General Capital and Holding Company Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-2(1)(1), Ahmedabad

ITA 538/AHD/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6127 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 03-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Recovery proceedings; Business income; Charitable institution; Additional evidence; Bad and doubtful debts
• Section: 143(3); 80G; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE, SHRI S. S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ITA NO. 538/AHD/2016 (ASSESSMENT YEAR: 2012- 13) GENERAL CAPITAL AND HOLDING COMPANY PVT. LTD., E/9, BHASKAR APARTMENT, MIRAMBICA SCHOOL ROAD, NARANPURA, AHMEDABAD - 380013 APPELLANT VS. INCOME TAX OFFICER, WARD 2(1)(1), NAVJIVAN TRUST BLDG., AHMEDABAD RESPONDENT PAN: AADCG1059M /BY ASSESSEE : SHRI SUNIL TALATI, A.R. /BY REVENUE : SHRI V. K. SINGH, SR. D.R. /DATE OF HEARING : 17.01.2018 /DATE OF PRONOUNCEMENT : 12.02.2018 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2012-13 ARISES AGAINST THE CIT(A)-2, AHMEDABADS ORDER DATED 08.02.2016, IN CA SE NO. CIT(A)- 2/521/WD.2(1)(1)/14-15, AFFIRMING ASSESSING OFFICER S ACTION DISALLOWING ITS SECTION 80G DEDUCTION CLAIM OF RS.11,11,111/-, SUND RY BALANCE WRITTEN OFF AMOUNTING TO RS.1,00,00,000/- AS WELL AS PARTLY CON FIRMING SECTION 36(1)(III) ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 2 - INTEREST DISALLOWANCE OF RS.10,22,586/- TO THE EXTE NT OF RS.2,22,586/-; RESPECTIVELY, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1 961; IN SHORT THE ACT. 2. WE COME TO THE FIRST ISSUE OF SECTION 80G DISALL OWANCE OF RS.11,11,111/-. THERE IS NO DISPUTE THAT THE PAYEE HEREIN IS SHANK ERSINGH VAGHELA BAPU CHARITABLE TRUST ENJOYS A VALID REGISTRATION U/S.80G OF THE A CT SINCE 18.07.2008. THE CIT, GANDHINAGARS APPROVAL ORDER DATED 18.07.2008 TO TH IS EFFECT FORMS PAGE 3 OF THE PAPER BOOK. RELEVANT BANK STATEMENT AT PAGE NO.1 OF THE PAPER BOOK REVEALS THAT THE ASSESSEE/PAYER HAD ACTUALLY PAID THE SUM IN QUESTIO N TO THE ABOVE PAYEE ON 14.08.2008. THE PAYEE TRUST THEREAFTER ISSUED ITS DONATION ACCEPTANCE RECEIPT ON 14.08.2011 (PAGE 2) ACKNOWLEDGING CHEQUE NO. 208216 QUA THE RELEVANT AMOUNT. THE ASSESSEE HAD BEEN SHOWING THE ABOVE SUM AS A CR EDIT ENTRY IN PAYEES LEDGER ACCOUNT THROUGHOUT THE INTERVENING PERIOD. IT CHOS E TO WRITE OFF THE SAME AS A DONATION IN THE RELEVANT PREVIOUS YEAR (PAGE 5) AFT ER TAKING IT AS OPENING BALANCE ON 01.04.2011. THE ASSESSING OFFICER FIRST OF ALL OBS ERVED IN PARA 3.1.1 OF THE ASSESSMENT ORDER DATED 05.02.2015 THAT THE ASSESSEE HAD PLACED ON RECORD PAYEES REGISTRATION ONLY WITHOUT ITS ACCEPTANCE RECEIPT. HE THEN CONCLUDED THAT ASSESSEES BOOKS STATED THE AMOUNT IN QUESTION AS OPENING BALA NCE WHICH MEANT THAT THE SAME WAS NOT PAID DURING THE RELEVANT PREVIOUS YEAR AS P ER SECTION 80G(1) & (2) OF THE ACT. ALL THIS REASONING LEAD TO THE IMPUGNED DISAL LOWANCE BEING MADE IN ASSESSEES HANDS. 3. THE CIT(A) UPHOLDS ASSESSING OFFICERS ACTION DI SALLOWING THE ABOVE 80G CLAIM AS FOLLOWS: 2.4. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF CLAIM OF DONATION AMOUNTING OF RS.11,11,111/- PAID TO SHANKARSINH VAGHELA BAPU CHARITABLE TRUST FOR THE REASON THAT THE APPELLANT HAS FILED THE COPY OF THE APPROVAL GRANTED BY THE CIT U/S. 80G OF THE IT ACT TO THE SA ID TRUST BUT NO RECEIPT FOR PAYMENT OF DONATION HAS BEEN FILED BEFORE HIM. THE AO ALSO OBSERVED THAT AS PER THE PROVISIONS OF SECTION 80G(1)AND (2) IT CLEARLY PROVIDES THAT THE DEDUCTION U/S. 80G IS ALLOWABLE ONLY IN RESPECT OF ANY SUM PAID DU RING THE YEAR UNDER CONSIDERATION. ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 3 - 2.5. ON THE OTHER SIDE, THE APPELLANT CLAIMED THAT INITIALLY IN THE YEAR 2008 THE APPELLANT HAS EXTENDED THE LOAN TO THE AFORESAID TR UST WITH THE OBJECT TO HELP THE TRUST. HOWEVER SUBSEQUENTLY IN THE YEAR UNDER CONSI DERATION THE APPELLANT CLAIMED TO HAVE DONATED THE ABOVE LOAN TO THE TRUST ON 14,0 8.2011. IT ALSO SUBMITTED COPY OF RECEIPT ISSUED BY THE SAID TRUST IN RESPECT OF THE DONATION MADE ALONGWITH APPROVAL OBTAINED U/S. 80G OF IT ACT. 2.6. HAVING CONSIDERED THE FACTS AND SUBMISSIONS IT IS NOTICED THAT THE APPELLANT HAS GIVEN THE LOAN OF RS.11,11,111/- TO THE AFORESA ID TRUST ON 14.08.2008 AND THE SAME WAS CONVERTED IN THE YEAR UNDER CONSIDERATION ON 14.08.2011 INTO THE DONATION. THUS IN THE YEAR UNDER CONSIDERATION IN F ACT, THE TRANSACTION WAS THE CONVERSION OF THE LOAN INTO THE DONATION WHICH IN A CCORDANCE WITH THE PROVISIONS OF 80G OF IT ACT IS NOT THE DEDUCTIBLE EXPENDITURE. TH E CONDITION FOR THE DEDUCTION U/S. 80G IS THAT THE DONATION SHOULD BE PAID IN THE YEAR UNDER CONSIDERATION WHICH IS NOT THE CASE OF THE APPELLANT. AS PER THE APPELLANT , IT WAS THE LOAN GIVEN TO THE TRUST ON 14.08.2008, EVEN IT WAS NOT IN THE NATURE OF THE PAYMENT AS DONATION IN THE YEAR 2008. IT WAS THE AFTER THOUGHT OF THE APPELLANT TO CONVERT THE SAID LOAN INTO THE DONATION. THUS THE CONDITION DOES NOT GET FULFILLED . MOREOVER AS PER THE EXPLANATION (5) TO SECTION 80G OF IT ACT IT HAS BEEN PROVIDED T HAT NO DEDUCTION SHALL BE ALLOWED UNDER THE SECTION IN RESPECT OF ANY DONATION UNLESS SUCH DONATION IS OF SUM OF MONEY. HERE IN THE INSTANT CASE, THE DONATION WAS S TATED TO BE IN THE FORM OF BOOK ENTRY ONLY BY CONVERTING THE LOAN INTO DONATION. TH US THERE WAS NO SUCH DONATION OF ANY MONEY INVOLVED IN THE YEAR UNDER CONSIDERATION. IN OTHER WORDS, THE APPELLANT HAVE WAIVED THE RIGHT TO RECOVER THE LENDINGS TO TH E TRUST IN THE YEAR UNDER CONSIDERATION, AND THIS RIGHT TO WAIVE THE RIGHT CA NNOT BE SAID TO BE THE DONATION GIVEN BY THE APPELLANT. 2.7. FURTHER IN THE APPELLATE PROCEEDING THE APPELL ANT HAS SUBMITTED COPY OF THE RECEIPT DATEDL4.08.2011 IN RESPECT OF THE DONATION ISSUED BY THE TRUST WHICH HAS NOT BEEN PRODUCED BEFORE THE AO IN THE ASSESSMENT PROCE EDINGS. THUS THE RECEIPT WAS AN ADDITIONAL EVIDENCE FILED FIRST TIME BEFORE THIS OFFICE FOR CONSIDERATION WITHOUT MAKING ANY WRITTEN REQUEST FOR ADMISSION OF THE ADD ITIONAL EVIDENCE UNDER RULE 46A OF IT ACT. HENCE, IN ABSENCE OF THE PROCEDURE FOLLO WED BY THE APPELLANT IN THIS REGARD AND WITHOUT KNOWING THE GOOD AND SUFFICIENT REASONS FOR NOT PRODUCING THIS EVIDENCE IN THE ASSESSMENT PROCEEDINGS THE ADDITION AL EVIDENCE SUBMITTED IS NOT ACCEPTED AND HENCE THE SAME IS REJECTED. 