH REFERENCE TO THE SECOND AMOUNT OF ADVANC E TOWARDS NSE MEMBERSHIP CARD, IT WAS SUBMITTED THAT ASSESSEE PAI D THE ADVANCE FOR PURCHASE OF NSE MEMBERSHIP CARD AND LATER ON AS THE TRANSACTION DID NOT GO THROUGH, THE AMOUNT WAS WRITTEN OFF AS UNRECOVERABL E. 3. THE ASSESSING OFFICER RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HASIMARA INDUSTRIES LTD. VS. C IT 230 ITR 927 (SC) DID NOT ALLOW THE RENT DEPOSIT CLAIM HOLDING IT AS A CA PITAL LOSS. SIMILARLY, THE ADVANCE TOWARDS NSE MEMBERSHIP ALSO WAS NOT ALLOWED , FOLLOWING THE DECISION OF ITAT MUMBAI `J BENCH IN THE CASE OF MA NOJ M. SHAH VS. JCIT 18 SOT 143 (2007). ACCORDINGLY, BOTH THE CLAIMS ARE D ISALLOWED AS CAPITAL EXPENDITURE/CAPITAL LOSS. 4. BEFORE THE LD. CIT(A), THE ASSESSEE MADE DETAILE D SUBMISSIONS WHICH ARE EXTRACTED IN THE ORDER. WITH REFERENCE TO THE RENT DEPOSITS, IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO AN AGR EEMENT FOR A PERIOD OF 3 YEARS AND VACATED AFTER 2 YEARS 2 MONTHS AND THERE FORE AN AMOUNT OF ` .5,14,300/- COULD NOT BE RECOVERED FROM THE LAND OW NER. IT WAS FURTHER SUBMITTED THAT THE RENT DEPOSIT WAS IN THE NATURE O F ADVANCE RENT AND THEREFORE ANY FAILURE TO RECOVER THE AMOUNT WOULD C ONSTITUTE BUSINESS LOSS. THE LD. CIT(A) RELYING ON THE JUDGEMENT OF THE HON BLE A.P. HIGH COURT IN THE CASE OF RAJAH MANYAM MEENAKSHAMMA VS. CIT 30 ITR 28 6 [1956] HELD THAT THE ABOVE DECISION BROUGHT OUT THE DISTINCTION BETW EEN THE PRICE PAID FOR TRANSFER OF RIGHT TO ENJOY THE PROPERTY AND THE REN T TO BE PAID PERIODICALLY TO THE OWNER OF THE LEASING OF THE PROPERTY. THE FORM ER IS A CAPITAL RECEIPT AND ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 3 THE LATER IS A REVENUE RECEIPT. IN VIEW OF THIS, S ECURITY DEPOSIT BY THE ASSESSEE IS TO BE TREATED AS MADE ON CAPITAL ACCOUN T AND THE LOSS SUFFERED SHOULD BE TREATED AS CAPITAL LOSS ONLY. 5. WITH REFERENCE TO THE AMOUNT OF ` .5,50,000/- TOWARDS ADVANCE PAYMENT TOWARDS NSE MEMBERSHIP, IT WAS SUBMITTED TH AT THE AMOUNT WAS PAID TO SHRI VAYIRAVAN FOR ACQUISITION OF NSE MEMBE RSHIP AS AT THAT TIME IT INVOLVED PAYMENT OF ABOUT ` .1.5 CRORES FOR NEW MEMBERSHIP AND THIS MEMBERSHIP WAS TO BE ACQUIRED FROM A COMPANY IN WHI CH MR. VAYIRAVAN WAS THE DIRECTOR. HOWEVER, NSE DID NOT PERMIT ACQUISIT ION OF THE OTHER COMPANY AND THEREFORE, ASSESSEE WITHDREW FROM THE PROPOSITI ON AND APPLIED THE MEMBERSHIP DIRECTLY TO THE NATIONAL STOCK