SHIVALIK VENTURES P. LTD, MUMBAI V. DCIT (OSD-1), MUMBAI

ITA 5407/MUM/2015

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7937 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 20-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY MEHTA ANUJ KISNADWALA
• Keywords: Recovery proceedings; Search and seizure; Wrong claim; Bad and doubtful debts
• Section: 143(3); 37(1); 37; 132

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL E BENCH MUMB AI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.5407/MUM/2015 (ASSESSMENT YEAR 201 2-13 ) M/S SHIVALIK VENTURES PVT. LTD. PLOT NO. 756, STANEY FERNANDES WADI, D S BABREKAR MARG, DADAR (W), MUMBAI-400028. PAN: AALCS7683R VS. ACIT CC-4(2), AAYAKAR BHAVAN, .M. K. ROAD, MUMBAI-400020. A PPELLANT RESPONDENT ITA NO.5613/MUM/2015 (ASSESSMENT YEAR 2012-13 ) ACIT CC-4(2), AAYAKAR BHAVAN, .M. K. ROAD, MUMBAI-400020. VS. M/S SHIVALIK VENTURES PVT. LTD. PLOT NO. 756, STANEY FERNANDES WADI, D S BABREKAR MARG, DADAR (W), MUMBAI-400028. PAN: AALCS7683R A PPELLANT RESPONDENT APPELLANT BY : SHRI VIJAY MEHTA, ANUJ KISNADWALA (AR) RESPONDENT BY : SHRI MANJUN ATHA SWAMY (CIT-DR), RAJEEV GUBGOTRA DATE OF HEARING : 31.08.2018 DATE OF PRONOUNCEMEN T : 19.09.2018 ORDERUNDER SECTION 254(1)OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER; 1. THESE CROSS APPEALS FILED UNDER SECTION 253 OF THE ACT ARE DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEAL S)-52, MUMBAI [LD. COMMISSIONER (APPEALS)] DATED 01.09.2015, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER DATED 30.03.2014 PASSED BY THE ASS ESSING OFFICER UNDER SECTION 143(3) OF THE ACT FOR ASSESSMENT YEAR 2012- 13. 2. THE FACTS OF THE CASE DISCUSSED IN BRIEF. THE ASSES SEE IS A PRIVATE LIMITED COMPANY AND IS ENGAGED IN THE BUSINESS CIVIL CONSTR UCTION, REAL ESTATE AND ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 2 PROPERTY DEVELOPMENT. A SEARCH AND SEIZURE ACTION U NDER SECTION 132 OF THE ACT WAS CARRIED OUT ON 26.05.2011 BY DDIT (INVESTIG ATION) III, MUMBAI AT THE REGISTERED OFFICE OF THE COMPANY AND AGAIN O N 22.09.2011 BY UNIT-IV AT THE BUSINESS PREMISES OF ASSESSEE-COMPANY AS WEL L AS ON RESIDENTIAL PREMISES OF THE DIRECTORS OF THE ASSESSEE-COMPANY. DURING THE COURSE OF SEARCH, UNACCOUNTED CASH AND JEWELLERY AND INCRIMIN ATING DOCUMENTS ALLEGEDLY INDICATING UNDISCLOSED INCOME WERE FOUND AND SEIZED. THE ASSESSEE FILED ITS REGULAR RETURN OF INCOME FOR ASS ESSMENT YEAR 2012-13 ON 30.03.2013 DECLARING TOTAL INCOME AT RS. NIL UNDER THE NORMAL PROVISION OF THE ACT. THE ASSESSMENT FOR THE AY 2012-13 WAS COMP LETED ON 30.03.2014 UNDER SECTION 143(3). THE ASSESSING OFFICER WHILE P ASSING THE ASSESSMENT ORDER MADE VARIOUS ADDITIONS AND DISALLOWANCES INCL UDING DISALLOWANCE OF CLAIM FOR WRITE OFF OF LOSS OF RS. 19 CRORES RELATI NG TO A PROJECT SITUATED AT FORT AND DISALLOWANCE OF CLAIM FOR WRITE OFF OF LOS S OF RS. 15 CRORES RELATING TO A PROJECT SITUATED AT POWAI. IN THE APP EAL FILED BEFORE THE LD. COMMISSIONER (APPEALS), THE DISALLOWANCE OF WRITE O FF OF RS. 19 CRORES RELATING TO PROJECT AT FORT WAS DELETED. HOWEVER, T HE DISALLOWANCE OF WRITE OFF OF RS.15 CRORES RELATING TO POWAI PROJECT WAS S USTAINED BY LD CIT(A). THEREFORE, AGGRIEVED BY THE ORDER OF LD. COMMISSION ER (APPEALS), BOTH THE PARTIES HAVE FILED THEIR RESPECTIVE APPEALS ON THE ISSUES DECIDED AGAINST EACH OF THEM. ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 3 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE ASSE SSEE. THE ASSESSEE HAS RAISED FOLLOWING EFFECTIVE GROUND OF APPEAL: 1. THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN LAW AND IN FACT IN CONFIRMING DISALLOWANCE OF LOSS OF RS. 15,00,00,000 /- ON ACCOUNT OF PROJECT SITUATED AT POWAI, MUMBAI, PAID TO M/S. SAI LEE DEVELOPERS. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE FACTS RELATING T O THE ABOVE SAID ISSUE ARE DISCUSSED IN BRIEF. THE AO DISALLOWED THE CLAIM OF WRITE OFF OF RS.15.00 CRORES RELATING TO POWAI PROJECT AND THE LD CIT(A) HAS CONFIRMED THE SAME. THE LD. AR OF THE ASSESSEE SUBMITS THAT IN THE YEAR 2008, THE ASSESSEE COMPANY PAID RS.12 CRORES TO M/S SAI LEE DEVELOPERS AND RS.3.00 CRORES TO M/S SAI LEE INFOTECH, AN ASSOCIATE CONCERN OF SA I LEE DEVELOPERS FOR THE PURPOSE OF ACQUIRING DEVELOPMENT RIGHTS IN A SRA PR OJECT SITUATED AT POWAI. THUS THE ASSESSEE PAID A SUM OF RS. 15 CROR E IN AGGREGATE IN ANTICIPATION FOR A FORMAL JOINT VENTURE AGREEMENT. ACCORDING TO THE ASSESSEE, M/S SAI LEE DEVELOPER ALSO ACKNOWLEDGED R ECEIPT OF CASE 15 CRORES FOR POWAI PROJECT. 5. THE ABOVE SAID PLOT WAS ORIGINALLY OWNED BY M/S F ORBES FORBES & CAMPBELL LTD IN THE YEAR 1964. THE DEVELOPMENT RIG HTS OF THE PLOT CHANGED HANDS FROM TIME TO TIME AND IN THE YEAR 200 1, M/S SAI LEE DEVELOPERS GOT THE RIGHT TO DEVELOP THE PLOT. ACCOR DINGLY, IT SUBMITTED A ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 4 PROPOSAL TO SLUM DEVELOPMENT AUTHORITY (SRA) FOR DE VELOPMENT OF THE PLOT. AFTER ALLOCATION OF AREA FOR WELFARE PURPOSE S, IT WAS ENTITLED TO A SALEABLE AREA OF APPROXIMATELY 5,50,000 SQ.FT. TIL L 2007, M/S SAI LEE DEVELOPERS EXECUTED THE PROJECT ON ITS OWN. LATER IT ENTERED INTO A JOINT VENTURE AGREEMENT WITH M/S CHANDIWALA ENTERPRISES O N 08-08-2007 FOR CONTINUING DEVELOPMENT WORK OF THE PLOT. AS PER TH E JOINT VENTURE AGREEMENT, M/S SAI LEE DEVELOPERS AND M/S CHANDIWAL A ENTERPRISES WOULD SHARE THE PROFIT IN THE RATIO OF 47.50% : 52.50%. AT THAT POINT OF TIME, IT WAS AGREED THAT THEY ARE LEGALLY OBLIGED TO CONSTRU CT AND HANDOVER 2,83,000 SQ.FT., TO OTHER STAKE HOLDERS AND THE SALEABLE ARE A AVAILABLE WITH THEM WAS 3,15,500 SQ.FT. IN THE MEAN TIME, M/S CHANDIWALA ENTERPRISES ASSIGNED ITS RIGHTS TO M/S GREAT DEAL DEVELOPERS P LTD ON 18-01- 2008, AS PER WHICH M/S GREAT DEVELOPERS CLAIMED THAT IT IS THE ASSIGNE E FOR THE ENTIRE PROJECT. THE CLAIM SO MADE AFFECTED THE RIGHTS OF M/S SAI L EE DEVELOPERS AND HENCE IT DISPUTED THE SAME AND ACCORDINGLY ISSUED NOTICE OF TERMINATION OF JOINT VENTURE AGREEMENT IT ENTERED WITH M/S CHANDIWALA EN TERPRISES. ARBITRATION PETITION WAS ALSO FILED BY M/S SAILEE DEVELOPERS AG AINST THE ABOVE SAID TWO PARTIES. AT THIS STAGE, THE ASSESSEE STEPPED INTO THIS PROJECT AND PAID A SUM OF RS.15 CRORES TO M/S SAI LEE GROUP IN THE YEAR 20 08, AS STATED ABOVE, IN ANTICIPATION OF A JOINT VENTURE AGREEMENT. 6. HOWEVER, ON 18 TH JUNE 2009, M/S SAI LEE DEVELOPERS FILED A POLICE COMPLAINT AGAINST THE ASSESSEE COMPANY ALLEGING THA T ASSESSEE HAS FORCIBLY ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 5 TAKEN THE POSSESSION OF POWAI PROPERTY. THE POLICE PROTECTION WAS REQUESTED CLAIMING THAT THE RIGHT OF EXCLUSIVE POSS ESSION OF THE SAID PROPERTY BELONGS TO SAI LEE DEVELOPERS. A SIMILAR P OLICE COMPLAINT WAS FILED AGAIN ON 1 ST JULY 2009 ALLEGING THAT THE ASSESSEE HAD SENT SOME MEN TO FORCIBLY OCCUPY THE SAID PROPERTY. THEREAFTER ON 3 RD JULY 2009, M/S SAI LEE DEVELOPERS WITHDREW THE SUIT FILED AGAINST M/S CHAN DIWALA ENTERPRISES AND M/S GREAT DEAL DEVELOOPERS P LTD AND INSTEAD, FILED A CIVIL SUIT AGAINST THE ASSESSEE COMPANY CLAIMING THAT THE ASSESSEE HAS PAI D THE SUM OF RS. 12 CRORES FOR A JOINT-VENTURE PROJECT AT THANE AND NOT FOR POWAI PROPERTY. IN THE SUIT, M/S SAI LEE DEVELOPERS PLEADED THAT TOTAL CONSIDERATION TO BE PAID BY THE ASSESSEE FOR THANE PROJECT WAS RS. 125 CRORE S AND THE ASSESSEE HAS SO FAR PAID RS.12 CRORES ONLY. M/S SAI LEE DEVELOP ERS ALSO DISPUTED THE RECEIPT GIVEN BY IT ACKNOWLEDGING THE MONEY OF RS.1 2 CRORES RECEIVED BY IT, BY CONTENDING THAT THE ASSESSEE HAD FRAUDULENTLY OB TAINED SIGNATURE ON THE RECEIPT VOUCHER, WHICH MENTIONED POWAI PROJECT. TH US THE CASE OF M/S SAI LEE DEVELOPERS WAS THAT THE ADVANCE AMOUNT WAS PAID BY THE ASSESSEE FOR THANE PROJECT AND NOT FOR POWAI PROJECT AND FURTHER THE ASSESSEE IS TRYING TO OBTAIN FORCIBLE POSSESSION OF THE POWAI PROPERTY. 