2.8. IN VIEW OF THE AFORESAID DISCUSSION, THE DISAL LOWANCE OF THE DEDUCTION MADE BY THE AO IS FOUND CORRECT AND JUSTIFIED AND HENCE THE SAME IS CONFIRMED. 4. HEARD RIVAL CONTENTIONS. RELEVANT RECORDS PERUS ED. LEARNED AUTHORIZED REPRESENTATIVE AND LEARNED DEPARTMENTAL REPRESENTAT IVE STRONGLY REITERATE ASSESSEES AND REVENUES RESPECTIVE STANDS AGAINST AND IN SUPPORT OF THE IMPUGNED DISALLOWANCE. BOTH PARTIES AGREE THAT THE RELEVANT BASIC CONDITIONS TO BE SATISFIED IN A SECTION 80G DEDUCTION CLAIM ARE THAT IT MUST PERT AIN TO AN ACTUAL SUM OF MONEY THAN IN KIND, IT IS TO BE PAID TO A RECOGNIZED SPEC IFIED INSTITUTION THROUGH BANKING ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 4 - CHANNEL FOLLOWED BY A NECESSARY PAYMENT RECEIPT ISS UED FROM THE DONEES END. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT TH E ASSESSEE HAS ACTUALLY PAID THE AMOUNT IN QUESTION WAY BACK IN FINANCIAL YEAR 2008- 09. IT THEREAFTER TREATED THE SAID AMOUNT AS LOANS AND ADVANCES TILL THE RELEVANT PREV IOUS YEAR WHEREIN IT CHOSE TO WRITE OFF THE ABOVE AMOUNT IN DISPUTE AS A DONATION . THE DONEE TRUST HAS ALSO ISSUED CORRESPONDING RECEIPT IN RELEVANT PREVIOUS YEAR ONL Y ON 14.08.2011. 5. LEARNED DEPARTMENTAL REPRESENTATIVES CASE ACCOR DINGLY IS THAT THE CIT(A)S ORDER EXTRACTED HEREINABOVE HAS NOT ADMITTED THE AB OVE DONATION RECEIPT SINCE NOT ACCOMPANYING THE RELEVANT RULE 46A ADDITIONAL EVIDE NCE APPLICATION AS PER INCOME TAX RULES. WE DO NOT FIND IT AS CONVINCING ARGUMEN T ON REVENUES PART. THE FACT REMAINS THAT THE ASSESSEE ADMITTEDLY FILED THE ABOV E DONATION RECEIPT AS A PROOF OF PAYMENT ALONGWITH REGISTRATION CERTIFICATE DURING L OWER APPELLATE PROCEEDINGS. IT PLEADED THEREIN THAT THE ASSESSING AUTHORITY HAD NO T GRANTED IT SUFFICIENT TIME TO PRODUCE THE SAME ON RECORD. THE CIT(A)S ABOVE EXT RACTED FINDING NOWHERE SPECIFICALLY REBUT RELEVANCY OR GENUINENESS THEREOF AS HE HAS PROCEEDED TO ADOPT A HYPERTECHNICAL APPROACH BY SIMPLY BRUSHING ASIDE BO TH THE NECESSARY DOCUMENTS WITHOUT EVEN A PROPER FACTUAL VERIFICATION. WE CON CLUDE THAT LEARNED CIT(A) HAS PREFERRED TECHNICAL OVER SUBSTANTIVE JUSTICE IN ORD ER TO REJECT ASSESSEES DONATION CLAIM WITHOUT EVEN EXAMINING THE ISSUE AS TO WHETHE R THE ASSESSING OFFICER HAD AFFORDED SUFFICIENT OPPORTUNITY TO THE ASSESSEE OR NOT. WE THEREFORE TAKE THE ABOVE DOCUMENT(S) PERTAINING TO THE ASSESSEES PAYEE TRUS T AS PART OF RECORDS IN THIS BACKDROP OF FACTS. 6. COMING TO MERITS, WE FIND THAT THIS IS NOT THE R EVENUES CASE THAT THE DONATION TRUST IS NOT AN APPROVED INSTITUTION OR IT HAS NOT ISSUED THE CORRESPONDING ACCEPTANCE RECEIPT. THERE IS FURTHER NO QUARREL ON BASIC FACTS INTER ALIA THE ASSESSEE HAVING ACTUALLY TRANSFERRED THE MONEY TO DONEE TRUS T THROUGH BANKING CHANNEL ONLY ON 14.08.2008. ITS BOOKS RECOGNIZED THE SAID AMOUN T ON ASSET SIDE TILL THE RELEVANT PREVIOUS YEAR WHEREIN IT DECIDED TO FORGO ITS LOAN RIGHT BY WAY OF DONATING THE AMOUNT IN QUESTION TO THE DONEE IN LIEU OF THE CORR ESPONDING ACCEPTANCE RECEIPT. ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 5 - WE ARE OF THE OPINION THAT BOTH THE LOWER AUTHORITI ES HAVE ERRED IN LAW AS WELL AS ON FACTS IN THIS PECULIAR CIRCUMSTANCES TO INTERPRET T HE RELEVANT STATUTORY PROVISION SECTION 80G OF THE ACT IN AN UNSUSTAINABLE MANNER W HICH TANTAMOUNTS TO DENYING THE NECESSARY RELIEF IN BOTH ASSESSMENT YEARS I.E. THE YEAR OF ACTUAL PAYMENT AS WELL AS THAT OF GETTING THE NECESSARY DONATION RECEIPT. IN OUR CONSIDERED OPINION, THE PURPOSE OF USING THE CRUCIAL EXPRESSION IN RELEVAN T PREVIOUS YEAR IN STATUTE IS TO ENSURE ACTUAL PAYMENT ON OR BEFORE THE RELEVANT PRE VIOUS YEAR RATHER THAN ALTOGETHER REJECTING A CASE ALIKE THE INSTANT FACTS ONLY. WE THEREFORE ACCEPT ASSESSEES FIRST SUBSTANTIVE GROUND TO DELETE THE IMPUGNED SECTION 8 0G DISALLOWANCE OF RS.11,11,111/- UNDER CHALLENGE. 7. THE ASSESSEES NEXT SUBSTANTIVE GROUND SEEKS TO REVERSE BOTH THE LOWER AUTHORITIES ACTION IN DISALLOWING ITS CLAIM OF SUN DRY BALANCES WRITE OFF AMOUNTING TO RS.1,00,00,000/- IN CASE OF M/S. BHAGYAM INDUSTR IES PVT. LTD. AND M/S. DOLPHIN METAL (INDIA) LTD. INVOLVING SUMS OF RS.60LACS AND RS.40LACS; RESPECTIVELY. ITS FURTHER ALTERNATIVE PLEA IS THAT THE ABOVE SUNDRY B ALANCES BE CONSIDERED AS ALLOWABLE EITHER U/S.36(1)(VII) AS BAD DEBTS OR U/S.37 OF THE ACT. WE NOTICE IN THIS BACKDROP THAT THE CIT(A)S DETAILED DISCUSSION TAKES INTO A CCOUNT THE RELEVANT FINDING IN ASSESSMENT AS WELL AS ASSESSEES SUBMISSIONS AS UND ER: 3. THE SECOND GROUND OF APPEAL IS AS UNDER:- 'THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN MAKING DISALLOWANCE OF RS.1,00,00,000/- BEING SUNDRY BALAN CE WRITTEN OFF. IN THIS REGARD YOUR APPELLANT WOULD LIKE TO STATE THAT THE LD. AO HAS NOT APPRECIATED THE EXPLANATIONS / SUBMISSIONS MADE DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS. YOURS APPELLANT STATES THAT AMOUNT OF RS.L ,00,00,0007- BEING ADVANCE WERE MADE IN ORDINARY CO URSE OF BUSINESS AND THUS APPELLANT PRAYS BEFORE OUR HONOR TO KINDLY DEL ETE THE DISALLOWANCE OF RS.1,00,00,000/- BEING SUNDRY BALANCE WRITTEN OFF. WITHOUT PREJUDICE TO ABOVE, YOUR APPELLANT WOULD LIKE TO PAY BEFORE YOUR HONOUR THAT SUNDRY BALANCE V/RITTEN OFF AMOUNTING TO RS.1,00,00,000/- SHOULD EITHER BE ALLOWED U/S. 37 OR 36(1) (VII) OF THE ACT.' 3.1 ASSESSING OFFICER'S FINDINGS:- THE RELEVANT EXTRACTS FROM THE ASSESSMENT ORDER ARE REPRODUCED HERE UNDER.- ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 6 - '3.2. IN RESPECT OF THE BALANCE AMOUNT OF RS. 1,00, 00,000/- UNDER THE HEAD SUNDRY BALANCES WRITTEN OFF, IT WAS STATED BY THE ASSESSEE IN ITS WRITTEN SUBMISSIONS DATED 03.12.2014,13.01.2015 AND 27.01.2015 THAT THE SAME PERTAINED TO ADVANCES GIVEN TO BHAGYAM INDUSTRIES P. LTD. RS.60,00,000/- IN JUN E 2009 AND DOLPHIN METAL (INDIA) LTD. RS.40,00,000/- IN APRIL 2010 AND NO MO NEY COULD BE RECOVERED SINCE GIVING OF SUCH ADVANCES AND HENCE, THE AMOUNTS WERE WRITTEN OFF AS NON- RECOVERABLE, ASSESSEE HAS FURTHER CONTENDED THAT TH E ADVANCES WERE GIVEN IN COURSE OF COMPANY'S BUSINESS OF LENDING MONEY AND A LSO FILED COPY OF THE MEMORANDUM OF ASSOCIATION AS WELL AS THE LOAN AGREE MENTS WITH THE CONCERNED PARTIES ALONGWITH COPY OF CHEQUE ISSUED BY DOLPHIN METAL (INDIA) LTD. OBTAINED AS AN INDEMNITY AGAINST FUTURE LOSSES. IN ITS' LETTER DTD. 27.01. 