EXCHANGE. IN THIS PROCESS, THE AMOUNT PAID WAS NOT RECOVERED AND ACCORDINGLY WRITT EN OFF. 6. THE LD. CIT NOTICED THAT THE AMOUNT WAS ORIGINAL LY PAID BY THE DIRECTOR OF THE COMPANY BY A CHEQUE DATED 24.1.2002 DRAWN FROM HIS PROPRIETARY ACCOUNT TO SHRI VAYIRAVAN AND ASSESSEE HAS NOT BEEN ABLE TO DEMONSTRATE THAT AMOUNT HAD ACTUALLY BEEN TRANSFERR ED FROM THE BANK ACCOUNT AT VIJAYAWADA. IT WAS CONSIDERED THAT THE ADVANCE AMOUNT NOW CLAIMED AS AN EXPENDITURE HAS NOT BEEN ESTABLISHED ANY FIRST PLACE. FURTHER, IT WAS ALSO NOTICED THAT ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT OF THE CLAIM THAT SEVERAL STEPS HAVE BEEN TAKEN TO REC OVER THE AMOUNT OF ADVANCE. FURTHER, HE ALSO SUPPORTED THE CASE OF TH E MANOJ M. SHAH VS. JCIT (SUPRA) RELIED ON BY THE A.O. TO DISMISS THE ASSESS EES GROUND BOTH ON FACTUAL POSITION AND ALSO CONSIDERING JUDICIAL DECISIONS. THE ASSESSEE IS AGGRIEVED ON THE ABOVE ORDER ON THE TWO ISSUES AND RAISED TWO GR OUNDS ACCORDINGLY. 7. THE LD. COUNSEL AFTER REFERRING TO THE FACTS AS STATED IN THE ORDERS AND THE PAPER BOOK SUBMITTED THAT THE EXPENDITURE IS AL LOWABLE AS BUSINESS LOSS. THE LD. COUNSEL IN THE COURSE OF ARGUMENTS RELIED O N THE DECISION OF THE ITAT IN THE CASE OF M/S. P.C. SYSTEMS PVT. LTD. VS. DCIT , VISAKHAPATNAM IN ITA NO.103/VIZAG/2002 DATED 14.3.2008 WHICH ITSELF RELI ED ON THE HONBLE RAJASTHAN HIGH COURT JUDGEMENT IN THE CASE OF CIT V S. ANJANI KUMAR CO. LTD. ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 4 259 ITR 114 (RAJ). THE LD. COUNSEL ALSO RELIED ON THE ORDER OF THE ITAT IN THE CASE OF DCIT VS. M/S. EDELWEISS CAPITAL LTD., M UMBAI ITA NO.3971/MUM/2009 DATED 15.2.2011 AND ALSO THE DECIS ION OF THE HONBLE HIGH COURT IN THE CASE OF MOHAN MEAKIN LTD. VS. CIT IN ITA NO.405/2007 DATED 11.5.2011. IT WAS THE CONTENTION THAT THESE AMOUNTS ARE ALLOWABLE AS BUSINESS LOSS. 8. THE LD. D.R. HOWEVER RELIED ON THE FACTS OF THE CASE AND THE DECISION OF THE HONBLE SUPREME COURT RELIED ON BY THE ASSES SING OFFICER IN THE CASE OF HASIMARA INDUSTRIES LTD. VS. CIT (SUPRA). 9. WE HAVE CONSIDERED THE ISSUE AND EXAMINED THE FA CTS AS PLACED ON RECORD AND LEGAL PROPOSITIONS. COMING TO THE CASE LAW RELIED UPON BY THE LD. COUNSEL IN THE CASE OF M/S. P.C. SYSTEMS PVT. LTD. VS. DCIT CIRCLE-1 BY THE COORDINATE BENCH AT VIZAG THE FACTS OF THE CASE ARE THAT ASSESSEE HAS CLAIMED THAT AN AMOUNT OF ` .2,88,070/- GIVEN TO M/S. PCL, NEW DELHI THROUGH