7. THE LD. AR FOR THE ASSESSEE FURTHER SUBMITS THAT TH E POWAI PROJECT IS STILL UNDER LITIGATION AND THE COURT HAS ORDERED STATUS Q UO. M/S SAI LEE WAS ALSO NOT READY TO RETURN THE AMOUNT PAID BY THE ASSESSEE . IN SUCH CIRCUMSTANCES THE ASSESSEE COMPANY OBTAINED A LEGAL OPINION FROM M/S P.S LEGAL, ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 6 ADVOCATES AND SOLICITORS. THE AFORESAID SOLICITORS, VIDE THEIR LETTER DATED 05-12-2011, EXPRESSED OPINION THAT THE RECOVERY OF RS. 12.00 CRORES AND THE ADDITIONAL AMOUNT OF RS. 3.00 CRORES WHICH ARE SUBJECT MATTER OF DISPUTE IS DOUBTFUL. IT WAS FURTHER OPINED THAT THE PROJECT IS LADEN WITH STRINGENT ULC CONDITIONS AND FURTHER MANY STAKE HOL DERS ARE HAVING RIGHTS OVER CONSTRUCTED AREAS. SINCE THE PROJECT WAS APPR OVED BY SRA, IT WOULD NOT BE POSSIBLE FOR THE ASSESSEE TO ENTER INTO ANY ARRANGEMENT WITH M/S SAI LEE DEVELOPERS WITHOUT OBTAINING PERMISSION FROM SR A AUTHORITIES, IT WAS OPINED BY SOLICITORS. THE SOLICITORS FURTHER OPINE D THAT ONLY RECOURSE NOW OPEN TO THE ASSESSEE IS TO CONTINUE WITH EXISTING L ITIGATION AND ALSO FILE A FRESH CIVIL SUIT PRAYING FOR A DECREE AGAINST SAI L EE DEVELOPER AND SAI LEE INFOTECH THAT A FORMAL AGREEMENT BE DIRECTED TO BE EXECUTED BY THEM IN FAVOUR OF THE ASSESSEE. ON THE BASIS OF LEGAL ADVI CE, THE ASSESSEE COMPANY CAME TO THE CONCLUSION THAT, UNLESS A CLEAR TITLE T O POWAI PROPERTY AND SRA APPROVAL FOR THE CHANGE OF DEVELOPER IS OBTAINED, T HE PROJECT CANNOT BE PROCEEDED WITH. THE CASE OF THE ASSESSEE IS THAT IT HAD SPENT MONEY ON THE SAID PROJECT IN THE COURSE OF ITS BUSINESS, I.E. TO ACQUIRE THE PROPERTY WITH THE INTENTION TO DEVELOP AND SELL THE SAME. HOWEVER , DUE TO THE CIRCUMSTANCES PREVAILING IN THIS CASE, THERE WAS GR EAT DEAL OF UNCERTAINTY IN OBTAINING RIGHTS OVER THE POWAI PROJECT AND ACCORDI NGLY IT WAS FELT THAT THE MONEY SPENT FOR THE ABOVE SAID PROJECT WAS IRRECOVE RABLE AND COMPLETELY LOST. THEREFORE, IN THE BEST FITNESS OF THE BUSINES S, THE ASSESSEE COMPANY ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 7 DECIDED THAT IT WOULD NOT BE RATIONAL TO CONSIDER T HE AMOUNT OF RS. 15.00 CRORES SPENT ON POWAI AS RECOVERABLE. EVEN IF THE CLAIM OF M/S SAI LEE DEVELOPERS THAT THE ABOVE SAID AMOUNT WAS PAID TOWA RDS THANE PROJECT IS ACCEPTED AS CORRECT FOR A MOMENT, THE ASSESSEE IS N OT IN A POSITION TO PAY THE BALANCE AMOUNT OF RS.115 CRORES AS ALLEGED TO BE PA YABLE. THE LD A.R SUBMITTED THAT M/S SAI LEE DEVELOPERS WAS ALSO NOT READY TO RETURN THE ABOVE SAID AMOUNT OF RS.15 CRORES. ACCORDINGLY A CO NSCIOUS DECISION WAS TAKEN BY THE BOARD OF DIRECTORS TO WRITE IT OFF AS BUSINESS LOSS. IT WAS SUBMITTED THAT ALL THE DOCUMENTARY EVIDENCES WERE F URNISHED BEFORE THE LOWER AUTHORITIES IN SUPPORT OF THE CLAIM. 8. THE LD A.R SUBMITTED THAT THE LOWER AUTHORITIES HAV E FAILED TO CONSIDER THE DOCUMENTS AND EXPLANATIONS PLACED BEFORE THEM EXPLA INING THE REAL DISPUTE. THE OBSERVATION OF LEARNED COMMISSIONER (APPEALS) T HAT THERE IS NOTHING TO SUGGEST THAT AMOUNT IS IRRECOVERABLE FROM SAI LEE D EVELOPERS IS WHOLLY UNTENABLE. THE ASSESSEE CANNOT WAIT FOR AN INDEFIN ITE PERIOD, I.E., TILL THE ISSUE/DISPUTE IS FINALLY DECIDED BY SUPREME COURT T O TAKE A DECISION IN THIS MATTER. HENCE THE ASSESSEE, IN ITS BOARD OF DIRECTO RS MEETING HELD ON 4 TH JANUARY 2012, HAS DECIDED TO WRITE OFF THE ADVANCE AMOUNT AS BUSINESS LOSS. THE COPY OF THE BOARD RESOLUTION IS ALSO PLACED ON RECORD. THE OBSERVATION OF LEARNED COMMISSIONER (APPEALS) THAT THE ASSESSEE NEVER TRIED TO RECOVER THE AMOUNT FROM THE SAID PARTY OR THE DECISION OF ASSESSEE TO WRITE-OFF THE AMOUNT IS PREMATURE IS ABSOLUTELY UNTENABLE. IT WAS ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 8 SUBMITTED THAT THE REVENUE AUTHORITY CANNOT BE ALLO WED TO SIT ON THE CHAIR OF BUSINESSMAN AND REGULATE THE MANNER OF CONDUCTING B USINESS. IT WAS FURTHER SUBMITTED THAT THE LOWER AUTHORITIES HAS NOT DOUBTE D THE GENUINENESS OF TRANSACTION OR THE PAYMENT MADE TO SAI LEE DEVELOPE R/INFOTECH. THE SAID PARTIES ARE ALSO NOT RELATED PARTIES. THE AMOUNT WA S SPENT IN THE ORDINARY COURSE OF BUSINESS. ACCORDINGLY, THE LD A.R CONTEND ED THAT THE CLAIM FOR DEDUCTION OF RS.15.00 CRORES PERTAINING TO POWAI PR OJECT LOSS SHOULD BE ALLOWED. IN SUPPORT OF HIS CONTENTIONS, THE LANDED AR OF THE ASSESSEE RELIED UPON THE DECISION OF BOMBAY HIGH COURT RENDERED IN CASE OF CIT VERSUS WACKHARDT INTERNATIONAL LTD [2009] 314 ITR 11(BOMBA Y), CIT VERSUS GOODLASS NEROLAC PAINTS LTD [1990] 188 ITR 1(BOMBAY ) AND THE DECISION OF TRIBUNAL IN KYATI REALOTRS PRIVATE LIMITED VERSU S ACIT IN ITA NO. 129/M/12 DATED 4 TH MARCH 2016. 9. ON THE OTHER HAND THE LD. DR FOR THE REVENUE SUPPOR TED THE ORDER OF THE AUTHORITIES BELOW PASSED ON THIS ISSUE. THE LD. DR FOR THE REVENUE FURTHER SUBMITS THAT THE ASSESSEE COULD NOT SUBSTANTIATE IT S CLAIM BEFORE THE LOWER AUTHORITIES. HE SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY DOCUMENTARY EVIDENCE TO SUBSTANTIATE HIS CLAIM EVEN BEFORE TRIB UNAL. THE ASSESSEE CLAIMS TO HAVE NOT ENTERED INTO ANY AGREEMENT WHEN THE PAYMENT OF RS.15 CRORES WAS MADE. THE VARIOUS DECISIONS CITED BY ASS ESSEE ARE DISTINGUISHABLE ON THE FACTS OF THE PRESENT CASE. T HE ASSESSEE HAS NOT GIVEN ANY COMPELLING REASON OR CIRCUMSTANCES TO WRITE OFF THE CLAIM. THE AMOUNT ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 9 WAS WRITTEN-OFF BY THE ASSESSEE ONLY TO AVOID THE L EGITIMATE TAX TO THE REVENUE. THE DISPUTE BETWEEN THE ASSESSEE AND M/S S AI LEE DEVELOPER IS STILL PENDING IN THE COURT OF LAW AND NOT FINALLY C ONCLUDED. HENCE THE CLAIM OF THE ASSESSEE IS PREMATURE. IN SUPPORT OF HIS SUB MISSIONS THE LD DR FOR THE REVENUE RELIED ON THE FOLLOWING DECISIONS (A) EMBASSY CLASSIC P LTD VS. ACIT (7 ITR (T) 287)(BANG .) (B) MADDI VENKATRAMAN & CO. VS CIT (SC DATED 02.12.1997 ) (C) INDIAN ALUMINUM COMPANY VS CIT (AIR 1972 SC1880) (D) CIT VS NAINITAL BANK LTD (AIR 1965 SC 1227) (E) ASSAM PESTICIDES AND AGRO VS CIT (227 ITR 846) (GAU ). 10. IN THE REJOINDER, THE LD A.R SUBMITTED THAT THE ASS ESSEE HAS PAID THE ADVANCE AMOUNT OF RS.15 CRORES IN THE YEAR 2008 AND TILL DATE NOTHING HAS BEEN RECEIVED BACK. NO FURTHER DEVELOPMENT HAS ALS O TAKEN PLACE. HE FURTHER SUBMITTED THAT M/S SAI LEE DEVELOPERS/INFOT ECH ARE NOT RELATED PARTIES IN ORDER TO DOUBT THE GENUINENESS OF THE DE AL. IN FACT, THE TAX AUTHORITIES HAVE NOT DOUBTED THE GENUINENESS OF THE DEAL AT ALL. THE LD A.R SUBMITTED THAT THE CLAIM OF THE ASSESSEE CAN BE VIE WED FROM ANOTHER ANGLE. HE SUBMITTED THAT, SINCE THE ASSESSEE IS ENGAGED IN REAL ESTATE BUSINESS, THE RIGHT OVER THE LAND IS ACTUALLY STOCK IN TRADE FO R THE ASSESSEE. ACCORDINGLY, AS PER THE ACCOUNTING STANDARD FOR VAL UATION OF INVENTORIES, THE STOCK IN TRADE SHOULD BE VALUED AT THE YEAR END AT COST OR MARKET VALUE, WHICHEVER IS LESS. IN THE INSTANT CASE, IN VIEW OF THE DISPUTES AND STRINGENT ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 10 SRA REGULATIONS, THE SOLICITORS HAVE EXPRESSED THE VIEW THAT THE RIGHT OF THE ASSESSEE OVER THE PROJECT CANNOT BE SAID TO HAVE BE EN CREATED. FURTHER, THEY HAVE EXPRESSED THE VIEW THAT THE VERY PURPOSE OF PA YMENT IS BEING