2015, IT WAS STATED BY ASSESSEE THAT GIVING LOANS AND ADVANCES WAS PRINCIP AL OBJECT OF THE COMPANY'S BUSINESS. IT WAS FURTHER CONTENDED THAT THE ADVANCE MADE TO BHAGYAM INDUSTRIES PVT LTD & DOLPHIN METAL (I) LTD. WERE IN ORDINARY C OURSE OF ASSESSEE COMPANY'S BUSINESS AND THAT THE ADVANCE WERE MADE THROUGH MAN ISH SHAH DIRECTOR OF GYSCOAL ALLOYS LTD. (AN ASSOCIATE COMPANY IN WHICH DIRECTOR S OF ASSESSEE COMPANY ARE ALSO DIRECTORS) WHO WAS EXPECTED TO PURSUE THE REPAYMENT IN CASE OF DEFAULT OR DELAY, HOWEVER, SHRI MANISH SHAH EXPIRED ON 21.08.2014 AFT ER SUFFERING FROM CANCER AND HENCE, THE COMPANY COULD NOT PURSUE THE RECOVERY. I N RESPECT OF DOLPHIN METAL (I) LTD SINCE THERE WERE NO ASSETS LEFT WITH THE COMPAN Y AFTER PAYING SECURED DEBTORS OF BANK ON SALE OF ASSETS AND HENCE, THERE WAS NO ALTE RNATIVE BUT TO WRITE OFF THE AMOUNT AS NON-RECOVERABLE. IN RESPECT OF BHAGYAM IN DUSTRIES, THE WHERE ABOUT COULD NOT BE LOCATED AND HENCE, THE AMOUNT WAS WRIT TEN OFF AS NON-RECOVERABLE AND SINCE THE ADVANCES WERE ENTIRELY GENUINE, THE SAME WERE REQUIRED TO BE ALLOWED AS WRITTEN OFF AGAINST COMPANY'S BUSINESS INCOME. 3.2.1. THE REPLIES AND CONTENTIONS OF THE ASSESSEE COMPANY ARE CONSIDERED AND NOT FOUND TO BE ACCEPTABLE ON ACCOUNT OF FOLLOWING: (I) IT IS SEEN THAT ASSESSEE COMPANY HAS FAILED TO PROVE THAT THE AMOUNTS CLAIMED TO HAVE BEEN ADVANCED BY IT TO THE TWO PART IES NAMELY DOLPHIN METAL (I) LTD. & BHAGYAM INDUSTRIES HAD ACTUALLY BE EN ADVANCED BY ASSESSEE COMPANY AND THE AMOUNTS WERE IN THE NATURE OF LOANS AND ADVANCES MADE IN ORDINARY COURSE OF ASSESSEE COMPAN Y'S BUSINESS. (II) IT IS PERTINENT TO MENTION HERE THAT IT IS AN ADMITTED FACT THAT WHERE-ABOUTS OF THE LOANEE NAMELY M/S. BHAGYAM INDUSTRIES OR BHA GYAM INDUSTRIES P. LTD. ARE NOT TRACEABLE ANYWHERE IN ANY. DATABASE OF SALES TAX DEPARTMENT OR THE MCA SITE. FURTHER, ASSESSEE COMPANY'S LOAN AGRE EMENT SHOWS THAT NO INDIVIDUAL IS IDENTIFIED AS SIGNATORY TO THE SAME & IT APPEARS THAT NOT EVEN CHEQUE WAS OBTAINED FROM THE SAID PARTY AS A SECURI TY INDEMNITY. (III) IT IS SEEN THAT THERE WAS DEFAULT IN RESPECT OF BOTH THESE ADVANCES AS SOON AS THE LOANS WERE CLAIMED TO HAVE BEEN GRANTED TO THES ES PARTIES SINCE ASSESSEE COMPANY NEVER RECEIVED ANY MONEY INCLUDING INTEREST INCOME FROM THESE PARTIES, WHICH SHOWS THAT THE AMOUNTS EVEN IF PAID BY ASSESSEE COMPANY TO THESE PARTIES, WERE NOT IN THE NATURE OF LOANS AND ADVANCES MADE IN ORDINARY COURSE OF ASSESSEE'S BUSINESS OF FINANCING . IT IS ALSO EVIDENT THAT THERE WAS NO DUE DILIGENCE CARRIED OUT BY THE ASSES SEE COMPANY, PRIOR TO GRANTING OF LOAN AND ADVANCES TO THEE PARTIES, NOR ANY SECURITY ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 7 - /UNDERTAKING/PLEDGE OF ANY ASSETS WAS MADE BY ASSES SEE AGAINST THE LOANS AND ADVANCES GRANTED TO THESE PARTIES. IN FACT, IN ABSENCE OF TRACEABILITY OF ONE OF THE PARTIES BHAGYAM INDUSTRIES ON ANY DATABA SE SHOWS THAT THE AMOUNTS EVEN IF ADVANCED WERE NOT IN ORDINARY COURS E OF ASSESSEE COMPANY'S BUSINESS. (IV) ON PERUSAL OF THE LOAN AGREEMENTS ENTERED INTO WITH THE LOANEE BY ASSESSEE COMPANY, IT IS SEEN THAT THE SAME ARE VERY CURSORY AND NEITHER NOTARIZED NOR REGISTERED DOCUMENTS. FURTHER, EVEN THE STAMP P APER USED FOR AGREEMENT WITH BHAGYAM INDUSTRIES IS DATED 09.07.20 09 WHEREAS THE LOAN AGREEMENT IS PRE-DATED TO 06.06.2009. (V) ASSESSEE COMPANY NEVER DEPOSITED THE CHEQUE OB TAINED FROM DOLPHIN METAL (I) LTD. NOR ANY LEGAL PROCEEDINGS INITIATED AGAINS T THE BOTH THE LOANEE PARTIES DESPITE HAVING FAILED TO RECOVER EVEN SINGL E RUPEE OUT OF THE MONEY PAID. IN FACT, DURING THE COURSE OF ASSESSMENT PROC EEDINGS IN THE CASE OF GOPAL IRON & STEELS CO. (GUJARAT) LTD FOR THE ASSES SMENT YEAR RELEVANT TO PREVIOUS YEAR 2011-12 I.E. IN SUBSEQUENT TO THE YEA R IN WHICH ASSESSEE CLAIMED TO HAVE ADVANCED THE FUNDS & BECAME IRRECOV ERABLE, IT IS SEEN THAT THE SAID DOLPHIN METAL INDIA LTD HAD PAID HUGE AMOU NTS OF RS. 90,38,062/- AS ROLLING CHARGES FROM APRIL 2011 TO MARCH 2012 WH ICH PROVES THAT THE DEBT COULD NOT HAVE BECOME BAD AT THE TIME WHEN ASS ESSEE WROTE OFF THE AMOUNT CLAIMING THE SAME AS IRRECOVERABLE. HENCE, T HE CLAIM IN RESPECT OF THE SAID PARTY IS FOUND TO BE NON-GENUINE. 3.2.3 IN LIGHT OF THE ABOVE, IT IS FACTUALLY EVIDEN T THAT THE AMOUNTS CLAIMED AS SUNDRY BALANCES WRITTEN OFF ON ACCOUNT OF NON-RECOV ERABLE LOANS AND ADVANCE MADE TO DOLPHIN METAL (INDUSTRIES) LTD & BHAGYAM IN DUSTRIES P LTD WERE NOT MADE IN ORDINARY COURSE OF ASSESSEE COMPANY'S BUSIN ESS & HENCE, NOT ALLOWABLE AS DEDUCTION. 3.2.4 NOTWITHSTANDING THE ABOVE, IT IS ALSO PERTINE NT TO MENTION THAT ASSESSEE COMPANY'S NON-RECOVERABLE LOANS & ADVANCES WERE IN THE NATURE OF CAPITAL LOSS & HENCE, ARE NOT ALLOWABLE AS DEDUCTION AGAINST THE A SSESSEE COMPANY'S REVENUE RECEIPTS & INCOME TAXABLE FOR THE YEAR UNDER CONSID ERATION. IN THIS REGARD, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS: (I) IN THE CASE OF VIJAYKUMAR MILLS LTD VS CIT(MAD. ) 247 ITR 176, IT WAS HELD THAT IF ADVANCE WAS NOT MADE FOR THE PURPOSE OF THE BUSINESS, THE SAME WAS NOT ALLOWABLE AS A DEDUCTION ON ITS WRITE OFF. (II) IN THE CASE OF DATAMATICS FINANCIAL SERVICES L TD. VS. DCIT 2011- TIOL- 124 ITAT MUMBAI, IT WAS HELD THAT EVEN IF ASSESSEE ADVANCED LOANS IN THE SHAPE OF ICDS AND OFFERED INTEREST INCOME ON SUCH DEPOSITS A S BUSINESS INCOME & MEMORANDUM OF ASSOCIATION PERMITTED ASSESSEE COMPAN Y TO DO BUSINESS OF FINANCING OF LOANS, THE SAME WERE BASICALLY INVESTM ENTS MADE BY ASSESSEE OUT OF SURPLUS FUNDS. HENCE SUCH DEPOSITS WRITTEN OFF CANN OT BE ALLOWED AS BAD DEBT. (III) IN THE CASE OF A.V. THOMAS & CO. LTD. VS. CIT (SC) 48 ITR 67, THE DISALLOWANCE IN RESPECT OF CLAIM FOR DEDUCTION ON A CCOUNT OF WRITE OFF OF OUTSTANDING DEBT WAS UPHELD ON THE GROUND THAT DEBT IS AN OUTSTANDING WHICH IF ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 8 - RECOVERED WOULD HAVE SWELLED THE PROFITS AND IT IS NOT MONEY HANDED OVER TO SOMEONE WHICH THAT PERSON HAS FAILED TO RETURN & HE NCE, CLAIM FOR WRITE OFF IN RESPECT OF SUCH DEBT IS NOT AN ALLOWABLE EXPENSES. (IV) IN THE CASE OF INDIAN ALUMINIUM CO. LTD. VS. C IT (SC) 79 ITR. 514 IT WAS HELD THAT A BUSINESS DEBT SHOULD SPRING FROM THE CA RRYING ON OF A BUSINESS AND SHOULD BE INCIDENTAL TO IT AND CANNOT BE JUST ANY L OSS SUSTAINED BY THE ASSESSEE EVEN IF HAS SOME CONNECTION WITH ITS BUSINESS. 