M/ S. ROBOTICS SYSTEMS FOR THE PURPOSE OF PURCHASING COMP UTERS TO THE SAID ASSESSEE ORGANIZATION BUT ON ACCOUNT OF NON-SUPPLY OF SYSTEMS BY M/S. ROBOTICS SYSTEMS, THE AMOUNT COULD NOT BE REALIZED AND THEREFORE TREATED AS RECOVERABLE. IN ARRIVING AT THE DECISION, THE COOR DINATE BENCH RELIED ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CAS E OF CIT VS. ANJANI KUMAR CO. LTD. (SUPRA) WHEREIN AFTER DISCUSSING THE ISSUE WITH REFERENCE TO CAPITAL REVENUE EXPENDITURE, ULTIMATELY NOTICED IF ANY ASS ET IS REQUIRED AND IF IT IS A BENEFIT OF ENDURING NATURE CAN OF COURSE ASSESSEE C ANNOT GET THE DEDUCTION OF AMOUNT FOR ACQUISITION OF LAND AS REVENUE EXPEND ITURE. WHEN LOAN WAS NOT ACQUIRED, NO CAPITAL ASSET HAS BEEN ACQUIRED, THERE FORE, THE PAYMENT OF ` .50,489/- IS TO BE ALLOWED AS BUSINESS LOSS. IN T HE CASE OF DCIT VS. EDELWEISS CAPITAL LTD., MUMBAI (SUPRA) THE FACTS WE RE ABOUT THE CLAIM OF ` .27,97,170/- PAID AS AN ADVANCE TO TWO COMPANIES FO R DEVELOPMENT OF WEBSITE WHICH DID NOT MATERIALIZE. IN THAT CASE FO LLOWING THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ANJANI KUMAR CO. LTD. (SUPRA), THE EXPENDITURE HAS BEEN ALLOWED AS BUSINE SS LOSS. IT WAS HELD THAT THE EXPENDITURE WOULD HAVE BEEN ALLOWABLE AS REVENU E EXPENDITURE AS A ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 5 COROLLARY WHEN THE WEBSITE DID NOT MATERIALIZE THE AMOUNT ADVANCED TO THE COMPANIES WHO ARE ENGAGED TO DEVELOP THE WEBSITE WH EN THEN BECAME RECOVERABLE, CAN BE WRITTEN OFF AND CLAIMED AS LOSS INCIDENTAL TO THE BUSINESS. THE LOSS IS THUS ALLOWABLE AS BUSINESS LOSS IN TERM S OF SECTION 28 OF THE ACT. THE THIRD CASE RELIED UPON BY THE LD. COUNSEL IS TH E DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF MOHAN MEAKIN LTD . VS. CIT, DELHI (SUPRA). IN THAT CASE, THE ASSESSEE ADVANCED FUNDS TO M/S. K ANPUR BOOT HOUSE FOR CARRYING OUT NECESSARY MANUFACTURING OF HANDMADE LE ATHER SHOES AS IT HAD OBTAINED HUGE ORDERS FOR EXPORT OF GOODS AGGREGATE VALUE OF ` .63.15 LAKHS. SINCE THE ADVANCES MADE TO THE SAID COMPANY WERE NO T REALIZED AND SUPPLIES WERE SUSPENDED, THE LOSSES WERE WRITTEN OFF AS BAD DEBT. ON THESE FACTS, THE HONBLE HIGH COURT HAS ALLOWED THE AMOUNT AS BUSINE SS LOSS. 10. THE REVENUE HAS RELIED ON THE CASE OF HONBLE S UPREME COURT IN THE CASE OF HASIMARA INDUSTRIES LTD. VS. CIT (SUPRA) WH EREIN IT WAS HELD AS UNDER: HELD THE HIGH COURT WAS RIGHT IN CONCLUDING