DISPUTED BY M/S SAI LEE DEVELOPERS, IT CAN NEVER BE SAID THA T THE SAID SUM WOULD EITHER BE RECOVERED OR PRESERVED IN PROJECT. UNDER THESE CIRCUMSTANCES, THE MARKET VALUE OF THE RIGHT OF THE ASSESSEE SHOULD BE TAKEN AS NIL, IN WHICH CASE ALSO THE ENTIRE AMOUNT OF RS.19 CRORES WOULD H AVE BEEN ALLOWED AS DEDUCTION. THE LD A.R FURTHER SUBMITTED THAT THE B OARD OF DIRECTORS USUALLY REVIEW THE STATUS AND VIABILITY OF ALL IT P ROJECTS IN THEIR MEETING. ACCORDINGLY, IN THEIR MEETING HELD ON 04-01-2012, T HE BOARD OF DIRECTORS HAS REVIEWED THE STATUS AND VIABILITY OF ALL PENDIN G PROJECTS. INVITING OUR ATTENTION TO THE COPY OF MINUTES OF BOARD MEETING, THE LD A.R SUBMITTED THAT THE BOARD HAS ALTOGETHER EXAMINED THE STATUS O F 44 PROJECTS. INVITING OUR ATTENTION TO THE COPY OF MINUTES OF BOARD MEETI NG, HE SUBMITTED THAT MANY PROJECTS WERE CONSIDERED TO BE GOOD. HOWEVER, INVESTMENTS AGGREGATING TO RS.117.08 CRORES WERE CONSIDERED TO BE NOT RECOVERABLE. THE BOARD TOOK NOTE OF THE FACT THAT THE APPLICABLE ACCOUNTING STANDARDS MANDATE THAT AN ENTERPRISE MUST ENSURE THAT ITS ASS ETS ARE CARRIED AT NO MORE THAN THEIR RECOVERABLE AMOUNT. ACCORDINGLY THE BOA RD DECIDED TO WRITE OFF THE AMOUNT OF RS.117.08 CRORES. THE LD A.R SUBMITT ED THAT THE ASSESSING OFFICER HAS ACCEPTED THE WRITE OFF TO THE TUNE OF R S.83.08 CRORES AND DID NOT ACCEPT THE WRITE OFF OF RS.34 CRORES (15 CRORES + 1 9 CRORES). HOWEVER, THE ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 11 LD CIT(A) HAS DELETED THE ADDITION OF RS.19 CRORES. ACCORDINGLY, THE LD A.R SUBMITTED THAT IT IS A CONSCIOUS DECISION TAKEN BY THE BOARD OF DIRECTORS ON COMMERCIAL CONSIDERATIONS. ACCORDINGL Y HE CONTENDED THAT THE LOSS OF RS.15.00 CRORES CLAIMED BY THE ASSESSEE SHO ULD BE ALLOWED. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES ON THIS ISSUE AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITI ES. THE ASSESSING OFFICER HAS TAKEN THE VIEW THAT, IN THE BUSINESS OF REAL ES TATE, SUCH KIND OF DISPUTES IN PROPERTY DEALING IS VERY COMMON. THE AO HAS FUR THER TAKEN THE VIEW THAT THE PROJECT WOULD COMMENCE IN FUTURE, IF THE O N-GOING DISPUTE IS SETTLED IN FAVOUR OF THE ASSESSEE. THE ASSESSING OFFICER A LSO TOOK THE VIEW THAT THE WRITING OFF OF THE WHOLE PROJECT MERELY BECAUSE OF A DISPUTE/LITIGATION WOULD NOT BE A PRUDENT BUSINESS PRACTICE. HE ALSO OBSERVED THAT THE DISPUTE IS WITH REGARD TO THE PROJECT AND NOT WITH REGARD T O PAYMENT MADE BY THE ASSESSEE. HE ALSO TOOK THE VIEW THAT, EVEN IF THE ASSESSEE LOSES ITS CLAIM OVER POWAI PROPERTY, IT COULD STILL HAVE RIGHT OVER THANE PROPERTY. ACCORDINGLY THE ASSESSING OFFICER TOOK THE VIEW THA T, TILL THE CONCLUSION OF THE LITIGATION, THE AMOUNT PAID BY THE ASSESSEE CAN NOT BE TREATED AS LOSS. ACCORDINGLY THE AO DISALLOWED THE CLAIM FOR DEDUCTI ON OF LOSS OF RS.15.00 CRORES RELATING TO POWAI PROJECT. 12. BEFORE LD. COMMISSIONER (APPEALS), THE ASSESSEE URG ED THE SIMILAR CONTENTIONS AS SUBMITTED BEFORE US. THE LEARNED COM MISSIONER (APPEALS) ACCEPTED THE FACT THAT THE AMOUNT OF ADVANCE OF RS. 15 CRORES PAID BY ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 12 ASSESSEE WAS NOT QUESTIONED BY M/S SAI LEE DEVELOPE RS. THE LEARNED COMMISSIONER (APPEALS) ALSO TOOK THE VIEW THAT THER E IS NOTHING TO SUGGEST THAT M/S SAI LEE DEVELOPERS HAS REFUSED TO RETURN T HE AMOUNT OR IT IS NOT THE CASE THAT IT DOES NOT HAVE ANY ASSET FROM WHICH REC OVERY OF ABOVE SAID AMOUNT COULD BE MADE THROUGH LEGAL CHANNELS. THE LD CIT(A) ALSO TOOK THE VIEW THAT THE ASSESSEE DOES NOT APPEAR TO BE MAKING EFFORTS TO RECOVER THE ABOVE SAID AMOUNT OF RS.15.00 CRORES. ACCORDING TO LD CIT(A), WHAT THE ASSESSEE IS TRYING TO SAY IS THAT THEY NEED TO SHEL L OUT A FURTHER AMOUNT OF RS.110 CRORES TO ACQUIRE DEVELOPMENT RIGHTS IN THAN E PROJECT. ACCORDING THE LD CIT(A), GIVEN THE FACT THAT THE REAL ESTATE PROJECTS ARE USUALLY COMPLICATED, THE ASSESSEE CANNOT SIMPLY WRITE OFF A NY SUCH ADVANCE THE WAY IT WANTS, ESPECIALLY IN THE ABSENCE OF ANY COMP ELLING CIRCUMSTANCES OR REASONS. THE LD CIT(A) FURTHER OBSERVED THAT THE W RITING OFF OF ENTIRE AMOUNT AS EXPENDITURE DURING THE YEAR HAS IMPACT UP ON THE NET TAXABLE INCOME OF THE YEAR AND HENCE THIS ISSUE BECOMES AN IMPORTANT ISSUE FROM TAXATION POINT OF VIEW. THE LD CIT(A) ACCEPTED THE CONTENTIONS OF THE ASSESSEE THAT IT IS PREROGATIVE OF THE ASSESSEE TO DECIDE THE MANNER IN WHICH A BUSINESS IS TO BE CONDUCTED. HOWEVER HE TOOK THE VIEW THAT THE BUSINESS CANNOT BE RUN IN A WAY TO DELIBERATELY REDUCE THE T AXABLE INCOME. ACCORDINGLY THE LD CIT(A) CONCLUDED THAT THE CLAIM OF THE ASSESSEE IS PREMATURE. ACCORDINGLY THE LD CIT(A) HAS CONFIRMED THE DISALLOWANCE MADE BY THE AO. ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 13 13. IN THE PRESENT CASE, THE TAX AUTHORITIES HAVE NOT D ISPUTED THE PAYMENT OF RS. 15 CRORES MADE BY THE ASSESSEE TO SAI LEE DEVELOPER S. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE HAS MADE THE PAYMENT IN T HE ORDINARY COURSE OF ITS BUSINESS ACTIVITY FOR ACQUIRING THE DEVELOPMENT RIG HT. WE HAVE NOTED THAT THE ASSESSEE HAS EXPLAINED ALL THE FACTS IN DETAIL BEFORE LD. COMMISSIONER (APPEALS) AS NARRATED/EXTRACTED BY HIM IN PARA-14 O F THE IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE, THE RELEVANT CONTENTIO NS MADE BY THE ASSESSEE BEFORE LD CIT(A) ARE EXTRACTED BELOW:- 61. VIDE THE AFOREMENTIONED AGREEMENT, THE SAID PA RTIES AGREED TO SHARE THE PROFITS FROM THE PROJECT IN THE FOLLOWING RATIO: PARTICULARS PERCENTAGE PROFITS M/S. SAI LEE DEVELOPERS 47.5% M/S. CHANDIWALA BNIERORISES 52.5% 62. FURTHER, IN THE SAID JOINT VENTURE AGREEMENT TH E PARTIES HAVE AGREED THAT THEY ARE UNDER LEGAL OBLIGATION TO CONSTRUCT AND HA ND OVER CERTAIN BUILT AREA TO THE FOLLOWING PARTIES: SR. NAME OF PARTY AREA (SQ.FT.) 1 MANORANIAN BUILDERS & DEVELOPERS PVT. LTD. 156,000 SHREE SIDDHIUINAUAK DEVELOPERS 20,400 YARSHRAJ REALTORS PVT. LTD. 53,300 SHRI. BHAATUANIIBHAI BHANUSHALI 20,500 ACME STHAPATI LTD. 32,800 TOTAL 2,83,000 63. THUS, VIDE THE SAID AGREEMENT IT WAS AGREED BY THE PARTIES THAT DUE TO THE ABOVE, THE SAID PLOT OF LAND HAS ENCUMBRANCES TO TH E EXTENT OF APPROX. 2,90,000 SQ. FT. FURTHER, THEY AGREED THAT THE COMM ERCIALLY EXPLOITABLE AREA AVAILABLE WITH THEM WAS APPROX. 3,15,500 SQ. FT. 64. LATER, VIDE DEED OF ASSIGNMENT DATED 18 TH JANUARY 2008, M/S. CHANDIWALA ENTERPRISES ASSIGNED THEIR RIGHTS OF DEVELOPMENT TO M/S, GREAT DEAL DEVELOPERS PRIVATE LIMITED. CONSEQUENTLY, BY VIRTUE OF THE SAID ASSIGNMENT, M/S. GREAT DEAL DEVELOPERS PRIVATE LIMITED CLAIMED TO BE ASSIGNEE OF THE ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 14 ENTIRE PROJECT. HOWEVER, M/S. SAI LEE DEVELOPERS DI SPUTED THE SAME AND ISSUED NOTICE OF TERMINATION OF THE JOINT VENTURE A GREEMENT BETWEEN ITSELF AND M/S. CHANDIWALA ENTERPRISES. 65. M/S. SAI LEE DEVELOPERS ALSO FILED AN ARBITRATI ON PETITION NO. 213/2009 AGAINST M/S. CHANDIWALA ENTERPRISES AND M/S. GREAT DEAL DEVELOPERS PRIVATE LIMITED. 66. IN THE MEANWHILE, THE APPELLANT HAD PAID RS. 12 CRORES TO M/S, SAI LEE DEVELOPERS AND RS. 3 CRORES TO M/S, SAI LEE INFOTEC H. (BEING THE ASSOCIATE CONCERN OF M/ S. SAI LEE DEVELOPERS) FOR ACQUIRING THE DEVELOPMENT RIGHTS OF THE SAID PROJECT SITUATED AT POWAI. FURTHER, THE SA ID SUM WAS PAID IN ANTICIPATION OF A FORMAL JOINT VENTURE AGREEMENT. T HE RECEIPT ACKNOWLEDGMENT FROM M/S. SAI LEE STATING THAT THE P AYMENT IS RECEIVED TOWARDS POWAI PROJECT IS ENCLOSED HEREWITH FOR YOUR PERUSAL (COPY ENCLOSED). IT MAY BE NOTED THAT IN THE RECEIPTS M/S. SAI LEE D EVELOPERS HAVE ACKNOWLEDGED THAT THEY HAVE RECEIVED THE SAID SUM T OWARDS POWAI PROJECTS. 