3.2.5 THE FACTS OF ASSESSEE'S CASE ARE SQUARELY IDE NTICAL TO THE FACTS OF THE ABOVE CITED DECISIONS. ASSESSEE COMPANY HAS FAILED THE PR OVE THAT THE AMOUNTS WERE ADVANCED IN ITS REGULAR COURSE OF BUSINESS. SINCE, IT FAILED THE PROVE EVER EXISTENCE OF A PERSON/PARTY TO WHOM THE AMOUNT WAS CLAIMED TO LOANS ADVANCED AND IN RESPECT OF ANOTHER THROUGH LOAN AGREEMENT PRODUCE, GENUINENESS OF THE SAID AGREEMENT NEITHER NOTARIZED NOR REGISTERED, ABSENCE OF ANY COLLATERAL SECURITIES, NON-INITIATED ANY RECOVERY PROCEEDINGS AGAINST THE SAID PARTIES ARE CIRCUMSTANCES LOADING TO THE CONCLUSION THAT THE AMOUNTS CLAIMED FOR WRITTEN OFF WERE NOT ALLOWABLE AS DEDUCTION AGAINST ASSESSEE'S TOTAL INC OME FOR THE YEAR UNDER CONSIDERATION. IN LIGHT OF THE ABOVE, THE CLAIM OF ASSESSEE COMPANY FOR SUNDRY BALANCES WRITTEN OFF ON ACCOUNT OF MONEY ADVANCED T O DOLPHIN METAL (I) LTD. RS. 40,00,000,'- AND BHAGYAM INDUSTRIES P. LTD. RS. 60, 00,000/- ARE HELD TO BE NOT ALLOWABLE AS BUSINESS DEDUCTIONS AGAINST THE INCOME FROM OTHER SOURCES. THE ENTIRE CLAIM OF RS. 1,00,00,000/- IS HEREBY REJECTED AND T HE AMOUNT IS HEREBY ADDED TO THE ASSESSEE'S TOTAL INCOME.' 3.2. APPELLANT'S SUBMISSION:- THE RELEVANT EXTRACTS FROM THE SUBMISSION OF THE AP PELLANT ARE REPRODUCED HERE UNDER:- 2) 'THE SECOND GROUND OF APPEAL IS WITH REGARD TO DISALLOWANCE OF RS. 1,00,00,000/- MADE BY A.O. IN RESPECT OF SUNDRY BAL ANCES WRITTEN OFF DURING THIS YEAR. IT IS SUBMITTED THAT THE APPELLANT HAD A DVANCED MONEY OF RS. 60,00,000/- TO BHAGYAM INDUSTRIES P. LTD IN JUNE ,2 009 AND RS. 40,00,000/- TO DOLPHIN METAL (INDIA) LTD. IN APRIL, 2010 AS ADV ANCES IN NORMAL COURSE OF BUSINESS. THE COPIES OF LEDGER ACCOUNT OF BOTH THE PARTIES FR OM AY 2010-11 TO AY 2012-13 ALONG WITH BANK STATEMENT HIG HLIGHTING ENTRIES OF ADVANCES GIVEN ARE ENCLOSED HEREWITH ON PAGE NO. 4 TO 9. FURTHER THE ABOVE ADVANCES GIVEN TO BOTH THE PARTIES WERE IN TH E ORDINARY COURSE OF BUSINESS TO EARN INTEREST INCOME, AS THE APPELLANT IS ENGAGED IN MONEY LENDING BUSINESS, WHICH CAN ALSO BE VERIFIED FROM THE COPY OF MEMORANDUM WHICH IS ENCLOSED ON PAGE NO. 10 TO 15 . THE LD. A.O. HAS STATED VARIOUS OBJECTIONS ON PAGE 4, PARA 3.2.1 , WHICH ARE NOT AT ALL CORRECT OR RELEVANT AS UNDER: THE A.O. HAS STATED IN POINT (I) PARA, 3.2.1 ON P AGE 4, THAT THE ASSESSE HAS FAILED TO PROVE THAT THE ADVANCES WERE ACTUALLY MADE TO THESE PARTIES.IN THISREGARD ,THE APPELLANT HAS TO STATE T HAT ADVANCESTO BOTH THE PARTIES WERE GIVEN IN THE ORDINARY COURSE OF BUSINE SS AND THROUGH PROPER ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 9 - BANKING CHANNEL,WHICH CAN BE VERIFIED FROM THE COPY BANK STATEMENT ENCLOSED ON PAGE NO 5 AND 7 TO 9. THE A.O. HAS FURTHER STATED IN POINT (II) IN PARA 3.2.1 THAT THE ASSESSEE COMPANY'S LOAN AGREEMENT SHOWS THAT NO IND IVIDUAL IS IDENTIFIED AS SIGNATORY TO THE SAME &. IT APPEARS THAT NOT EVEN C HEQUE WAS OBTAINED FROM THE SAID PARTY AS A SECURITY OR INDEMNITY. IN THIS REGARD , WE HAVE TO STATE THAT THE COPIES OF LOAN AGREEMENT MADE WITH BOTH TH E PARTIES I.E. BHAGYAM INDUSTRIES AND DOLPHIN METAL (INDIA) LTD ARE ENCLOS ED ON PAGE NO. 16 TO 19 & 21 TO 24 , FROM WHICH IT CAN BE SEEN THAT THE SIGNATORY AUTH ORITIES IN BOTH THE CASESARE EASILY IDENTIFIABLE. FURTHER MERE LY THE APPELLANT DID NOT OBTAIN THE CHEQUE FROM THE ABOVE PARTIES CAN NEVER BEA GROUND TO DISALLOW GENUINE BUSINESS LOSS. THE PRACTICE TO OBTAIN SECUR ITY WOULD DIFFER FROM ASSESSEE TO ASSESSEE AND AS PER COMPANY'S BUSINESS POLICY AND THERE CAN NOT BE ANY STIPULATION TO SUCH BUSINESS LOANS & ADVANCE S. FURTHER PLEASE REFER CLAUSE 33 OF PART B OF MEMORANDUM OF ASSOCIATION, W HEREIN IT IS CLEARLY MENTIONED THAT THE APPELLANT CAN LEND THE MONEY WIT HOUT SECURITY UPON SUCH TERMS AND IN SUCH MANNER AS MAY BE THOUGHT PROPER F ROM TIME TO TIME. THUS STAND TAKEN BY THE A.O. IS TOTALLY INCORRECT. THE LD. A.O. HAS OBSERVED IN POINT (V) IN PARA 3. 2.1. THAT THE DEBT / ADVANCES COULD NOT BECOME BAD IN RESPECT OF PARTY N AMELY DOLPHIN METAL (I) LTD AT THE TIME WHEN THE ASSESSEE WROTE OFF THE AMOUNT CLAIMING THE SAME AS IRRECOVERABLE. IN THIS REGARD, THE APPELLANT HAS TO STATE THAT MERELY ON THE BASIS OF THE OBSERVATION MADE IN CASE OF THIRD PARTY, THE A.O. COULDN'T JUMP TO CONCLUSION THAT THE CLAIM OF THE ASSESSEE I N FOUND TO BE NON- GENUINE. THE APPELLANT HAS TRIED HARD FOR THE RECOV ERY OF LOANS GIVEN TO BOTH THE PARTIES AND FINALLY THE SAME HAD BEEN WRIT TEN OFF IN THE YEAR UNDER CONSIDERATION. THE A.O. HAS WRONGLY TAKEN SHELTER O F THE THIRD PARTY WHO SUCCEEDED IN RECOVERY OF ITS DUES FROM THE DOLPHIN METAL (I) LTD. LIKEWISE WE HAVE TO STATE THAT THE OTHER PART NAMELY ASSOCIA TED TRADECOM HAS FILED A SUIT AGAINST DOLPHIN METAL (I) LTD FOR ITS RECOVERY OF DUES FOR THE SIMILAR YEAR UNDER CONSIDERATION. THE EVIDENCES REGARDING SUITS FILED BY ASSOCIATED TRADECOM ARE ALSO ENCLOSED HEREWITH AS P ER PAGE NO. 25 TO 40, WHICH PROVED BEYOND THE DOUBT THAT THE PARTY DOLPHIN METAL (I) LTD IS A DEFAULTER AND CLAIM OF THE APPELLANT IS GENUINE AND LEGAL ONE. THE LD. A.O. HAS RELIED ON VARIOUS DECISIONS AS CIT ED ON 6, PARA 3.2.4, WHICH ARE NOT AT ALL APPLICABLE IN ASSESSEE'S CASE , AS THE ABOVE LOANS GIVEN TO BOTH THE PARTIES IN NORMAL COURSE OF BUSINESS , WHICH IS CLEARLY JUSTIFIABLE FROM THE ABOVE SUBMISSION AS WELL AS EVIDENCES ENCL OSED HEREWITH. IN VIEW OF THIS, THE ENTIRE CLAIMED OF RS. 1,00.00,000/- WR ITTEN AS BAD DEBT MAY PLEASE BE CONSIDERED AS GENUINE BUSINESS LOSS AND B E ALLOWED ACCORDINGLY.' 3.3. THE APPELLANT HAD ALSO MADE THE FURTHER WRITTE N SUBMISSION VIDE ITS LETTER DATED 01 /02/2016 AND THE SAME HAVE ALSO BEEN CONSI DERED. 3.4. DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 10 - CLAIM OF BALANCE WRITTEN OFF OF RS.1,00,00,000/- IN RESPECT OF LOANS GRANTED BY THE APPELLANT TO TWO DIFFERENT PARTIES BHAGYAM INDUSTRI ES PVT LTD. AT RS.60,00,000/- IN THE MONTH OF JUNE 2009 AND DOLPHIN METAL INDIA LTD. AT RS.40,00,000/- IN APRIL 2010. SINCE THE MONEY COULD NOT BE RECOVERED SINCE GRANTING THE LOANS TO BOTH THE PARTIES AND HENCE IN THE YEAR UNDER CONSIDERATION T HESE LOANS WERE WRITTEN OFF AS NON RECOVERABLE. THE AO HAS DISCUSSED VARIOUS REASO NS FOR NON ACCEPTANCE OF THE SUBMISSION OF THE APPELLANT IN PARA 3.2.1 TO 3.2.5 OF THE ASSESSMENT ORDER. 