THAT THE AMO UNT OF ` .20 LAKHS HAD BEEN DEPOSITED BY THE ASSESSEE WITH THE L ICENSOR- COMPANY FOR THE PURPOSE OF SECURING THE LICENSE UND ER WHICH THE ASSESSEE HAD ACQUIRED THE RIGHT TO WORK THE LICENSO RS COTTON MILLS. THIS IS CLEAR FROM THE FACT THAT THE DEPOSIT WAS MA DE PURSUANT TO A CLAUSE IN THE LEAVE AND LICENSE AGREEMENT. HAD A D EPOSIT AS REQUIRED BY THAT CLAUSE NOT BEEN MADE, THE ASSESSEE WOULD NOT HAVE SECURED THE LICENSE OF THE COTTON MILL. AT TH AT TIME THE ASSESSEE WAS DOING NO BUSINESS IN COTTON. THE DEPO SIT WAS, CLEARLY, MADE FOR THE PURPOSE OF ACQUIRING A PROFIT -MAKING ASSET TO CARRY ON BUSINESS IN COTTON. IT CANNOT, THEREFORE, BE HELD THAT THE DEPOSIT WAS MADE ON THE REVENUE ACCOUNT OR THAT THE LOSS THEREOF MUST BE TREATED AS A BUSINESS LOSS. THE LOSS THERE OF WAS A LOSS SUFFERED ON THE CAPITAL ACCOUNT AND COULD NOT BE DE DUCTED ON THE BASIS THAT IT WAS A BUSINESS LOSS. CT VS. HASHIMA RA INDUSTRIES LTD. (1989) 175 ITR 477 (CAL) : TC 14R 585 AFFIRMED; CIT VS. MOTIRAM NAND RAM (1940) 8 ITR 132 (PC) : TC 14R 814 APPLIED. CONCLUSION : ASSESSEE BEING ENGAGED IN TEA BUSINESS, AMOUNT DEPO SITED BY ASSESSEE WITH THE LICENSOR-COMPANY FOR THE PURPOSE OF SECURING LICENSE UNDER WHICH ASSESSEE COULD WORK LICENSORS COTTON MILLS WAS ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 6 FOR THE PURPOSE OF ACQUIRING A PROFIT MAKING ASSET AND LOSS OF SUCH DEPOSIT FOLLOWING LIQUIDATION OF LICENSOR-COMPANY C OULD NOT BE DEDUCTED AS BUSINESS LOSS. 11. FURTHER, THE A.O. ALSO RELIED ON THE DECISION O F COORDINATE BENCH IN THE CASE OF MANOJ M. SHAH VS. JCIT (SUPRA) WITH REFEREN CE TO ACQUISITION OF NSE MEMBERSHIP WHICH IS CONSIDERED AS CAPITAL EXPENDITU RE. 12. THUS, THE ABOVE CASE LAW INDICATE THAT IF THE A SSESSEE ADVANCES FUNDS IN THE COURSE OF BUSINESS AND THE DEPOSITS OR ADVAN CES NOT RECOVERED THEN THE AMOUNT IS ALLOWABLE AS CAPITAL LOSS WHEREAS IF THE AMOUNT WAS DEPOSITED FOR THE PURPOSE OF SECURING LICENSE IN NEW BUSINESS THE SAME IS NOT ALLOWABLE AS BUSINESS LOSS AS IT SUFFERED THE LOSS ON CAPITAL ACCOUNT. IN THE LIGHT OF THE ABOVE PRINCIPLE, THE TWO CLAIMS MADE BY THE ASSESSE E ARE EXAMINED. 