67. ON 18TH JUNE 2009, M/S. SAI LEE DEVELOPERS FILE D A POLICE COMPLAINT AGAINST THE COMPANY ALLEGING FORCIBLE POSSESSION OF THE SAID PROPERTY. THE POLICE PROTECTION WAS REQUESTED CLAIMING THAT THE R IGHT OF EXCLUSIVE POSSESSION OF THE SAID PROPERTY BELONGS TO M/S. SAI LEE DEVELO PERS. ALSO, SIMILAR POLICE COMPLAINT WAS FILED AGAINST THE APPELLANT ON 1 ST JULY 2009 ALLEGING THAT THEY HAD SENT SOME MEN TO FORCIBLY OCCUPY THE PROPERTY U NDER CONSIDERATION. 68. ON 3RD JULY 2009, M/S. SAI LEE DEVELOPERS WITHD REW THE SUIT FILED AGAINST M/S. CHANDIWALA ENTERPRISES AND M/ S. GREAT DEAL DE VELOPERS POT. LTD AND FILED A SUIT AGAINST THE APPELLANT COMPANY. 69. IN JULY 2009, M/S. SAI LEE DEVELOPERS FILED SUI T AGAINST THE COMPANY CLAIMING THAT THE APPELLANT HAD PAID THE SAID RS. 1 2 CRORES TOWARDS A JOINT VENTURE PROJECT AT THANE. IT WAS ALLEGED THAT THE T OTAL CONSIDERATION TO BE PAID BY THE APPELLANT TOWARDS THE THANE PROJECT WAS RS. 125 CRORES. IN THE SAID SUIT M/S. SAI LEE DEVELOPERS CLAIMED THAT THE SAID AMOUN T WAS PAYABLE BY THE COMPANY TO VARIOUS PLOT OWNERS OUT OF WHICH ONLY RS . 12 CRORES WAS PAID SO FAR. FURTHER, IT WAS ALLEGED THAT THE APPELLANT HAD FRAUDULENTLY ACQUIRED THE SIGNATURE ON THE RECEIPT VOUCHER CLAIMING IT TO BE TOWARDS POWAI PROJECT. ALSO, IN THE SAID SUIT M/S. SAI LEE DEVELOPERS HAVE ADMIT TED RECEIPT OF RS. 12 CRORES BUT DENIED THAT IT WAS TOWARDS THE POWAI PROJECT. A LSO, THERE IS NO INFALLIBLE DOCUMENTARY EVIDENCE AS THERE IS NO FORMAL MEMORAND UM OF UNDERSTANDING OR AGREEMENT FOR THE POWAI PROJECT BETWEEN THE APPE LLANT AND THE SAID PARTY (COPY OF CITY CIVIL COURT SUIT NO 1480 OF 2009). ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 15 70. THUS, TO CONCLUDE, M/S. SAI LEE DEVELOPERS HAVE ALLEGED THAT THE COMPANY IS TRYING TO OBTAIN FORCIBLE POSSESSION OF THE POWA I PROPERTY WHEREAS THEY HAVE RECEIVED THE MONEY FOR THANE PROJECT. 71. IN RESPONSE, MR. SHAILESH AJGAONKNR, THE GENERA L MANAGER OF THE COMPANY, VIDE AFFIDAVIT IN REPLY DATED 22M JULY 200 9, HAS STATED ON OATH THAT ALL THE ALLEGATIONS, CONTENTIONS AND CLAIMS OF M/S. SAI LEE DEVELOPERS ARE FALSE. FURTHER, HE CATEGORICALLY STATED THAT MONEY WAS PAID BY THE COMPANY TO M/S. SAI LEE DEVELOPERS TOWARDS THE POWAI PROPERTY. HE HAS STATED THAT M/S. SAI LEE DEVELOPERS HAVE ALSO ISSUED A RECEIPT ACKNO WLEDGING THE FACT THAT THE PAYMENT IS RECEIVED TOWARDS POWAI PROPERTY. 72. IT MAY PLEASE BE NOTED THAT THE POWAI PROPERTY IS STILL UNDER LITIGATION AS COURT HAS MAINTAINED THE STATUS-QUO ORDER. 73. ACCORDINGLY, FOR WANT OF ANALYSING THE FURTHER COURSE OF ACTION FOR THE POWAI PROJECT, THE APPELLANT OBTAINED LEGAL OPINION OF P S LEGAL, ADVOCATES & SOLICITORS. ACCORDINGLY, VIDE LETTER DATED 5TH DECE MBER 2011, THE AFORESAID SOLICITORS SUBMITTED THEIR OPINION MENTIONING FACTS OF THE PRESENT CASE (COPY ENCLOSED). EXTRACTS OF THE SAID OPINION IS REPRODUC ED HEREIN BELOW FOR YOUR HONORS' READY REFERENCE AND PERUSAL: 9. THE SAID M/S SAI LEE DEVELOPERS HOWEVER HAS DIS PUTED THE SAME AND HAS FILED IN BOMBAY CITY CIVIL COURT A CIVIL SUIT B EARING NO. 1480/ 2009 AGAINST SVPL THEREIN PRAYING FOR AN ORDER OF MANDAT ORY AND PERMANENT INJUNCTION AGAINST SVPL FROM ENTERING INTO THE SAID PROPERTY. IN THE SAID SUIT, IN PARA (22) IT HAS BEEN CATEGORICALLY AVERRE D BY M/S SAI LEE DEVELOPERS THAT THE SAID SUM OF RS. 12 CRORES HAS B EEN PAID BY SVPL AS PROJECT ADVANCE NOT FOR POWAI PROJECT BUT FOR ANOTH ER PROJECT OF SAI LEE WHICH IS AT THANE. M/S SAI LEE DEVELOPERS HAS ALSO ALLEGED THAT THE PROJECT INVESTMENT FOR THANE PROJECT WAS TO BE OF R S. 125 CRORES AND THE SAID SUM OF RS 12 CRORES IS SVPL'S PART CONTRIBUTIO N. ALSO, IT HAS BEEN ALLEGED THAT THERE DOES NOT EXIST ANY AGREEMENT BET WEEN SAI LEE DEVELOPERS AND SVPL WHICH CAN SHOW THAT THE SAID IN VESTMENT IS FOR POWAI PROJECT. IT APPEARS THAT VARIOUS INTERIM APPL ICATIONS MADE IN THE SAID SUIT ARE STILL PENDING. IT IS ALSO LEARNT THAT NO ORDER HAS YET BEEN PASSED IN FAVOUR OF SVPL IN THE SAID SUIT. 10. THUS, AT ONCE, IT WOULD BE NOTED THAT THE CONSI DERATION OF RS.12 CRORES PAID BY SVPL TO M/S SAI LEE DEVELOPERS HAS COME UND ER CHALLENGE FROM SAI LEE ON THE SAID VITAL GROUND THAT IT WAS 'PROJE CT ADVANCE FOR SAI LEE'S PROPERTY LOCATED AT THANE AND NOT FOR POWAI LAND AT ALL. WE ALSO HAVE TO POINT OUT THAT SVPL MAKING PAYMENT OF SUMS TO SAI L EE OR TO ITS SISTER CONCERN SAI LEE INFOTECH LTD. COULD NOT HAVE FETCHE D ANY RIGHTS TO SVPL IN AS MUCH AS THE PROPERTY WAS ADMITTEDLY HANDED OVER BY SAI LEE INTO JOINT VENTURE WITH CHANDIWALA. WHEN THE SAID ARRANGEMENT EXISTED, AND NOW IS SUBJECT MATTER OF LITIGATION, SUCH DIRECT PAYMENT T O A SINGLE PARTY TO THE JOINT VENTURE CANNOT CREATE ANY RIGHTS IN THE PROJE CT AT ALL. IN ADDITION ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 16 THERETO SAI LEE HAS POINTED OUT LACK OF ANY FORMAL AGREEMENT WITH SVPL AND HAS CLAIMED THAT POWAI LAND IS NOT THE SUBJECT OF SVPL'S INVESTMENT. 11. AS NOTED ABOVE THE VERY PURPOSE OF THE SAID PAY MENT HAS BEEN DISPUTED BY SAI LEE AND THE SAME IS A SUBJECT MATTER OF THE PENDING CIVIL SUIT. IN DUE COURSE OF TIME AS AND WHEN THE SUIT WILL BE HEARD T HE COURT SHALL DECIDE UPON THE SAID ISSUE. HOWEVER, AT THIS STAGE THE BRU TE FACT IS THAT THE PAYMENT IS SUBJECT MATTER OF DISPUTE AND IT CAN NEV ER BE SAID THAT THE SAID SUM WOULD EITHER BE RECOVERED OR PRESERVED IN PROJE CT. THE ONLY RECOURSE NOW OPEN TO SVPL IS TO CONTINUE WITH THE SAID EXIST ING LITIGATION AND ALSO TO FILE A FRESH SUIT PRAYING FOR A DECREE AGAINST M /S. SAI LEE DEVELOPERS AND SAI LEE INFOTECH LTD. THAT A FORMAL AGREEMENT B E DIRECTED TO BE EXECUTED BY THEM IN FAVOUR OF SVPL. 12. AT THE SAME TIME WE SEEK A DISCUSSION ON WHETHE R SVPL SHALL GAIN ANY RIGHTS IN THE PROJECT AT ALL. KINDLY NOTE THAT THE PROJECT IS LADEN WITH STRINGENT ULC CONDITIONS, IT HAS VALID AND EXISTING CLAIMS FOR CONSTRUCTED AREAS BY SOCIETY AND ITS 31 MEMBERS, IT HAS CLAIMS BY FORMER DEVELOPERS SUCH AS YASHRAJ AND OTHERS, ALSO THIRD PARTIES SUCH AS GREAT DEAL HAVE A CLAIM ON THE PROPERTY BY VIRTUE OF REGISTERED DEED OF ASSIGNMENT, FURTHER THE CLAIMS OF ZOOM ARE ALSO PENDING. IN SUCH CIRCUM STANCES, SO FAR AS SVPL GAINING CLEAR DEVELOPMENT RIGHTS IS CONCERNED, THE SITUATION IS NOTHING SHORT OF CHAOTIC. FURTHER, SINCE SRA HAS AP PROVED THE SAID PROJECT UNDER DCR 33 (14), IT WOULD NOT BE POSSIBLE FOR SVP L TO ENTER INTO ANY ARRANGEMENT WITH SAI LE UNLESS THE SAID AUTHORITY S PECIFICALLY PERMITS CHANGE OF DEVELOPER. HENCE WE HAVE TO URGE SVPL TO TAKE A FRESH LOOK AT THE SITUATION AND TAKE APPROPRIATE DECISION' 74. ON PERUSAL, YOUR HONOR MAY NOTE THAT, IN THE AF ORESAID OPINION IT IS CLEARLY MENTIONED THAT THE PAYMENT OF RS. 12 CRORES BY THE COMPANY ITSELF IS THE SUBJECT MATTER OF DISPUTE. FURTHER, HE HAS STAT ED THAT THE RECOVERY OF THE SAID SUM IS DOUBTFUL. IT IS ALSO MENTIONED IN THE A FORESAID REPLY THAT AS THERE ARE A LOT OF LITIGATIONS/ CLAIMS BY THE SOCIETY, 31 MEMBERS, THE FORMER DEVELOPERS, ETC., IT IS HIGHLY UNCERTAIN FOR THE CO MPANY TO OBTAIN CLEAR TITLE ON THE SAID POWAI PROPERTY. MORE SO, AS THE PROJECT IS UNDER THE ALREADY APPROVED SRA SCHEME, ANY CHANGE IN THE DEVELOPER REQUIRES SP ECIFIC PERMISSION FROM THE SRA AUTHORITY. THUS, THERE WAS FURTHER UNCERTAI NTY WITH RESPECT TO THE SAID PROJECT. 