3.5. THE APPELLANT HAS CLAIMED THAT THESE LOANS WER E GRANTED TO THE AFORESAID PARTIES IN THE ORDINARY COURSE OF BUSINESS AND THER EFORE THE SAME ARE ALLOWABLE U/S. 37 OR SECTION 36()(VII) OF IT ACT. IT WAS ALSO ARGU ED THAT THE APPELLANT WAS ENGAGED IN MONEY LENDING BUSINESS. FOR SUPPORT, IT SUBMITTE D COPY OF MEMORANDUM OF ASSOCIATION OF THE APPELLANT. THESE ADVANCES WERE M ADE THROUGH PROPER BANKING CHANNEL WHICH WAS VERIFIABLE FROM THE BANK STATEMEN T. THE DETAILED SUBMISSION GIVEN BY THE APPELLANT HAS BEEN REPRODUCED IN THE P RECEDING PARA OF THIS ORDER. 3.6. HAVING CONSIDERED THE FACTS AND SUBMISSIONS, T HE APPELLANT'S CLAIM THAT THE APPELLANT WAS IN THE BUSINESS OF MONEY LENDING IS N OT VERIFIABLE FROM THE COPY OF THE MEMORANDUM OF ASSOCIATION SUBMITTED. THE RELEVA NT CLAUSES OF THE MAIN OBJECT UPON WHICH THE APPELLANT PLACED RELIANCE ARE REPROD UCED AS UNDER: 'A.3. TO CARRY ON THE BUSINESS OF AN INVESTMENT COM PANY AND TO INVEST IN AND HOLD AND OTHERWISE DEAL IN SHARES, STOCKS, DEBENTURES, D EBENTURE-STOCKS, BOUND OBLIGATIONS AND SECURITIES ISSUED OR GUARANTEED BY ANY COMPANY CONSTITUTED OR PRIVATE INDUSTRIAL ENTERPRISES CARRYING ON BUSINESS IN INDIA OR ELSEWHERE AND SHARES DEBENTURES, DEBENTURE- STOCKS, BONDS SECURIT IES ISSUED GUARANTEED BY ANY GOVERNMENT STATE , DOMINION SOVEREIGN PUBLIC BODY O R AUTHORITY, SUPREME, MUNICIPAL LOCAL OR OTHERWISE WHETHER IN INDIA OR EL SEWHERE AND TO PROVIDE MERCHANT BANKING SERVICES BY ACTING AS MANAGER TO T HE PUBLIC ISSUE OR BROKERAGE, LOAN SYNDICATION, GUARANTEE AND ALSO TO ACT AS REGI STRAR TO THE ISSUE, INVESTMENT SCHEMES OF THE COMPANIES, BODIES CORPORATE AND ALSO TO CARRY ON THE BUSINESS OF PROJECT FINANCING, SHARES AND SECURITIES, FINANCING AND TO ACT AS SHARES AND STOCK BROKERS AT ANY PLACE IN INDIA IN CONSULTATION WITH THE RULES AND REGULATIONS OF VARIOUS STOCK EXCHANGES IN INDIA IN ACCORDANCE WITH THE GUIDELINES FRAMED BY THE SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) FROM TIME TO TIME. B.2 TO FORM, CONSTITUTE, FLOAT LEND MONEY TO ASSIST AND CONTROL SIMILAR ASSOCIATIONS OR UNDERTAKINGS WHATSOEVER. B-15 TO ACT AS DISTRIBUTORS, DEALERS, EXPORTERS, IM PORTERS, AGENTS AND TO UNDERTAKE AND CARRY ON ANYWHERE IN INDIA OR ABROAD ANY OR ALL THE TRADES AND BUSINESS OF GINNERS, PACKERS, BALERS, SPINNERS, WEA VER, PROCESSORS AND MANUFACTURERS OF ALL TYPES OF YAM, FIBRES, FABRICS, COTTON, WOOL, SILK, FLAX, HEMP, JUTE, CELLULOSE AND NON CELLULOSE PRODUCTS, NYLON, POLYSTER WHETHER TEXTILE, NETTED OR LOOPED AND ALSO FIBROUS OR TEXTILE SUBSTANCES ALTER ING, ADDING, BLEACHING, BLENDING, CARBONIZING, CALENDARING, CONVERTING, COLOURING, CU RING, CREEPING, DYEING, DOUBLING, DIPPING, DEWATERING, DEVELOPING, ENLARGIN G, EXTRACTING, FISHING, IMPROVING, KNITTING, KNOCTING,, MANIPULATING, MERCE RIZING, MAKING, PRINTING, PREPARING, RECONDITIONING, REFINING, SIZING, SOURCI NG, SANFORIZING, TREATING, TWISTING, THINNING, TEXTURISING, WATERING, WASHING, WORKING, UTILIZING. ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 11 - B.33 TO LEND, INVEST OR OTHERWISE EMPLOY OR DEAL WI TH MONEY BELONGING TO OR ENTRUSTED TO THE COMPANY IN SECURITIES AND SHARES O R OTHER MOVABLE OR IMMOVABLE PROPERTY OR WITHOUT SECURITY UPON SUCH TERM AND IN SUCH MANNER AS MAY BE THOUGHT FROM TIME TO TIME, TO VERY SUCH TRANSACTIONS AND IN VESTMENTS IN SUCH MANNER AS THE DIRECTORS MAY THINK SUBJECT TO THE PROVISION OF THE COMPANIES ACT, 1956. B-38 TO CARRY ON BUSINESS AS CONSIGNORS, CONSIGNEES AND AGENTS AND TO BUY, SELL, IMPORT, RESELL, EXCHANGE, MANUFACTURE OTHERWISE DEA L IN ALL KINDS AND CLASSES OF COTTON, WOLLEN, RAYON, SILK, ART SILK, NYLON, JUTE, SYNTHETIC, OTHERS NATURAL MAN - MADE STAPLE FIBRES, FABRICS, YARN, THREAD AND MATER IALS MADE THEREFROM AND OTHER SYNTHETIC FABRICS, MATERIALS AND GARMENTS. B-46 TO CARRY ON ALL KINDS OF AGENCY BUSINESS AND A S BUYING AND SELLING AGENTS OF ALL ARTICLES, THINGS, COMMODITIES AND PRODUCTS.' 3.7. THUS FROM THE ABOVE CLAUSES OF THE MAIN OBJECT NOWHERE IT COULD BE SAID THAT THE LENDINGS GIVEN TO THE AFORESAID TWO PARTIE S WERE MADE IN THE ORDINARY COURSE OF ITS BUSINESS. EVEN AS PER THE COPY OF LOA N AGREEMENT SUBMITTED THE AFORESAID LOANS WERE TEMPORARY IN NATURE. THUS THE CONTENTION OF THE APPELLANT IN THIS REGARD IS NOT FOUND TO BE ACCEPTABLE. FURTHER THESE LOANS WERE GRANTED BY THE APPELLANT IN THE PRECEDING YEARS AND UPON SUCH LOAN S NO INTEREST INCOME HAS BEEN RECEIVED BY THE APPELLANT TILL THE YEAR UNDER CONSI DERATION. THUS THE REQUIREMENT OF THE PROVISIONS OF SECTION 36(2) IS NOT GETTING FULF ILLED AS THE INTEREST INCOME PERTAINING TO THE AFORESAID LOANS HAVE NOT BEEN SHO WN AS INCOME IN THE PRECEDING YEARS OR IN THE YEAR UNDER CONSIDERATION IN THE BOO KS OF ACCOUNTS. THUS IN ABSENCE OF FULFILLMENT OF THE CONDITION U/S. 36(2) OF IT AC T THE DEDUCTION OF THE BAD DEBT COULD NOT BE ALLOWED. THE APPELLANT'S CLAIM U/S. 37 (1) OF IT ACT IS ALSO FOUND NOT CORRECT FOR THE REASON THAT THE APPELLANT HAS NOT E STABLISHED THAT THE LENDINGS GIVEN TO THESE PARTIES WERE IN RESPECT OF BUSINESS OF THE APPELLANT CARRIED OUT. AS HAS BEEN DISCUSSED IN THE PRECEDING PARA THAT THESE LOA NS WERE IN NO WAY CONNECTED WITH THE OBJECT CLAUSE OF THE MEMORANDUM OF ASSOCIA TION. THE APPELLANT HAS ALSO UNABLE TO SUBMIT ANY DETAILS AND EVIDENCES TO PROVE THAT M/S.BHAGYAM INDUSTRIES PVT LTD. WAS NOT TRACEABLE FROM ANY SOURCE OF INFOR MATION. EVEN IN THE LOAN AGREEMENTS THE SIGNATORIES AS WITNESSES ARE ALSO NO T IDENTIFIABLE AS THEIR NAMES AND COMPLETE ADDRESSES ARE NOT MENTIONED THEREIN. EVEN NO CHEQUES FROM BHAGYAM INDUSTRIES PVT LTD. HAVE BEEN TAKEN FROM THE SAID P ARTY AS A SECURITY AS INDEMNITY. FOR THE SAKE OF ARGUMENT EVEN IF IT IS ASSUMED THAT THE APPELLANT HAS GRANTED THE ADVANCES IN THE ORDINARY COURSE OF BUSINESS OF FINA NCING, IN THAT CASE THE INTEREST INCOME COULD HAVE BEEN DERIVED SINCE GRANTING LOAN TO BHAGAYM INDUSTRIES IN JUNE 2009 AND DOLPHIN METALS INDIA LTD. IN JUNE 2010. BU T BY NOT DERIVING ANY INTEREST INCOME FROM THESE PARTIES THE APPELLANT'S CONTENTIO N OF THE BUSINESS OF FINANCE AND LENDINGS IN THE ORDINARY COURSE OF BUSINESS IS NOT ESTABLISHED. EVEN AS PER CLAUSE B - 15, THE LENDINGS ON THE TERMS TO BE DECIDED BETWE EN THE APPELLANT AND THE CUSTOMERS OR OTHER COMPANIES DEALING WITH THE APPEL LANT GRANTED IN RESPECT OF THE GUARANTEE AND THE PERFORMANCE OF ANY CONTRACT COULD BE REGARDED AS BUSINESS IN ORDINARY COURSE AS PER THE MEMORANDUM OF ASSOCIATIO N. HOWEVER, IN THE APPELLANT'S CASE NEITHER ANY TERMS AND CONDITION OF LENDINGS HAVE BEEN BROUGHT ON RECORD, NOR IT HAS BEEN PROVED THAT THOSE TWO PARTI ES WERE CUSTOMERS OR HAVING ANY ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 12 - DEALING WITH THE APPELLANT COMPANY. THEREFORE, THES E LENDINGS COULD NOT BE SAID TO BE COVERED IN THE ORDINARY COURSE OF BUSINESS. 