13. WITH REFERENCE TO THE NON-RECOVERY OF THE DEPOS IT OF RENT, IT IS ADMITTED FACT THAT THIS AMOUNT WAS ADVANCED IN THE COURSE OF ASSESSEES BUSINESS FOR ACQUIRING A PREMISES. HOWEVER, AS SEE N FROM THE TERMS OF AGREEMENT AS PLACED IN THE RECORD, THE LICENSE FEE WAS ONLY AN AMOUNT OF ` .9,700/- PER MONTH, WHEREAS THE ASSESSEE MADE A DEP OSIT OF ` .6,70,000/- FOR 3 YEARS PERIOD AGREEMENT. THE TERMS DO INCLUDE A CLAUSE THAT EITHER PARTY CAN EXERCISE AN OPTION BY GIVING 3 MONTHS NOT ICE BEFORE THE EXPIRY OF LICENSE BUT AFTER COMPLETION OF MINIMUM PERIOD OF 1 8 MONTHS FOR VACATING THE PREMISES. AS SEEN FROM THE RECORD, ASSESSEE DO OCC UPY THE PREMISES FOR MORE THAN 24 MONTHS AND IN FACT HAD GIVEN A NOTICE FOR VACATION ON 9.5.2002 SUBSEQUENTLY VACATED THE PREMISES, THEREFORE, THE C ONTENTION THAT THE AMOUNT WAS ADVANCE RENT CANNOT BE ACCEPTED AS THE T ERMS CLEARLY INDICATE AMOUNT IS A SECURED DEPOSIT TO BE RETURNABLE AND TH E PREMISES WAS VACATED. IN FACT AS SEEN FROM THE CLAIM BEFORE THE COURT THA T A CHEQUE FOR AN AMOUNT OF ` .6,70,000/- WAS GIVEN TO THE ASSESSEE DATED 10.9.20 02 WHICH WAS BOUNCED. SUBSEQUENTLY, THE ASSESSEE DID OBTAIN AN AMOUNT OF ` .1 LAKH ON 9.5.2003 WHICH WAS ENCASHED. HOWEVER, THE ASSESSEE COULD FILE A PETITION ONLY IN OCTOBER, 2005 FOR RECOVERY OF THE AMOUNT. THIS INDICATE THAT A NON- RECOVERY OF THE AMOUNT DID NOT HAPPEN IN THIS YEAR AS THE CASE OF ACTION ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 7 AROSE AS EARLY AS ASSESSEE VACATED THE PREMISES IN THE YEAR 2002. MOREOVER, THIS IS NOT FOR ACQUIRING ANY ASSET AS DECIDED BY T HE DECISIONS OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. ANJANI KUMAR CO. LTD. (SUPRA) OR BY THE COORDINATE BENCHES IN THE CASE OF M/S. P.C. SYSTEMS (SUPRA) & M/S. EDELWEISS (SUPRA) THIS IS A DEPOSIT MADE IN THE COU RSE OF ASSESSEES BUSINESS AND ASSESSEE SHOULD HAVE REFERRED THE AMOUNT AT THE TIME OF VACATING THE PREMISES. THIS LOSS SO CLAIMED CANNOT BE CONSIDERE D AS A BUSINESS LOSS AND CERTAINLY IS ON CAPITAL ACCOUNT. THEREFORE, WE ARE OF THE OPINION THAT THE CASE LAW RELIED UPON BY THE ASSESSEE DO NOT APPLY TO THE FACTS OF THE CASE AND ACCORDINGLY, THE ORDERS OF THE A.O. AND CIT(A) ON T HE ISSUE IN TREATING THE AMOUNT AS CAPITAL LOSS IS UPHELD. 14. THE NEXT ISSUE IS WITH REFERENCE TO THE CLAIM O F NON-RECOVERY OF AN AMOUNT OF ` .5,50,000/- STATED TO HAVE BEEN PAID TO SHRI VAYIRA VAN AT MUMBAI FOR ACQUIRING THE MEMBERSHIP OF NSE EXCHANGE HELD B Y THE COMPANY IN WHICH SAID PERSON WAS A DIRECTOR. BEFORE US THE LD. COUN SEL FAIRLY ADMITTED THAT HE DID NOT HAVE ANY DETAILS WITH REFERENCE TO THE PAYM ENT OF AMOUNTS AS NOTED BY THE CIT(A) EXCEPT THAT AMOUNT WAS ISSUED