75. ACCORDINGLY, IN VIEW OF THE SAID OPINION, THE A PPELLANT ASCERTAINED THAT UNLESS A CLEAR TITLE TOWARDS THE POWAI PROPERTY AND SRA APPROVAL FOR THE CHANGE IN DEVELOPER IS OBTAINED, THE PROJECT CANNOT BE PROCEEDED WITH. 76. IT IS FURTHER SUBMITTED THAT, THE AMOUNT WAS SP ENT BY THE COMPANY TOWARDS THE PROJECT. THUS, THE SAID AMOUNT, PER SE, IS GIVE N IN THE ORDINARY COURSE OF THE BUSINESS OF THE COMPANY I.E. TO ACQUIRE THE PRO PERTY WITH THE INTENTION TO DEVELOP AND TO SELL THE SAME. IT IS FURTHER RESPECT FULLY SUBMITTED THAT, DUE TO THE CIRCUMSTANCES PREVAILING IN THE PRESENT CASE, T HERE WAS A GREAT DEAL OF ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 17 UNCERTAINTY IN OBTAINING THE RIGHTS OF THE POWAI PR OJECT. IT IS SUBMITTED THAT THE MONEY ALREADY SPENT FOR THE AFORESAID PROJECT WAS I RRECOVERABLE AND COMPLETELY LOST. MORE IMPORTANTLY, ON PERUSAL OF TH E FACTS OF THE CASE, IT IS ABUNDANTLY CLEAR THAT THE WHOLE FACT THAT THE AMOUN T IS PAID BY THE COMPANY FOR THE SAID PROJECT IS A SUBJECT MATTER OF LITIGAT ION. 77. IT IS RESPECTFULLY STATED AND SUBMITTED THAT SU CH LOSSES IS A TYPICAL FEATURE OF REAL ESTATE INDUSTRY. AT TIMES MONEY IS SPENT/ A DVANCES ARE GIVEN EVEN BEFORE THE FINALIZATION OF THE DEAL. FURTHER, IF TH E DEAL BECOMES UNVIABLE DUE TO LIKELY LITIGATION OR SUCH OTHER PROBLEMS, THEN THE PROJECTS HAVE TO BE GIVEN UP. THUS, LOSS ARISING DUE TO THE SAME IS NOTHING BUT B USINESS LOSS. 78. IT IS FURTHER RESPECTFULLY SUBMITTED THAT THE M ONEY SPENT BY THE APPELLANT IN THE PRESENT CASE WAS NOT RECOVERABLE ANY MORE. IT M AY ALSO BE NOTED THAT THE COMPANY HAS ALREADY MADE LONG DRAWN EFFORTS TO SALV AGE THE SITUATION AND ONLY THEREAFTER, THE SAID LOSS WAS CLAIMED. 79. HENCE, CONSIDERING THE PRESENT LITIGATIONS, DIS PUTES, CLAIMS ETC. THE CLAIM OF THE COMPANY OVER THE SAID POWAI PROJECT IS BECOM E VERY UNCERTAIN AND THE CHANCES TO OBTAIN A FAVOURABLE DECISION IS VERY REM OTE. THEREFORE, IN THE BEST FITNESS OF BUSINESS, THE COMPANY DECIDED THAT IT WO ULD BE RATIONAL TO CONSIDER THE UNSALVAGEABLE AMOUNT OF RS. 15,00,00,000/- SPEN T FOR THE POWAI PROJECT AS IRRECOVERABLE BUSINESS LOSSES. 14. FROM THE EXPLANATIONS FURNISHED BY THE ASSESSEE, WE NOTICE THAT THE ASSESSEE-COMPANY HAS TAKEN A CONSCIOUS COMMERCIAL D ECISION FOR WRITING OFF THE AMOUNT ON THE BASIS OF FACTS AND CIRCUMSTAN CES SURROUNDING THE CASE. EVEN THOUGH THE TAX AUTHORITIES HAVE EXPRESS ED THE VIEW THAT THERE IS CHANCE OF RECOVERY, THE LD A.R, DURING THE COURSE O F ARGUMENTS SUBMITTED THAT THE SAID AMOUNT COULD NOT BE RECOVERED TILL DA TE. WE HAVE ALSO NOTED THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSI NG OFFICER HAS CALLED THE DIRECTOR OF THE ASSESSEE-COMPANY M/S SAI LEE DEVELO PER, SHRI MANGESH SAWANT WHO HAD CONFIRMED THAT THE LITIGATION WITH T HE ASSESSEE IS PENDING. IN OUR VIEW, ONE CANNOT COMPEL A BUSINESSMAN TO TAK E A COMMERCIAL ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 18 DECISION IN A PARTICULAR MANNER, I.E., IN THE INSTA NT CASE, TAX AUTHORITIES CANNOT FORCE THE ASSESSEE TO WAIT FOR INDEFINITE PE RIOD BEFORE WRITING OFF THE AMOUNT AS IRRECOVERABLE, WHEN THE CHANCE OF RECOVER Y OF AMOUNT IS REMOTE AS PER THE ADVISE GIVEN BY THE LEGAL EXPERTS. IT I S WELL SETTLED PROPOSITION OF LAW THAT THE REVENUE AUTHORITIES SHOULD NOT SIT IN THE ARM CHAIR OF BUSINESS MAN AND DICTATE THE MANNER OF CONDUCTING THE BUSINE SS, I.E., THEY SHOULD NOT INTERFERE IN THE REASONABLE DECISION TAKEN BY THE B USINESSMEN, PARTICULAR WHEN THE DECISION WAS TAKEN ON PRUDENT BASIS ON COM MERCIAL CONSIDERATIONS AND ALSO BY CONSIDERING SURROUNDING CIRCUMSTANCES. WE HAVE ALSO NOTICED THAT THERE IS DIFFERENCE OF OPINI ON BETWEEN THE ASSESSEE AND M/S SAI LEE DEVELOPERS WITH REGARD TO THE PROJE CT FOR WHICH THE IMPUGNED ADVANCE WAS GIVEN, I.E., WHILE THE ASSESSE E HAS CLAIMED THAT IT HAS GIVEN THE ADVANCE FOR POWAI PROJECT, WHICH IS S UPPORTED BY THE RECEIPT GIVEN BY M/S SAI LEE DEVELOPERS, THE OTHER PARTY IS CONTENDING THAT THE SAME WAS GIVEN FOR THANE PROJECT. SUBSEQUENTLY, M/S SAI LEE DEVELOPERS HAS ALSO ALLEGED THAT THE RECEIPT GIVEN BY IT ACKNO WLEDGING THE PAYMENT GIVEN BY THE ASSESSEE IS FORGED ONE. POLICE COMPLA INTS HAVE ALSO BEEN FILED AGAINST THE ASSESSEE TWO TIMES. WE NOTICE THAT THE DISPUTE IS GOING ON BETWEEN THE ASSESSEE AND M/S SAI LEE DEVELOPERS SIN CE 2008 ONWARDS. THE LD A.R HAS ALSO CLARIFIED THAT THE ABOVE SAID PARTY IS NOT RELATED TO THE ASSESSEE. FURTHER M/S SAI LEE DEVELOPERS IS ALSO N OT SHOWING INTEREST TO RETURN BACK THE MONEY. HENCE THE INFERENCE DRAWN BY THE TAX AUTHORITIES ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 19 THAT THE DISPUTE IS WITH REGARD TO THE LAND AND NOT WITH REGARD TO THE ADVANCE PAYMENT DOES NOT APPEAR TO BE CORRECT. IN VIEW OF THE SEQUENCE OF EVENTS NARRATED ABOVE, THE ASSESSEE HAS ENTERTAINED A DOUB T ABOUT ITS RIGHT IN THE POWAI LAND AND ALSO ABOUT RECOVERY OF ADVANCE GIVEN . HENCE THE ASSESSEE HAS TAKEN LEGAL OPINION FROM M/S P.S LEGAL, ADVOCAT ES & SOLICITORS, ABOUT THE PROSPECTS OF ITS RIGHT OVER POWAI PROPERTY AND ALSO ABOUT THE PROSPECTS OF RECOVERING MONEY. THE ADVOCATES HAVE NOTICED TH AT THE RIGHT OVER POWAI PROPERTY WAS VESTED WITH TWO PERSONS, VIZ., M/S SAI LEE DEVELOPERS & M/S CHANDIWALA ENTERPRISES. HOWEVER, THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH ONLY ONE PERSON, VIZ., M/S SAI LEE D EVELOPERS. IN THE MEAN TIME, M/S CHANDIWALA ENTERPRISES HAVE ALSO TRANSFER RED ITS RIGHT TO M/S GREAT DEAL DEVELOPERS P LTD, WHICH HAS NOT BEEN ACC EPTED BY M/S SAI LEE DEVELOPERS. HENCE M/S SAI LEE DEVELOPERS HAS INITI ATED LEGAL PROCEEDINGS AGAINST M/S CHANDIWALA ENTERPRISES AND M/S GREAT DE AL DEVELOPERS P LTD. FURTHER, M/S SAI LEE DEVELOPERS HAS ALSO STATED THA T THE AGREEMENT WITH THE ASSESSEE WAS WITH REGARD TO THANE PROPERTY AND NOT FOR POWAI PROPERTY. HENCE THE SOLICITORS HAVE EXPRESSED THE VIEW THAT T HE PROSPECTS OF HAVING ANY RIGHT OVER POWAI PROPERTY AS WELL AS PROSPECTS OF RECOVERING MONEY FROM M/S SAI LEE DEVELOPERS ARE BLEAK. BY CONSIDER ING ALL THESE FACTS, THE ASSESSEE IN ITS BOARD OF DIRECTORS MEETING HELD ON 4 TH JANUARY 2012 HAS DECIDED TO WRITE OF THE ADVANCE AMOUNT AS BUSINESS LOSS. AS SUBMITTED BY LD A.R, THE ASSESSEE HAS REVIEWED ALL ITS ONGOING P ROJECTS AND HAS DECIDED ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 20 TO WRITE OFF RS.117.08 CRORES. AS NOTICED EARLIER, THE AO HAS ACCEPTED WRITE OFF OF RS.83.08 CRORES AND DISALLOWED RS.34 CRORES, OF WHICH THE LD CIT(A) HAS ALLOWED RS.19 CRORES. WE NOTICE THAT THE ASSES SEE HAS FOLLOWED A PROPER AND SYSTEMATIC PROCEDURE FOR ARRIVING AT ITS DECISION TO WRITE OFF VARIOUS AMOUNTS, INCLUDING THE IMPUGNED AMOUNT OF R S.15 CRORES GIVEN M/S SAI LEE GROUP. THE COMMENTS FURNISHED TO THE B OARD OF DIRECTORS IN THE BOARD MEETING IN RESPECT OF M/S SAI LEE DEVELOP ERS ARE EXTRACTED BELOW, FOR THE SAKE OF CONVENIENCE:- MR. MANGESH SAWANT, THE KEY PERSON IN SAILEE DEVEL OPERS & SAILEE INFOTECH REFUSES TO ACKNOWLEDGES THAT THE MONEY WAS PAID FOR POWAI AND HAS MADE TO THE STATEMENT TO THE EFFECT IN THE COURT. LOOKING TO THE COMPLEXITY OF THE MATTER, THE PROFILE OF MR. MA NGESH SAWANT, THE LITIGATION, THE LEGAL OPINION IN THE MATTER, ITS PR UDENT NOT THE PURSE THE MATTER ANY FURTHER. RECOMMENDED TO WRITE OFF. 15. THE HONBLE BOMBAY HIGH COURT IN CIT VS GOODLASS NA ROLAC PAINTS LTD. (SUPRA) HELD THAT WHEN TWO FACTS ARE PROVED, NAMELY , THAT THAT THE DEBT IS TRADE DEBT AND THAT IT HAS BECOME BAD, THE COURT SH OULD NOT INTERFERE WITH THE DECISION OF THE ASSESSEE IN WRITING OFF THE AMO UNT IN PARTICULAR YEAR UNLESS IT IS ANYTHING PATENTLY WRONG WITH THE ASSES SEES DECISION. FURTHER IN CIT VERSUS WOCKHARDT INTERNATIONAL LTD THE HONBLE BOMBAY HIGH COURT HELD THAT WHEN THE ASSESSEE WROTE THE AMOUNT IN THE YEAR OF ACCOUNT THE COURT WAS ENTITLED TO PRESUME THAT THE AMOUNT BECAM E IRRECOVERABLE WHEN ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 21 THE ASSESSEE WROTE OFF IT IN ITS BOOKS OF ACCOUNT A ND, THEREFORE, THE ASSESSEE WAS ENTITLED TO CLAIM THE AMOUNT. 16. FURTHER, THE CO-ORDINATE BENCH OF TRIBUNAL IN KYATI REALTORS PVT. LTD. VS. ACIT (SUPRA) HELD THAT WHEN THE ASSESSEE ADVANCED M ONEY IN THE COURSE OF ITS BUSINESS OF REAL ESTATE DEVELOPMENT, THE LOSS O F SUCH MONEY ON ACCOUNT OF NON-RECOVERABILITY OF ADVANCE MADE IN THE COURSE OF BUSINESS IS REQUIRED TO BE ALLOWED UNDER SECTION 28/37 OF THE ACT AS BUS INESS LOSS. IT WAS FURTHER HELD THAT THE FACT THAT ADVANCE WAS MADE IN THE ORDINARY COURSE OF BUSINESS WAS NOT DENIED BY THE ASSESSING OFFICER. T HE ADVANCE SO GIVEN COULD NOT BE RECOVERED, IS ALSO A MATTER OF RECORD, UNDER THESE CIRCUMSTANCES, THE ASSESSEE HAS WRITTEN OFF THE AMO UNT IN ITS BOOKS OF ACCOUNT. SUCH AMOUNT IS REQUIRED TO BE ALLOWED AS A BUSINESS LOSS UNDER SECTION 28/37 OF THE ACT. 17. UNDER THE SET OF FACTS, WE NOTICE THAT THE BOARD OF DIRECTORS HAVE DECIDED TO WRITE OFF THE ADVANCE OF RS.15.00 CRORES GIVEN T O M/S SAI LEE GROUP. AS NOTICED EARLIER, THE ASSESSEE HAS TAKEN THIS DECISI ON AS A PRUDENT BUSINESS MAN IN THE FACTS AND CIRCUMSTANCES SURROUNDING THE CASE AND WE ARE OF THE VIEW THAT THE TAX AUTHORITIES ARE NOT ENTITLED TO Q UESTION THE WISDON OF THE ASSESSEE IN THIS REGARD. ACCORDINGLY, IN OUR VIEW, THE CLAIM OF THE ASSESSEE- COMPANY IN WRITING OFF RS. 15 CRORE CANNOT BE CONSI DERED TO BE PREMATURE ONE AND ACCORDINGLY WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF BUSINESS LOSS. ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 22 18. IN OUR VIEW, THE RATIO OF VARIOUS DECISION RELIED BY LD. DR ARE NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE. IN THE CASE OF INDIAN ALUMINUM COMPANY VS. CIT (SUPRA), THE ISSUE BEFORE THE APEX COURT WAS RELATED TO WHETHER THE WEALTH TAX PAID BY THE ASSESSEE, A TRAD ING COMPANY IS DEDUCTABLE AS EXPENDITURE OR NOT. IN CIT VS. NAINIT AL BANK LTD. (SUPRA) THE ISSUE BEFORE THE HONBLE COURT WAS WHETHER THE LOSS OCCURRED ON ACCOUNT OF ROBBERY WAS INCIDENTAL TO THE BUSINESS ACTIVITY OR NOT. THE HONBLE COURT HELD THAT EVERY LOSS IS NOT DEDUCTIBLE IN COMPUTING THE INCOME OF BUSINESS UNLESS IT IS INCURRED IN THE COURSE OF CARRYING OUT THE OPERATION OF BUSINESS AND IS INCIDENTAL TO THE OPERATION. IN MADDI VENKAT ARAMAN & CO. (P.) VS. CIT (SUPRA), THE ASSESSEE-COMPANY CLAIMED DEDUCTION OF RS. 2,95,000/- INCURRED IN PENALTY PROCEEDING INITIATED UNDER FORE IGN EXCHANGE REGULATION ACT (FERA), WHEREIN THE SAID EXPENDITURE WAS REMITTED TO A PRIVATE PARTY IN SINGAPORE FOR VIOLATION OF LAW. IN ASSAM PESTICIDE AND AGRO VS. CIT (SUPRA), THE QUESTION BEFORE THE HONB LE HIGH COURT WAS RELATED WITH THE COMMISSION PAID BY ASSESSEE WITHOU T ANY COMMERCIAL CONSIDERATION OR BUSINESS EXPEDIENCY. THE DECISION RENDERED BY BANGALORE BENCH OF TRIBUNAL IN THE CASE OF EMPRESS CLASSIC P LTD (SUPRA) WAS RELATED TO THE CLAIM OF BAD DEBTS. THE ASSESSEE WROTE OFF T HE DEBT AND CLAIMED DEDUCTION ON THE STRENGTH OF THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE CASE OF TRF LTD (323 ITR 397). HOWEVER , IT WAS NOTICED THAT THE DEBT ITSELF WAS RECOVERED BEFORE THE DATE OF FI LING OF RETURN OF RETURN AND ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 23 HENCE THE TRIBUNAL HELD THAT THE DECISION RENDERED IN THE CASE OF TRF LTD (SUPRA) WILL NOT APPLY TO THE FACTS OF THE CASE. T HEREFORE, IN OUR VIEW, NONE OF THE CASE LAW RELIED BY LD. DR HAS RELEVANCE WITH THE GROUNDS OF APPEAL RAISED BY ASSESSEE. 19. IN VIEW OF THE FOREGOING DISCUSSIONS, WE ARE OF T HE OPINION THAT THE VIEW TAKEN BY THE TAX AUTHORITIES IS NOT JUSTIFIED. ACC ORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ALLOW THE CLAIM OF RS.15.00 CRORES CLAIMED BY THE ASSESSEE AS BUSINESS LOSS. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. 20. THE REVENUE IN ITS CROSS APPEAL (ITA NO.5613/M/2015 ) HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. COMMISSIONER (APPEALS), ERRED IN DIRECTING THE AO T O DELETE THE DISALLOWANCE OF RS. 19,00,00,000/- WHICH WAS MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF WRONG CLAIM OF LOSS MADE BY T HE ASSESSEE. 2. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD THE COMMISSIONER (APPEALS), ERRED IN DIRECTING THE AO TO DELETE THE DISALLOWANCE OF RS. 19, 00,00,000 WHICH WAS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF WRONG CLAIM OF WRITE-OFF MADE BY THE ASSESSEE EVEN WHEN THE RECOVERABILITY OF THE AMOUNT DID NOT REACH TO ITS DEAD END AND NEITHER THE PARTY REFUSED TO PAY . 21. THE FACTS RELATING TO THE CLAIM OF RS.19.00 CRORES MADE BY THE ASSESSEE ARE STATED IN BRIEF. A PLOT OF LAND BEARING CTS NO.14 63 OF FORT DIVISION, MUMBAI ADMEASURING 7901.40 SQ. MTRS., WAS OWNED BY THE STATE GOVERNMENT AND WAS PARTLY RESERVED FOR EDUCATION DE PARTMENT AS COLLEGE ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 24 RESERVATION. APART FROM THE ABOVE, THE SAID LAND C ONSISTED OF 138 SLUMS. THE SLUM MEMBERS JOINTLY FORMED A SOCIETY NAMED AS SIDDHIVINAYAK CO- OP HSG. SOCIETY. THE SAID SOCIETY SUBMITTED A PROP OSAL TO A CONCERN NAMED M/S SREELEKHA ENTERPRISES TO UNDERTAKE RE-DEVELOPME NT OF THE PROPERTY UNDER THE PROVISIONS OF SRA. LATER M/S SREELEKHA ENTERPRISES DECIDED TO DEVELOP THE PROPERTY JOINTLY WITH M/S SHREE KEDAR I NFRA PROJECTS P LTD (HEREINAFTER REFERRED AS SREE KEDAR). LATER SREE KEDAR ENTERED INTO MOU WITH THE ASSESSEE AND ACCORDINGLY, THE ASSESSEE ALS O BECAME A PARTY FOR THE REDEVELOPMENT PROJECT. ACCORDINGLY, THE ASSESSEE IN FUSED A SUM OF RS.19.00 CRORES AS ITS INITIAL CONTRIBUTION FOR THE SAID PROJECT. IT WAS AGREED THAT THE ASSESSEE WOULD GET RIGHT OVER 70% OF FREE SALE AREA OF THE PROPERTY. 22. HOWEVER, THE PROJECT DID NOT PROCEED AS ENVISAGED BY THE PARTIES. THE PROPERTY WAS NOT DECLARED AS SLUM NOR THE STATE GOV ERNMENT OF MAHARASHTRA GRANTED PERMISSION TO DEVELOP THE SAID PROPERTY. HENCE THE ABOVE SAID TWO PARTIES TERMINATED THE ORIGINAL AGRE EMENT ENTERED BY THEM WITH SIDHDHIVINAYAK CO-OP HSG. SOCIETY FOR DEVELOPM ENT OF PROPERTY. IN VIEW OF THE ABOVE SAID DEVELOPMENT, THE ASSESSEE DE MANDED BACK ITS MONEY FROM THE ABOVE SAID TWO PARTIES. THE ASSESSEE RECE IVED CHEQUES FOR RS.12.00 CRORES FROM M/S SHREELEKHA ENTERPRISES AS AGAINST THE ADVANCE OF RS.19.00 CRORES GIVEN BY THE ASSESSEE. AT THIS STA GE ITSELF, THERE WAS REDUCTION OF RS.7.00 CRORES. HOWEVER, ALL THE CHE QUES WERE DISHONOURED. IT WAS STATED THAT THE ASSESSEE HELD SEVERAL MEETI NGS WITH THE ABOVE SAID ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 25 PARTIES AND ALSO SENT VARIOUS CORRESPONDENCES TO TH E ABOVE SAID PARTIES. BUT THERE WAS NO RESPONSE FROM THEM. HENCE THE ASSESSE E OBTAINED A LEGAL OPINION FROM SOLICITORS AND ADVOCATES, WHO HAS OBSE RVED THAT THE LAND BELONGED TO THE STATE GOVERNMENT AND THE SLUM DEVEL OPMENT AUTHORITY HAS NOT YET GRANTED CLEARANCE FOR THE DEVELOPMENT OF LA ND. IT WAS ALSO OBSERVED THAT SUCH KIND OF PERMISSION COULD BE OBTAINED ON THE STRENGTH OF DECISION TO BE TAKEN AT CABINET LEVEL. FURTHER THE THE SAID LAND IS ALREADY INHIBITED WITH VARIOUS CONCRETE STRUCTURES OF GOVERNMENT ESTA BLISHMENTS. UNDER THESE SET OF FACTS, THE SOLICITORS EXPRESSED THE VI EW THAT THE CHANCES OF OBTAINING APPROVAL MAY