3.8. THE AO ALSO OBSERVED THAT THE LOAN AGREEMENT W ITH BHAGAYM INDUSTRIES WAS DATED 09.07.2009 (CORRECTLY 27.07.2009) WHILE T HE AGREEMENT WAS SHOWN TO BE EXECUTED ON 6.6.2009. IN OTHER WORDS WHEN THE NON J UDICIAL STAMP OF RS.100/- HAD BEEN PURCHASED ONLY ON 27.07.2009 THEN HOW COUID TH IS AGREEMENT BE EXECUTED ON 06.06.2009, IT MEANS THIS AGREEMENT HAS BEEN BACKDA TED. THEREFORE THE AUTHENTICITY OF THE SAID AGREEMENT WAS IN DOUBT. IT HAS ALSO BEE N NOTICED THAT THE APPELLANT COMPANY NEVER DEPOSITED THE CHEQUE OBTAINED FROM DO LPHIN METAL INDIA LTD. NOR ANY LEGAL PROCEEDINGS WERE INITIATED AGAINST BOTH T HE PARTIES DESPITE BEING FAILED TO RECOVER EVEN A SINGLE RUPEE OUT OF THE MONEY PAID T O THEM. ON THE CONTRARY THE AO OBSERVED THAT DOLPHIN METAL HAS REPAID THE ROLLING CHARGES TO ANOTHER PARTY VIZ. GOPAL IRON AND STEEL COMPANY GUJARAT LTD. WHICH HAS PROVED THAT THE DEBT COULD NOT BECOME BAD AT THE TIME WHEN APPELLANT WROTE OFF THE AMOUNT CLAIMING THE SAME AS IRRECOVERABLE AS THE CLAIM IN RESPECT OF THE SAI D PARTY WAS FOUND NOT GENUINE. THE APPELLANT HAS RELIED UPON VARIOUS DECISIONS /JU DGMENTS IN HIS FAVOUR, BUT THE SAME ARE NOT FOUND RELEVANT BECAUSE THE APPELLANT I S FOUND NOT TO BE GRANTED THE LOANS AND ADVANCES TO THE AFORESAID TWO PARTIES IN ITS ORDINARY COURSE OF BUSINESS AS DISCUSSED IN THE PRECEDING PARAS. EVEN, THE APPE LLANT HAS NOT EVEN PROVED THAT THESE ADVANCES WERE MADE TO ITS BUSINESS ASSOCIATES . FOR EXAMPLE IN THE CASE OF PATNAIK & CO. LTD., THE HON'BLE COURT HAS DECIDED T HE ISSUE IN VIEW OF THE OLD PROVISIONS OF SECTION 28(I) & HAS ALLOWED THE REVEN UE LOSS ON THE ISSUE TOTALLY DIFFERENT FROM THE FACTS OF THE APPELLANT. LIKEWISE IN THE CASE OF DCIT VS. HINDUSTAN MI SWACO LTD., THE ISSUE INVOLVED WAS IN RESPECT OF CLAIM OF BAD DEBT U/S. 36(1 ](VII) OF THE I. T. ACT R.W. 36(2) (I) OF I. T. ACT WHICH HAS ALREADY BEEN DISCUSSED IN THE APPELLANTS CASE IN THE PRECEDING PARAS OF THIS ORDER. 3.9. THE AO HAS ALSO RELIED UPON VARIOUS JUDGMENTS IN SUPPORT OF THE CONTENTION THAT THE NON RECOVERABLE LOANS FROM THE SAID PARTIE S WERE NOT THE DEDUCTIBLE EXPENDITURES AGAINST THE INCOME OF THE YEAR UNDER C ONSIDERATION. 3.10. IN VIEW OF THE AFORESAID DISCUSSION, THE CLAI M OF THE WRITTEN OFF AS BAD DEBT OF THE LENDINGS GRANTED TO BOTH THE PARTIES IS NOT ALL OWABLE UNDER THE PROVISIONS OF IT ACT AND THE AO HAS RIGHTLY DISALLOWED THESE CLAIMS OF DEDUCTIONS. THUS, DISALLOWANCE MADE BY THE AO IS CONFIRMED. 8. WE DEEM IT APPROPRIATE FIRST OF ALL TO DEAL WITH RELEVANT DOCUMENTS ON RECORD. PAPER BOOK PAGES 6 TO 50 COMPRISE OF ASSESSEES MEM ORANDUM INCLUDING ITS MONEY LENDING ACTIVITY CLAUSE, COPY OF LEDGER ACCOUNTS PE RTAINING TO BOTH ENTITIES M/S. BHAGYAM INDUSTRIES PVT. LTD. AND M/S. DOLPHIN METAL (INDIA) LTD. RIGHT FROM ASSESSMENT YEAR 2010-11 UP TO THE IMPUGNED ASSESSME NT YEAR ALONGWITH NECESSARY BANK STATEMENTS HIGHLIGHTING THE ADVANCES IN QUESTI ON TO HAVE BEEN ACTUALLY GIVEN THROUGH BANKING CHANNEL, CORRESPONDING LOAN AGREEME NTS, EVIDENCE INDICATING CIVIL SUIT FILED BY ONE M/S. ASSOCIATED TRADECON AGAINST THE SAID LATTER ENTITY AS WELL AS ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 13 - INITIATING SECTION 138 CHEQUE DISHONOUR CRIMINAL PR OCEEDINGS, LATTER COMPANYS INCORPORATION AS PER CIN ALLOTTED UNDER COMPANIES A CT AND ITS BLANK CHEQUE(S) GIVEN AS COLLATERAL SECURITY; RESPECTIVELY. 9. WE NOW PROCEED TO EXAMINE THE INSTANT ISSUE IN L IGHT OF RELEVANT FACTUAL BACKDROP AS EMANATING FROM PRECEDING PARAGRAPHS. T HERE DOES NOT APPEAR TO BE MUCH DISPUTE ABOUT THE BASIC FACT ON RECORD. THE A SSESSEE HAD ACTUALLY ADVANCED THE TWO SUMS IN QUESTION OF RS.60LACS AND RS.40LACS TO M/S. BHAGYAM INDUSTRIES PVT. LTD. AND M/S. DOLPHIN METAL (INDIA) LTD. THE CORRESPONDING LOAN AGREEMENTS DEMONSTRATE THAT THE PARTIES IN QUESTION HAD AGREED FOR INTEREST @ 13 TO 14% PER ANNUM ON REDUCING BALANCE METHOD. THE ASSESSING OFF ICER AND CIT(A) ARE FIRST OF ALL OF THE VIEW THAT THE ASSESSEE HAS FAILED IN PRO VING ITSELF TO BE AN ENTITY ENGAGED IN MONEY LENDING BUSINESS. WE FIND THAT HONBLE KE RLA HIGH COURT IN (2014) 45 TAXMANN.COM 118 (KERLA) PENINSULAR PLANTATIONS LTD. VS. ACIT HOLDS THAT SUCH A SPECIFIC MONEY LENDING CLAUSE IS NOT NECESSARY AS I T IS VERY MUCH POSSIBLE FOR A COMPANY TO LEND MONEY TO ANOTHER ENTITY EVEN IN ABS ENCE OF A MONEY LENDING CLAUSE. THEIR LORDSHIPS ARE OF THE VIEW THAT THE T EST IN SUCH A CASE WOULD BE AS TO WHETHER THE TRANSACTION IN QUESTION HAS TAKEN PLACE IN ORDINARY COURSE OF BUSINESS OR NOT. THE ASSESSEES ABOVE REFERRED EVIDENCE SUFFIC IENTLY INDICATES THAT IT HAD PROPOSED TO CHARGE INTEREST ON THE ADVANCES IN QUES TION GIVEN THROUGH BANKING CHANNEL. WE CONCLUDE THAT THE MONEY IN QUESTION AD VANCED AS PER ITS ABOVE OBJECT CLAUSE OR FOR THAT EVEN IN ABSENCE OF OBJECT CLAUSE AMOUNTED TO A TRANSACTION IN ITS ORDINARY COURSE OF BUSINESS ONLY. BOTH THE LOWER A UTHORITIES CORRESPONDING FINDING BY THIS EFFECT ACCORDINGLY STAND REVERSED. 