ON 24.0 1.2002 FROM THE PERSONAL ACCOUNT OF THE DIRECTOR OF THE COMPANY AND WAS TRANSFERRED TO THE ASSESSEE COMPANY BY WAY OF JOURNAL ENTRY ON 26.8.20 03. THE FACTS OF WHICH WERE MENTIONED IN THE WRITTEN SUBMISSIONS TO THE CI T(A). IT IS FURTHER NOTICED THAT THIS AMOUNT WAS SUPPOSED TO HAVE BEEN FOR ACQUIRING THE MEMBERSHIP CARD OF NSE WHICH ASSESSEE DOES NOT HAVE IN ITS BUSINESS. SINCE THE DEAL DID NOT FINALISE, THE NON-RECOVERY OF THE AMOUNT CANNOT BE ALLOWED AS A BUSINESS LOSS FOLLOWING PRINCIPLES LAID DOWN B Y THE HONBLE SUPREME COURT IN THE CASE HASIMARA INDUSTRIES LTD. VS. CIT (SUPRA). HERE IN THIS CASE ALSO THE ADVANCE WAS MADE FOR ACQUIRING THE MEMBERS HIP CARD OF NSE IN WHICH ASSESSEES NOT DEALING AT ALL. THE ADVANCE WA S CLEARLY MADE FOR THE PURPOSE OF ACQUIRING A PROFIT MAKING ASSET TO CARRY ON BUSINESS IN NSE. THEREFORE, IT CANNOT BE HELD IF THE ADVANCE WAS MAD E ON THE REVENUE ACCOUNT OR WITH THE LOSS THERE OF MUST BE TREATED AS BUSINE SS LOSS. SINCE THE LOSS HAS SUFFERED ON CAPITAL ACCOUNT, THE PRINCIPLES LAID DO WN BY HONBLE SUPREME COURT IN THE CASE OF HASIMARA INDUSTRIES LTD. (SUPR A) CLEARLY APPLY TO THE FACTS ITA NO.215/VIZAG/2011 M/S. BALAJI EQUITIES LTD., VIJAYAWADA 8 OF THIS CASE. ACCORDINGLY, THE ADVANCE WAS CLAIMED AS UNRECOVERABLE CANNOT BE HELD AS A BUSINESS LOSS AND WAS RIGHTLY TREATED BY THE AUTHORITIES AS THE LOSS ON CAPITAL ACCOUNTS. 15. ONE MORE REASON FOR NOT ALLOWING THE CLAIM IS T HE YEAR OF LOSS. AS FAR AS THE CLAIM OF BAD DEBT IS CONCERNED THE SAME CAN BE ALLOWED IN THE YEAR OF WRITE OFF. THE LOSS HOWEVER HAS TO BE ALLOWED IN TH E YEAR THE LOSS AROSE. AS CAN BE SEEN FROM THE DETAILS ABOVE, THE SO CALLED N ON RECOVERY DID NOT OCCUR IN THIS ASSESSMENT YEAR. ASSESSEE CHOOSE TO WRITE O FF IN THIS YEAR. SINCE LOSS, EVEN A CAPITAL LOSS, AROSE IN AN EARLIER YEAR, THE SAME CAN NOT BE CONSIDERED IN THE IMPUGNED ASSESSMENT YEAR AT ALL. FOR THESE REASONS, BOTH THE GROUNDS OF THE ASSESSEE ARE DISMISSED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11 TH DEC13 SD/ - SD/ - ( SAKTIJIT DEY ) ( B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER VG/SPS VISAKHAPATNAM, DATED 11 TH DECEMBER, 2013 COPY TO 1 M/S. BALAJI EQUITIES LTD., FLAT N O.11, CHITTURI COMPLEX, NEAR HEAD POST OFFICE, VIJAYAWADA 2 ADDL. CIT, RANGE - 1, VIJAYAWADA 3 THE CI T, VIJAYAWADA 4 THE CIT (A) , VIJAYAWADA 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM