T.K.Hassan, CHENNAI V. ACIT, CHENNAI

ITA 2697/CHNY/2014

• Counselvise Citation: 269721714 RSA 2014
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 05-10-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 28-10-2014
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: V SURESH
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI , . ! '# , $ %& BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER ./ ITA NO 2697/MDS/2014 / ASSESSMENT YEAR : 2007-08 T.K.HASSAN, C/O SURESH & SRIDHARAN,CAS, 57, PMG COMPLEX, III FLOOR, SOUTH USMAN ROAD, T.NAGAR, CHENNAI -600 017. PAN AALPH1433M APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-IV(2), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI V. SURESH, CA / RESPONDENT BY : SHRI A.V.SREEKANTH, JCIT ! / DATE OF HEARING : 05.10.2015 '# ! / DATE OF PRONOUNCEMENT: 09.10.2015 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 18 .8.2014. - - ITA 2697/14 2 2. THE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL IS WITH REGARD TO DISALLOWANCE OF ` 23.30,000/- AS CAPITAL LOSS AGAINST THE ASSESSEES CLAIM OF REVENUE LOSS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DEBITED AN AMOUNT OF ` 23,30,000/- AS ADVANCED PAID AND NOT RECOVERED IN THE PROFIT AND LOSS ACCOUNT. THE SAID ADVANCE WAS PAID ON 11.8.2006 FOR PURCHASE OF 300 M.T. CRANE AND THE SA ID PURCHASE DID NOT MATERIALIZE AND THE SAME WAS CLAIMED AS BAD DEBT. THE AO DISALLOWED THE SAME AS THE AMOUNT HAS BEEN PAID TOWARDS ACQUIRING OF CRANE, WHICH IS A CAPITAL ASSET IN THE BUSINESS OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE WENT IN APPEA L BEFORE THE CIT(APPEALS), WHO CONFIRMED THE FINDING OF THE AO. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LD. AR SUBMITTED THAT THE MONEY WAS ADVANCED FOR THE PURCHASE OF CRANE WHICH IS IN STOCK-IN-TRADE OF THE ASSESSEES BUSINESS AND IT WAS CONSIDERED AS REVENU E LOSS ON WRITTEN OFF THE SAME. ACCORDING TO HIM, INTENTION OF THE ASSESSEE HAS TO BE SEEN, WHILE DECIDING THE ISSUE, WHETHER I T IS REVENUE LOSS OR CAPITAL LOSS. THE LD. AR, SUBMITTED THAT I N A SIMILAR - - ITA 2697/14 3 SITUATION, THE DELHI HIGH COURT IN THE CASE OF CIT V. NEW DELHI HOTELS LTD. (345 ITR 1) OBSERVED THAT WHEN THE ASSESSEE PAID ADVANCE FOR THE PURCHASE OF PROPERTY/PLOTS AND LOSS OF ADVANCE WAS CONSIDERED AS BAD DEBT, WHEN THERE WAS NO MATER IALIZATION OF TRANSACTION. 5. ON THE OTHER HAND, THE LD. DR, SUBMITTED THAT IT IS A CAPITAL LOSS WHICH CANNOT BE ALLOWED AS BAD DEBT. 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. TO ALLOW ANY AMOUNT AS BAD DEB T, THE FOLLOWING MANDATORY CONDITIONS MUST BE FULFILLED: ( A) THE DEBT HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE I NCOME OF THE ASSESSEE OF THE RELEVANT YEARS IN WHICH IT I S WRITTEN OFF OR IN THE EARLIER PREVIOUS YEARS; (B) THE DEBT REPRESENTS ONLY MONEY LENT IN THE ORDINARY COURSE OF BUSINESS OF BA NKING OR MONEY-LENDING, WHICH IS CARRIED ON BY ASSESSEE. ADMITTEDLY, IN THIS CASE, THE INCOME FROM THIS TRANSACTION HAS NOT BEEN GONE INTO COMPUTATION OF INCOME. THUS, IN THE CASE OF TRADER, SALES HAVE BEEN MADE ON CREDIT AND CORRESPO NDING CREDIT BECAME IRRECOVERABLE, THE SAID DEBT CAN BE A LLOWED - - ITA 2697/14 4 AS BAD DEBT ON WRITTEN OFF THE SAME. IN THE CASE B EFORE US, THE ASSESSEE ADVANCED MONEY FOR PURCHASE OF CRANE, WHICH IS A CAPITAL ASSET USED FOR THE PURPOSE OF EA RNING THE INCOME AND IT IS NOT STOCK-IN-TRADE. THE ADVANCE WA S MADE IN THE FIELD OF CAPITAL. THE CONDITIONS LAID DOWN I N SEC.36(1)(VII) READ WITH SEC.36(2) OF THE ACT WERE NOT FULFILLED. IT IS AN ADMITTED FACT THAT THE ADVANCE WAS MADE NOT IN THE NORMAL COURSE OF MONEY LENDING BUSINESS CARRIED ON BY THE ASSESSEE. MERELY BECAUSE, THE ASSESSEE ADVANCED MONEY AND LOST IN THE COURSE OF BUSINESS, IT CANNOT BE ALLOWED AS BAD DEBT. MANDATORY CONDITION LAID IN SEC.36(2) IS NOT AT ALL FULFILLED. THE ASSESSEE RE LIED ON THE JUDGMENT OF THE DELHI HIGH COURT IN THE CASE OF CIT V. NEW DELHI HOTELS LTD. (345 ITR 1), WHEREIN THE AMOUNT W AS ADVANCED FOR THE PURCHASE OF PROPERTY OR PLOTS IN T HE COURSE OF BUSINESS OF REAL ESTATE, AGAINST FAILURE TO TAKE PHYSICAL POSSESSION OF THE PLOTS/FLATS BY MAKING PAYMENT IN ADVANCE, HELD TO BE THE REVENUE LOSS. BUT IN THE P RESENT CASE, THE AMOUNT WAS ADVANCED IN THE CAPITAL FIELD FOR PURCHASE OF CAPITAL ASSET (FIXED ASSET) AND IT CANN OT BE - - ITA 2697/14 5 COMPARED WITH THAT CASE CONSIDERED BY THE DELHI HIG H COURT. ACCORDINGLY, IN OUR OPINION, THE LOWER AUTH ORITIES ARE JUSTIFIED IN DISALLOWING THE CLAIM OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 9 TH OF OCT., 2015 AT CHENNAI. SD/- SD/- ( . $ % ) ( & ' ( ) ) *+,-./01023 45067.082290.:3 ; $< /JUDICIAL MEMBER ! $<=>>2-6?06?@ABCA. &; /CHENNAI, D$ /DATED, THE 9 TH OCT., 2015. MPO* $E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I3 /CIT(A) 4. I /CIT 5. GJ% K /DR 6. %LM /GF.