10. NEXT COME RIVAL CONTENTIONS QUA GENUINENESS OF ASSESSEES MONEY LENDING AGREEMENT(S). THE REVENUES CASE IS THAT FORMER LO AN AGREEMENT IS STATED TO BE EXECUTED ON 06.06.2009 WHEREAS THE RELEVANT DOCUMEN T IS DATED 27.07.2009. IT THUS PLEADS THAT THE ASSESSING OFFICER AS WELL AS CIT(A) HAVE RIGHTLY QUESTIONED GENUINENESS OF THE SAID LOAN AGREEMENT. WE SEE NO SUBSTANCE IN THE INSTANT ARGUMENT. IT IS NOTICED THAT THE AMOUNT IN QUESTIO N COMPRISES OF THREE MONEY ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 14 - TRANSFERS VIDE CHEQUES / BANKING CHANNEL ENTRIES DA TED 08.06.2009, 10.06.2009 AND 11.06.2009 INVOLVING SUMS OF RS.50LACS AND RS.10LAC S EACH FOLLOWED BY A RECEIPT OF RS.10LACS; RESPECTIVELY LEAVING BEHIND NET SUM OF R S.60LACS. THESE TRANSACTIONS READ WITH LOAN AGREEMENT DATED 06.06.2009 IN QUESTI ON MAKE IT CLEAR THAT BOTH THE PARTIES HAD FIRST ENTERED INTO AGREEMENT AND THEREA FTER THE SAME WAS ATTESTED ON 27.07.2009. THE ABOVE LOAN AGREEMENT IS VERY MUCH A GENUINE DOCUMENT READ TOGETHER WITH ALL THE ABOVESTATED SURROUNDINGS FACT S AND CIRCUMSTANCES. THE MERE FACT THAT THE NAME OF AUTHORIZED PERSON ACTING ON B EHALF OF THE M/S. BHAGYAM INDUSTRIES PVT. LTD. IS NOT SPECIFIED DOES NOT IN O UR OPINION FORM THE SOLE REASON TO DISBELIEVE ALL THE SAID FACTS AND CIRCUMSTANCES IND ICATING THE ASSESSEE TO HAVE ACTUALLY PAID THE AMOUNT IN QUESTION THROUGH BANKIN G CHANNEL BY WAY OF A LOAN AGREEMENT. THE PAYEE CONCERNED DID NOT RETURN THE S AID AMOUNT FOR ALMOST THREE YEARS. WE QUOTE HONBLE APEX COURTS LANDMARK JUDG MENT IN CHAINRUP SAMPATRAM V. CIT (1953) 24 ITR 481 (SC) SETTLING THE LAW THAT ANTICIPATED LOSSES CAN BE BOOKED AT FIRST SIGN OF PROBABILITY. WE THUS OBSER VE THAT NON RECOVERY OF THE AMOUNT IN QUESTION FOR A CONTINUOUS TIME PERIOD OF THREE YEARS FORMED A SUFFICIENT REASON FOR THE ASSESSEE TO WRITE OFF THE CORRESPOND ING AMOUNT OF RS.60LACS PERTAINING TO THE SAID FORMER ENTITY M/S. BHAGYAM I NDUSTRIES (SUPRA). 11. IT FURTHER TRANSPIRES THAT ASSESSEES CASE QUA WRITE OFF REGARDING LATTER ENTITY M/S. DOLPHIN METAL (INDIA) LTD. IS MUCH STRONGER T HAN THAT OF FORMER ONE ACCEPTED HEREINABOVE. CASE RECORDS SUGGEST THAT THE SAID EN TITY HAD BEEN FACING BOTH THE CIVIL AS WELL AS SECTION 138 PROSECUTION PROCEEDINGS FOR HAVING NOT DISCHARGED ITS LIABILITY IN CASE OF M/S. ASSOCIATED TRADECOM. PAG E 48 OF THE PAPER BOOK REVEALS THAT THIS LATTER ENTITY HAD HELD ALREADY ITS ANNUAL GENERAL MEETING WAY BACK ON 29.09.2009. ITS AUTHORIZED SIGNATORY DETAILS/DULY INCORPORATED IN THE CORRESPONDING LOAN AGREEMENT IN PAGE 34 PARA 9. IT HAD ALSO SUBM ITTED COLLATERAL SECURITY IN THE NATURE OF BLANK CHEQUES. MR. SINGH AT THIS STAGE V EHEMENTLY SUBMITS THAT THESE BLANK CHEQUES DO NOT FORM A VALID COLLATERAL SECURI TY. WE DO NOT SEE ANY SUBSTANCE IN THE INSTANT PLEA SINCE THE ISSUE BEFORE US IS TH AT OF SUNDRY BALANCES WRITE OFF THAN THAT OF VALIDITY OF THE SAID NEGOTIABLE INSTRUMENTS . WE REFER TO OUR PRECEDING ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 15 - DETAILED DISCUSSION TO ONCE AGAIN CONCLUDE THAT ALL THESE FACTS AND CIRCUMSTANCES CONSTITUTED SUFFICIENT REASON FOR THE ASSESSEE TO W RITE OFF THE IMPUGNED SUM PERTAINING TO M/S. DOLPHIN METAL (INDIA) LTD. AMOUN TING TO RS.40LACS AS WELL AS THE GROSS SUM OF RS.1,00,000/-. 12. LEARNED DEPARTMENTAL REPRESENTATIVES NEXT VEHE MENT CONTENTION IS THAT SUCH CASES OF SUNDRY BALANCES WRITE OFF INVOLVE CAS H DEPOSIT INSTANCES FOLLOWED BY LOANS DISBURSED THROUGH CHEQUES LATER ON CLAIMED AS SUNDRY BALANCES WRITE OFF. MR. TALATI HAS FILED BEFORE US ASSESSEES BANK STATEMEN T WITH DUE CERTIFICATION THAT IT HAS NEVER DEPOSITED ANY CASH SUM SINCE INCORPORATION TI LL DATE. REVENUES ABOVE INSTANT ARGUMENT IS THEREFORE REJECTED. 13. NEXT LINE OF ARGUMENT BETWEEN LEARNED REPRESENT ATIVES IS QUA THE LEARNED CIT(A)S FINDINGS TREATING THE IMPUGNED WRITE OFF A S A CAPITAL LOSS AND NOT REVENUE IN NATURE SO AS TO BE DEPOSITED AGAINST INCOME OF T HE IMPUGNED ASSESSMENT YEAR. WE FIND THAT A CO-ORDINATE BENCH IN LATE SHRI JHAMU SUGHAND VS. ITO ITA NOS. 7803 & 7804/MUM/2011 DECIDED ON 29.08.2012 HAS DECI DED THE VERY ISSUE AGAINST THE REVENUE IN HOLDING THAT ADVANCES GIVEN IN THE N ATURE OF WORKING CAPITAL NOT RECOVERED AMOUNT TO BUSINESS LOSS WHEREIN REGISTRAT ION UNDER MONEY LENDING LAW IS NOT NECESSARY. LEARNED CO-ORDINATE BENCHS DETAILE D DISCUSSION QUA THIS EFFECT READ AS UNDER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS THE RELEVANT MATERIAL ON RECORD. AS IT IS EVIDENT FROM THE EARLIER ASSESSMEN T ORDERS AS WELL AS FROM THE ORDER OF THIS TRIBUNAL FOR THE AY 2004-05 THAT THE ASSESS EE WAS IN THE BUSINESS OF DISTRIBUTION, PRODUCTION AND FINANCE OF FILMS PRODU CTION. THE ADVANCE / LOANS WERE GIVEN IN THE ORDINARY COURSE OF THE BUSINESS AND NO T AS INVESTMENT IN CAPITAL FIELD. IT IS EVIDENT FROM THE RECORD AND PARTICULARLY FROM TH E ASSESSMENT ORDERS OF THE EARLIER YEARS THAT THE ASSESSEE USED TO GIVE ADVANC ES IN CONNECTION WITH THE BUSINESS ACTIVITY OF THE ASSESSEE. THEREFORE, WHEN THE BUSINESS OF THE ASSESSEE WAS CLOSED AND AFTER HIS DEATH THERE WAS NO CHANCE OF R ECOVERY OF DEBTS AS GIVEN IN THE ORDINARY COURSE OF THE BUSINESS THEN IT CANNOT BE S AID THAT THE DECISION TAKEN BY THE LEGAL HEIRS OF THE ASSESSEE IS NOT AN HONEST DECISI ON. IT IS PERTINENT TO NOTE THAT EVEN IF IT IS CONSIDERED THAT THE ADVANCES WERE GIVEN FO R FILM PRODUCTION BUT THE SAME IS IN THE NATURE OF WORKING CAPITAL OF THE ASSESSEE AN D WHEN THE BUSINESS WAS CLOSED AND THERE IS NO SCOPE FOR REVIVAL THEN THIS IS LOSS OF WORKING CAPITAL AND NOT IN THE CAPITAL FILED AS SUCH. EVEN OTHERWISE WHEN THE LEGA L REPRESENTATIVES OF THE ASSESSEE ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 16 - HAVE WRITTEN OFF THE BALANCES AS APPEARING ON THE A SSET SIDE OF THE BALANCE SHEET AS WELL AS THE ADVANCE AND LOAN APPEARING IN THE LIABI LITY SIDE OF THE BALANCE SHEET SIMULTANEOUSLY THEN ACCEPTING ONE OF THE ACT OF WRI TING BACK AND NOT ACCEPTING THE WRITE OFF UNRECOVERABLE AMOUNT IS CONTRARY TO THE R ULE OF CONSISTENCY OR UNIFORM PRINCIPLE ON THE PART OF THE AO. THE AO SHOULD HAVE ADOPTED THE SAME PRINCIPLE WHILE DEALING WITH THE IDENTICAL NATURE OF WRITE OF F AND WRITE BACK AMOUNTS BY THE ASSESSEE AS BOTH ARE REPRESENTING THE ADVANCE GIVEN AND ADVANCES RECEIVED IN THE ORDINARY COURSE OF THE BUSINESS AND IT IS VERY WELL POSSIBLE THAT THE ADVANCES GIVEN BY THE ASSESSEE WERE OUT OF ADVANCES RECEIVED BY TH E ASSESSEE. THUS IF THE WRITE OFF UNRECOVERABLE AMOUNTS ARE TREATED IN CAPITAL FILED THEN THE WRITE BACK AMOUNT WHICH IS CORRESPONDING TO THE WRITE OFF AMOUNT SHOU LD HAVE ALSO BEEN TREATED AS CAPITAL IN NATURE AND CANNOT BE TAXED AS INCOME OF THE ASSESSEE. THERE IS NO DISPUTE THAT THE LOANS TAKEN BY THE ASSESSEE WAS FOR BUSINE SS AND ADVANCES GIVEN WERE ALSO IN THE COURSE OF BUSINESS. THEREFORE THE SAME WERE NOTHING BUT REPRESENTING THE SAME NATURE OF TRANSACTION IN TRADING FIELD THOUGH OPPOSITE TO EACH OTHER. THE HON'BLE MADRAS HIGH COURT IN CASE OF CIT VS. CRESCE NT FILMS (P.) LTD. (SUPRA) WHILE DEALING WITH AN IDENTICAL ISSUE HAS OBSERVED AT PAGE NO.72 AS UNDER: IN ANY BUSINESS, CREDIT IS AN INDISPENSABLE PAR T AND ADVANCES OF A TEMPORARY NATURE WITH OR WITHOUT INTEREST IS A COMM ON INCIDENCE OF BUSINESS. IT IS NOT NECESSARY THAT EVERY BUSINESS S HOULD REGISTER ITSELF UNDER THE MONEY LENDERS ACT AND MAKE ANY CLAIM IN RELATIO N TO ANY ADVANCE MADE BY IT ONLY IN THE CAPACITY OF A PERSON CARRYIN G ON MONEY LENDING BUSINESS. IT IS ALSO NOT POSSIBLE TO AGREE WITH THE SUBMISSION THAT ANY MONEY SPENT TO SALVAGE THE CAPITAL WOULD AUTOMATICALLY RE SULT IN IMPRESSING THE MONEY SO SPENT WITH THE CHARACTER OF CAPITAL EXPEND ITURE. IF THE NATURE OF THE EXPENDITURE OR THE NATURE OF THE TRANSACTION IS SUCH AS TO BE REGARDED AS ONE IN THE REVENUE FIELD, IT CANNOT BE TREATED AS C APITAL, MERELY BECAUSE SUCH EXPENDITURE WAS INCURRED FOR THE PURPOSE OF SA LVAGING THE CAPITAL. IN THIS CASE, THE SUM OF ` 7,50,000 PAID BY THE DISTRI BUTOR WOULD HAVE BEEN LOST TO THE ASSESSEE, HAD THE PICTURE NOT BEEN COMPLETED AS THE MONEY PAID HIM FOR ACQUIRING DISTRIBUTION RIGHTS AND WITHOUT THE P ICTURE, THERE WAS NO LIKELIHOOD OF THE ASSESSEE REALISING HIS INVESTMENT . IN ORDER TO ENSURE THAT THE PICTURE WAS COMPLETED, THE ASSESSEE HAD AGREED TO LEND MONEY AND THAT LENDING WAS A SEPARATE TRANSACTION AND WAS NOT PART OF THE DISTRIBUTION ARRANGEMENT. THE MONEY SO LENT HAVING BEEN FOUND TO HAVE BECOME IRRECOVERABLE BY REASON OF THE PICTURE FAILING AT T HE BOX OFFICE AND THE PRODUCER BEING UNABLE TO REPAY HIS DEBTS, THE MONEY SO LOST TO THE ASSESSEE WAS RIGHTLY HELD BY THE COMMISSIONER AND THE TRIBUN AL TO BE A TRADING LOSS. LEARNED COUNSEL FOR THE REVENUE, HOWEVER, CONTENDED THAT THE DECISION OF THIS COURT IN THE CASE OF CIT V. COIMBATORE PICTURE S (P.) LTD. [1973] 90 ITR 452 SHOULD GOVERN THIS CASE. THE FACT THAT THE ASSE SSEE THEREIN WAS ALSO A DISTRIBUTOR EVEN AS THE ASSESSEE HERE IS A DISTRIBU TOR, DOES NOT IMPLY THAT THAT DECISION, WITHOUT ANYTHING MORE, WILL BE APPLI CABLE TO THIS CASE AS WELL. A DECISION IS TO BE REGARDED AS A PRECEDENT FOR ITS RATIO DECIDENDI AND NOT FOR THE FACTS IN RELATION TO WHICH SUCH RATIO WAS L AID DOWN. THE RATIO OF THAT CASE AS WE READ IT IS THAT BEFORE A DEDUCTION CAN B E CLAIMED ON THE GROUND OF BUSINESS LOSS, THE LOSS SHOULD HAVE BEEN INCURRE D IN THE COURSE OF BUSINESS, AND IT SHOULD BE IN THE NATURE OF REVENUE LOSS. WE ARE IN ENTIRE AGREEMENT WITH THAT PROPOSITION. ON THE FACTS OF TH IS CASE, THE LOSS TO THE ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 17 - ASSESSEE BEING A REVENUE LOSS WHICH HAD BEEN INCURR ED IN THE COURSE OF BUSINESS, THE ASSESSEE WAS ENTITLED TO DEDUCT THE S AME UNDER SECTION 37 OF THE SAID ACT. WE ANSWER THE QUESTION REFERRED TO US IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE.' 7. IT HAS BEEN HELD BY THE HON'BLE HIGH COURT THAT IT IS NOT NECESSARY THAT EVERY BUSINESS SHOULD REGISTER ITSELF UNDER THE MONEY LEN DERS ACT. IN ANY BUSINESS, CREDIT IS INDISPENSABLE PART OF ADVANCE OF TEMPORARY NATUR E WITH OR WITHOUT INTEREST IS COMMON IN BUSINESS. THUS, THE HON'BLE HIGH COURT HA S HELD THAT THE MONEY LENT DURING THE BUSINESS OF ACQUIRING, DISTRIBUTION RIGH TS IN THE PICTURE FOUND TO BECOME UNRECOVERABLE BY THE REASON OF PICTURE FAILING AT B OX OFFICE AND PURCHASER BEING UNABLE TO REPAY HIS DEBTS, THE MONEY SO LOST BY THE ASSESSEE HAS RIGHTLY HELD TO BE A TRADING LOSS. IN THE INSTANT CASE IT CANNOT BE A CA SE OF BAD DEBTS BUT IT IS CERTAINLY A TRADING LOSS AS ADVANCES GIVEN IN THE COURSE OF BUS INESS AND LOSS TO THE ASSESSEE IN VIEW OF THE FACTS AND CIRCUMSTANCES WHEN THE BUSINE SS OF THE ASSESSEE IS CLOSED AND FURTHER HE HAS ALREADY DIED. THIS VIEW IS ALSO FORT IFIED BY THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF DEVI FILMS P. LTD. VS. CIT. HENCE, WE DO NOT FIND ANY SUBSTANCE OR MERIT IN THE CONTENTION OF LD. DR THAT THE DECISION OF WRITING OFF WAS TAKEN BY THE LR OF THE ASSESSEE AFTER THE CONCL USION OF THE FINANCIAL YEAR BECAUSE THE DECISION FOR WRITE BACK WAS TAKEN BY LR OF THE ASSESSEE ONLY AFTER CONCLUSION OF THE FINANCIAL YEAR. THE AO WHILE EXER CISING HIS QUASI JUDICIAL AUTHORITY CANNOT APPLY DIFFERENT PRINCIPLES AND STA NDARDS WHILE DEALING WITH THE SIMILAR NATURE OF TRANSACTIONS. 8. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT BOTH THE WRITING OFF AS WELL A S WRITTEN BACK AMOUNTS SHOULD BE ACCEPTED BUT AT THE SAME TIME WHEN THERE IS NO BUSI NESS THE LOSS RETURNED BY THE ASSESSEE SHALL BE IGNORED AND THE INCOME SHOULD BE TREATED AS 'NIL'. HENCE, WE ALLOW THE CLAIM OF WRITE OFF BUT THE LOSS RETURNED BY THE ASSESSEE IS DISALLOWED AND INCOME IS TO BE TREATED AS 'NIL'. WE THEREFORE TAKE INTO ACCOUNT OUR PRECEDING DETAI LED ADJUDICATION IN VIEW OF THE RELEVANT FACTS AND CASE LAW INTER ALIA CONCLUDE THAT THE ASSESSEE HAS ADVANCED HE SUM IN QUESTION OF RS.60LACS AND RS.40LACS TO M/S. BHAGYAM INDUSTRIES PVT. LTD. AND M/S. DOLPHIN METAL (INDIA) LTD. TOTALING TO RS. 1CRORE THROUGH BANKING CHANNEL IN ITS ORDINARY COURSE OF BUSINESS IN LIEU OF CHARG ING INTEREST AND NON RECOVERY THEREOF FOR ALMOST THREE YEARS FORMED SUFFICIENT RE ASON TO WRITE THEM OFF AS SUNDRY BALANCES AS REVENUE LOSS TO BE ADJUSTED AGAINST ITS INCOME OF THE IMPUGNED ASSESSMENT YEAR. THE ASSESSEES SECOND SUBSTANTIVE GROUND IS ACCORDINGLY ACCEPTED. 14. LEARNED COUNSEL REPRESENTING ASSESSEE INVITES O UR ATTENTION TO ASSESSEES THIRD SUBSTANTIVE GROUND CHALLENGING SECTION 36(1) (III) INTEREST DISALLOWANCE OF ITA NO. 538/AHD/16 [GENERAL CAPITAL & HOLDING CO. P VT. LTD. VS. ITO] A.Y. 2012-13 - 18 - RS.2,22,586/- OUT OF RS.10,22,586/- MADE IN THE COU RSE OF ASSESSMENT. HE STATES VERY FAIRLY THAT THE ASSESSEE DOES NOT WISH TO PRES S FOR THIS THIRD SUBSTANTIVE GROUND. WE THEREFORE DECLINE THE INSTANT LAST SUBSTANTIVE G ROUND AS NOT PRESSED. 15. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS T HE 12 TH DAY OF FEBRUARY, 2018.] SD/- SD/- ( PRADIP KUMAR KEDIA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 12/02/2018 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0