BECOME REMOTE. FURTHER THE S OLICITORS HAVE CATEGORICALLY STATED THAT THE DOCUMENTS EXECUTED BE TWEEN THE SIDHDHIVINAYAK CO-OP HSG SOCIETY AND THE AFORESAID PARTIES DID NOT CREATE ANY RIGHT IN FAVOUR OF ANY PERSON TOWARDS THE SAID PROPERTY. IT WAS OPINED THAT, UNLESS AND UNTIL THE STATE GOVERNMENT AND THE SRA APPROVED THE PROJECT, NO RIGHT WITH RESPECT TO THE SAID PROPERTY COULD BE CREATED. SINCE THE ORIGINAL PARTIES DID NOT GET RIGHT OVER THE PRO PERTY, IT BECAME CLEAR TO THE ASSESSEE THAT IT IS ALSO NOT HAVING ANY HOLD OVER T HE PROPERTY. THE EFFORTS TAKEN BY THE ASSESSEE TO RECOVER THE AMOUNT ALSO DI D NOT YIELD ANY RESULT. ACCORDINGLY IT WAS DECIDED BY THE ASSESSEE WITH BUS INESS PRUDENCE TO WRITE OFF THE UNRECOVERABLE AMOUNT OF RS.19 CORES AS BUSI NESS LOSS. 23. THE AO, HOWEVER, TOOK THE VIEW THAT MERELY BECAU SE THE CHEQUES WERE BOUNCED, THE WHOLE PROJECT CANNOT BE WRITTEN OFF AN D TREATED AS BUSINESS ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 26 LOSS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO EXAMINED SHRI VIJAY B MASURKAR, THE DIRECTOR OF M/S SHREE KEDAR I NFRA PROJECTS P LTD, WHO STATED THAT THOUGH THE AGREEMENT WITH SHREE LEK HA HAS BEEN TERMINATED, THE LATER HAS NOT ABANDONED THE PROJECT . HENCE THE AO TOOK THE VIEW THAT THE PROJECT HAS NOT BEEN ABANDONED YET. THE AO ALSO TOOK THE VIEW THAT THE RIGHT OF THE ASSESSEE TO RECEIVE THE PAYMENT FROM M/S SREELEKHA ENTERPRISES HAS NOT EXTINGUISHED MERELY B ECAUSE THE CHEQUES WERE DISHONOURED. THE AO ALSO TOOK NOTE OF THE FAC T THAT THE ASSESSEE HAS NOT FILED ANY SUIT TO EITHER RECOVER THE AMOUNT OR ANY SUIT U/S 138 OF THE NEGOTIABLE INSTRUMENT ACT AGAINST DISHONOUR OF CHEQ UES HAVE BEEN FILED. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE ASSESSEE HAS NOT LOST HOPE AND THE POSSIBILITY OF RECOVERY HAS NOT REACHED DEAD EN D. ACCORDINGLY THE AO TOOK THE VIEW THAT THERE IS NO MERIT IN THE CLAIM O F BUSINESS LOSS OF RS.19 CRORES AND ACCORDINGLY DISALLOWED THE SAME. 24. THE LD CIT(A), HOWEVER, ALLOWED THE CLAIM AND HEN CE THE REVENUE HAS FILED THIS APPEAL. 25. THE LD. DR FOR THE REVENUE SUBMITTED THAT THE LD. COMMISSIONER (APPEALS) ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE. HE SUBMITTED THAT THE ASSESSEE HAS NO T PROVED THAT IT HAS CARRIED OUT DUE DILIGENCE EXERCISE TO VERIFY THE TI TLE OF LAND. THE LAND BELONGED TO THE STATE GOVERNMENT AND HENCE NO BUSIN ESSMAN WOULD GIVE ADVANCE OF SUCH A HUGE AMOUNT WITHOUT VERIFYING THE RIGHT OVER THE ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 27 PROPERTY. HE ALSO SUBMITTED THAT BOTH M/S SHREELEK HA ENTERPRISES AND M/S KEDAR INFRA MAY BE THE SISTER CONCERNS OF THE ASSES SEE AND THE ASSESSEE APPEARS TO HAVE CREATED/STAGE MANAGED THE IMPUGNED LOSS. FURTHER HE SUBMITTED THAT THE LD. COMMISSIONER (APPEALS) HAS N OT APPRECIATED THE FACT THAT M/S SHREELEKHA ENTERPRISES HAS NEVER REFUSED T O REFUND THE MONEY. IN FACT, M/S SHREELEKHA ENTERPRISES ISSUED CHEQUES FOR RS. 12 CRORE, WHICH ITSELF SHOWS THAT M/S SHREELEKHA ENTERPRISES WAS IN TERESTED TO REFUND THE ASSESSEES MONEY. THE ASSESSEE HAS NOT INITIATED AN Y LEGAL PROCEEDINGS AGAINST M/S SHREELEKHA ENTERPRISES. THE ASSESSEE HA S ALSO NOT INITIATED ANY RECOVERY PROCEEDING OR FILED ANY SUIT UNDER SECTION 138 OF NEGOTIABLE INSTRUMENT ACT ON DISHONORING OF THE CHEQUE. THE AS SESSEE FAILED TO PROVE EITHER DURING THE ASSESSMENT PROCEEDING OR IN FIRST APPELLATE PROCEEDING THAT MONEY CANNOT BE RECOVERED IN FUTURE. THE OBSER VATION OF LD. COMMISSIONER (APPEALS) THAT IN CASE THE ASSESSEE IS ABLE TO RECOVER THE AMOUNT IN FUTURE, THE SAME WILL BE TAXABLE IN THE H AND OF ASSESSEE CANNOT MAKE THE IMPUGNED CLAIM ALLOWABLE, UNLESS THE ASSES SEE IS ABLE TO SHOW THAT THE LOSS SO CLAIMED IS ACTUAL LOSS. IT IS SO POSSIBLE THAT THE DEPARTMENT MAY NOT COME TO KNOW OF THE RECOVERY AT ALL, IF THE SETTLEMENT TAKES PLACE BETWEEN THE PARTIES OUTSIDE THE BOOKS. 26. THE LD. DR FURTHER SUBMITS THAT THE ASSESSEE MADE T HE PAYMENT FOR A PROJECT TO BE CONSTRUCTED IN THE LAND BELONGING TO STATE GO VERNMENT, BUT THE STATE GOVERNMENT WAS NOT INVOLVED ANYWHERE IN THE TRANSAC TION. THEREFORE, THE ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 28 EXPENSES OF RS. 19 CRORE SO INCURRED BY ASSESSEE CA NNOT BE HELD AS WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINES S. HE SUBMITTED THAT THE IT IS THE RESPONSIBILITY OF THE ASSESSEE TO PROVE T HAT THE EXPENSES CLAIMED BY IT IS ALLOWABLE, AS HELD BY HONBLE BOMBAY HIGH COU RT IN THE CASE OF GOODLASS NEROLAC PAINTS (137 ITR 58)(BOM). HE SUBM ITTED THAT THE LOSSES ARE NOT CONSIDERED AS EXPENDITURE AS PER THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF WALFORT SHARES & SECURITIES (3 26 ITR 1)(SC). RELYING ON THE DECISION OF NAINITAL BANK (SUPRA), THE LD D. R CONTENDED THAT EACH AND EVERY LOSS IS NOT DEDUCTIBLE. HE ALSO PLACED H IS RELIANCE ON THE DECISIONS REPORTED IN THE CASE OF SWADESHI COTTON M ILLS (63 ITR 57) TO CONTEND THAT THE EXPENSES, WHICH ARE INCURRED WHOLL Y AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS ALONE ARE DEDUCTIBLE. THE LD D.R, BY PLACING RELIANCE ON THE FOLLOWING OBSERVATIONS MADE BY HON BLE RAJASTHAN HIGH COURT IN THE CASE OF JAIPUR ELECTRO P LTD (134 CTR 237)(RAJ.) SUBMITTED THAT THE PRINCIPLE THAT THE BUSINESSMAN IS THE BEST JUDGE DOES NOT AFFECT THE DUTY OF THE AO TO EXAMINE AS TO WHETHER THE EXPENDI TURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BUSINESS :- 11. THE GENERAL PRINCIPLE UNDERLYING S. 37(1) OF THE ACT IS THAT AN EXPENDITURE WHICH IS FOUND TO HAVE BEEN WHOLLY AND EXCLUSIVELY MADE OR LAID OUT BY A BUSINESSMAN FOR PURPOSE OF HI S BUSINESS IS TO BE ALLOWED. THERE CAN HARDLY BE ANY DISPUTE TO THE PROPOSITION THAT THE BUSINESSMAN IS THE BEST JUDGE TO DETERMINE THE BUSINESS EXPEDIENCY AND, THEREFORE, WHEN HE CLAIMS TO HAVE I NCURRED A ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 29 CERTAIN EXPENDITURE FOR BUSINESS EXPEDIENCY HIS VER SION SHOULD ORDINARILY BE ACCEPTED. THIS PRINCIPLE, HOWEVER, DO ES NOT DEBAR THE ASSESSING AUTHORITIES TO ENQUIRE AND INVESTIGATE AS TO WHETHER SUCH EXPENDITURE WAS ACTUALLY INCURRED BY THE BUSINESSMA N AND IF INCURRED WHETHER THE SAME WAS INCURRED WHOLLY AND E XCLUSIVELY FOR BUSINESS CONSIDERATION. THE DOCTRINE THAT THE BUSIN ESSMAN IS THE BEST JUDGE OF BUSINESS EXPEDIENCY DOES NOT AFFECT T HE RIGHT, NAY DUTY, OF THE ASSESSING AUTHORITIES TO KNOW WHETHER IT WAS INCURRED FOR BUSINESS PURPOSES AND NOT FOR OTHER EXTRANEOUS CONSIDERATIONS. HE FURTHER RELIED UPON THE DECISION RENDERED BY HO NBLE MADRAS HIGH COURT IN THE CASE OF T.S.HAJEE MOOSA & CO.(153 ITR 422) AND THE DECISION RENDERED BY HONBLE KARNATAKA HIGH COURT IN THE CAS E OF MYSORE KIRLOSKAR LTD (166 ITR 836) AND SUBMITTED THAT THE EXPRESSION WHOLLY AND EXCLUSIVELY USED IN SEC. 37(1) OF THE ACT HAVE BEE N EXPLAINED TO MEAN THAT THE TERM WHOLLY REFERS TO THE QUANTUM OF EXPENDIT URE AND EXCLUSIVELY REFERS TO THE MOTIVE OR OBJECTIVE OF EXPENDITURE. HE SUBMITTED THAT THE BUSINESS LOSS CLAIMED BY THE ASSESSEE ARE NOT INCUR RED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS WITHIN THE PROVISIONS OF SECTION 37(1) AND HENCE THE SAME SHOULD NOT QUALIFY FOR DEDUCTION. TH E TITLE OF LAND WAS NEITHER WITH ASSESSEE NOR WITH THE PERSON TO WHOM T HE ASSESSEE PAID THE MONEY. HENCE IT CAN BE SAID THAT THE ASSESSEE HAS C LAIMED AN EXPENDITURE WHICH IS AN OFFENCE OR PROHIBITED BY LAW. IN SUPPOR T OF HIS SUBMISSION, THE LD. DR RELIED UPON THE CIT VS. MAMTA ENTERPRISES [1 35 TAXMAN 393 (KAR)]. ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 30 THE LD. DR ALSO RELIED UPON THE SUBMISSIONS MADE BY HIM IN ASSESSEES APPEAL. HE SUBMITTED THAT THE LD CIT(A) HAS GRANTE D RELIEF TO THE ASSESSEE WITHOUT PROPERLY ANALYSING THE FACTS OF THE CASE. A CCORDINGLY HE CONTENDED THAT THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE SH OULD BE REVERSED. 27. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPO RTED THE ORDER OF LD. COMMISSIONER (APPEALS). HE SUBMITTED THAT THE ASSE SSEE WAS ATTRACTED BY THE PROJECT, SINCE IT IS LOCATED IN THE PRIME LOCAT ION OF MUMBAI AND WAS LUCRATIVE. SINCE THE PLOT WAS INHABITED BY SLUM PE OPLE, THE SAME WOULD QUALIFY UNDER SRA SCHEME AND HENCE THE DEVELOPERS H AVE SHOWN INTEREST IN THE OFFER MADE BY THE CO-OP HSG SOCIETY CONSISTING OF THOSE SLUM DEVELOPERS. IN VIEW OF THE LUCRATIVE NATURE OF PRO JECT, THE ASSESSEE HAS MADE THE IMPUGNED PAYMENT OF RS.19 CRORES TO GET RI GHT OVER THE PROPERTY. AFTER PASSAGE OF SOME TIME, WHEN THE THINGS WERE NO T MOVING AHEAD AS PER THE ORIGINAL PLAN, IT WAS REALISED THAT IT WOULD BE DIFFICULT TO CLEAR ALL THE ENCUMBRANCES SURROUNDING THE PROPERTY. IT ALSO CAM E TO LIGHT THAT THE LAND WAS NOT DECLARED AS SLUM NOR THE STATE GOVERNMENT H AS GRANTED PERMISSION TO DEVELOP THE SAID PROPERTY. IT WAS ALSO NOTICED T HAT M/S SHREELEKHA ENTERPRISES AND M/S KEDHAR INFRA HAS TERMINATED THE ORIGINAL AGREEMENT ENTERED WITH M/S SIDHDHIVINAYAK CO-OP HOUSING SOCIE TY FOR DEVELOPING THE PROPERTY. IN THIS SITUATION, THE ASSESSEE HAS DEMA NDED ITS MONEY BACK. AS NOTICED EARLIER, M/S SHREELEKHA ENTERPRISES GAVE A CHEQUE OF RS. 12 CRORE AGAINST THE PAYMENT OF RS. 19 CRORE INITIALLY ADVAN CED, BUT THE CHEQUE WAS ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 31 DISHONORED. HENCE THE ASSESSEE OBTAINED LEGAL OPINI ON FORM THE SOLICITORS ABOUT THIS PROJECT, WHO EXPRESSED THE VIEW THAT THE ASSESSEE HAS GOT NO RIGHT OVER THE PROPERTY AND FURTHER THE CHANCES OF RECOVE RING BACK THE ADVANCE AMOUNT IS ALSO BLEAK. THEREFORE, THE ASSESSEE DECI DED TO WRITE OFF THE AMOUNT PAID FOR FORT PROJECT IN THE BOARD OF DIRECT ORS MEETING. ACCORDINGLY, IT WAS WRITTEN OFF AND THE LOSS WAS CL AIMED AS BUSINESS LOSS. 28. THE LD A.R SUBMITTED THAT IT IS NOT THE CASE OF T HE AO THAT THE TRANSACTIONS WERE NOT GENUINE. THE AO HAS ONLY OPI NED THAT THE DISHONOURING OF CHEQUE CANNOT BE A GROUND TO WRITE OFF WHOLE OF THE ADVANCE GIVEN. HE SUBMITTED THAT THE AO HAS PRESUM ED THAT THE MONEY COULD BE RECOVERED BY THE ASSESSEE AND HIS PRESUMPT ION IS NOT BASED ON ANY MATERIAL. HE FURTHER SUBMITTED THAT NEITHER M/S SH REELEKHA ENTERPRISES NOR M/S KEDAR INFRA ARE RELATED TO THE ASSESSEE, AS DOU BTED BY LD D.R. HE SUBMITTED THAT THIS PAYMENT SO MADE COULD BE VIEWED FROM ANOTHER ANGLE, I.E., THE SAME CONSTITUTE STOCK IN TRADE FOR THE ASSESSEE AND HENCE THE SAME IS REQUIRED TO BE VALUED AT COST OR MARKET VAL UE, WHICHEVER IS LESS. IN THE INSTANT CASE, THE ASSESSEE HAS DETERMINED THAT THE MARKET VALUE AS AT THE YEAR END IS NIL. HE SUBMITTED THAT M/S SHREELEKHA E NTERPRISES ONLY ACQUIRED RIGHT TO DEVELOP THE PROPERTY IN THE YEAR 2006 AND NOT OWNERSHIP RIGHTS. THE QUESTION OF TRANSFER OF OWNERSHIP DOES NOT ARISE AT ALL. WHEN THE ASSESSEE ENTERED INTO THIS TRANSACTION IN THE Y EAR 2008, IT WAS ALSO AWARE THAT IT IS ACQUIRING ONLY DEVELOPMENT RIGHTS AND NO T OWNERSHIP RIGHTS. ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 32 HENCE THE CONTENTIONS OF LD D.R THAT THE ASSESSEE HAS ENTERED INTO THE TRANSACTION WITHOUT CARRYING OUT DUE DILIGENCE IS UNTENABLE. THE ASSESSEE ALSO CAME TO KNOW THAT THERE ARE NO ASSET WITH M/S SHREELEKHA ENTERPRISES AND M/S KEDAR INFRA HAS ALSO SUFFERED LOSS DUE TO T HIS PROJECT, I.E., BOTH THESE PERSONS WERE ALSO IN FINANCIAL DIFFICULTIES. ACCORDINGLY, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS TAKEN A CONSCIOUS D ECISION TO WRITE OFF THE ADVANCE AMOUNT AFTER OBTAINING LEGAL OPINION FROM T HE SOLICITORS. HE SUBMITTED THAT THE LD D.R IS TRYING TO IMPROVE THE CASE OF THE AO BY EXPRESSING THAT THE TRANSACTION ITSELF MAY NOT BE G ENUINE AND THE PARTIES MAY BE RELATED TO THE ASSESSEE. THE LD D.R ALSO EXP RESSED THE VIEW THAT THE IMPUGNED LOSS MAY BE A CREATED/ STAGE MANAGED ONE. THE LD A.R SUBMITTED THAT THE LD D.R IS NOT ENTITLED TO IMPOSE HIS OWN VIEWS OVER THAT OF THE AO. IN THIS REGARD, HE PLACED HIS RELIANCE ON THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF AISHWARYA RAI (127 I TD 204 @ 209) AND ALSO ON THE DECISION RENDERED IN THE CASE OF MAHIND RA & MAHINDRA (313 ITR (AT) 263) @ 322). THE LD A.R FURTHER SUBMITTED THAT THE VARIOUS CASE LAWS RELIED UPON BY LD D.R IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE SUBMITTED THAT THE ISSUE IN THE CASE OF G OODLASS NEROLAC WAS RELATED TO THE YEAR OF ALLOWABILITY OF EXPENSES. A LL OTHER CASES WERE RELATED TO EXPENDITURE ALLOWABLE U/S 37 OF THE ACT. HE SU BMITTED THAT THE HONBLE RAJASTHAN HIGH COURTS OBSERVATIONS MADE IN THE CAS E OF JAIPUR ELECTRO P LTD (SUPRA) ONLY MEAN THAT THE AO CANNOT BE PRECLUD ED FROM OBTAINING ALL ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 33 THE RELEVANT FACTS ONLY ON THE REASONING THAT THE D ECISION HAS BEEN TAKEN FROM BUSINESSMAN POINT OF VIEW. HE SUBMITTED THAT THE ASSESSEE, IN THE INSTANT CASE, HAS FULLY FURNISHED ALL THE RELEVANT DETAILS TO THE AO. THE LD. AR OF THE ASSESSEE RELIED ON THE DECISIONS WHICH WE RE REFERRED IN ASSESSEES APPEAL. 29. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE NOTICE THAT THE LD CIT(A) HAS RENDERED HIS DECISION AFTER ANALYSING THE FACTS SUR ROUNDING THE ISSUE. HENCE WE FEEL IT PERTINENT TO EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE:- 10. I HAVE CONSIDERED THE FACTS OF THE CASE, SUBMI SSION AND CONTENTIONS OF THE APPELLANT, AS ALSO THE ORDER OF THE AO. IT IS GATHE RED THAT GOVERNMENT OF MAHARASHTRA (DEPARTMENT OF EDUCATION) HAD A PLOT AD MEASURING 7901.40 SQ. MTRS. AT FORT, MUMBAI, KNOWN AS 'STATE TEACHERS COL LEGE COMPOUND', WHICH WAS IN A VERY DILAPIDATED CONDITION AND WAS DECLARE D AS SLUM BY THE ADDL. COLLECTOR OF DISTRICT OF MUMBAI. THE OCCUPANTS OF T HE ABOVE PREMISES COLLECTIVELY FORMED A HOUSING SOCIETY NAMED 'SIDDHI VINAYAK CO-OPERATIVE HOUSING SOCIETY', WHICH EXECUTED A DEVELOPMENT AGRE EMENT DATED 21/4/2006, APPOINTING M/S. SHREELEKHA ENTERPRISES AS THE DEVEL OPER, AND A POWER OF ATTORNEY WAS EXECUTED IN THEIR FAVOUR FOR DEVELOPME NT OF THIS PROPERTY. LATER, M/ S. SHREELEKHA ENTERPRISES ENTERED INTO A JOINT V ENTURE AGREEMENT DATED 28/5/2007 WITH M/S. SHREE KEDAR INFRA PROJECTS PVT. LTD., AS PER WHICH, SHREE KEDAR AGREED TO BECOME A JOINT VENTURE PARTNER AND AGREED TO PAY A SUM OF RS.25 CRORES TO SHREELEKHA AND ALSO TO BEAR THE COS T OF OBTAINING APPROVALS, SANCTIONS OF THE PLANS, DEVELOPMENT CHARGES AND COS T OF CONSTRUCTION, ETC. LATER, SHREE KEDAR AND SHREELEKHA APPROACHED THE APPELLANT COMPANY WITH A PROPOSAL TO CO-DEVELOP THE SAID PROPERTY AND OBTAIN 70% SALE RIGHTS OF FREE SALE AREA. AS CONSIDERATION FOR ACQUIRING SUCH RIGHTS, THE APPELL ANT WAS REQUIRED TO BEAR ALL THE EXPENSES RELATING TO THE ABOVE PROJECT, AND A MEMOR ANDUM OF UNDERSTANDING ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 34 DATED 19/2/2008 WAS ENTERED INTO, AMONG THREE PARTI ES, IN THIS REGARD. IN TERMS OF THE SAID MOU, THE APPELLANT COMPANY PAID A SUM O F RS.18 CRORES TO SHREE KEDAR AND RS. L CRORE TO SHREELEKHA (TOTALING TO RS .19 CRORES), TOWARDS THE ABOVE PROJECT. IT IS GATHERED THAT SOME OF THE EMPL OYEES OF G.T. HOSPITAL WERE LIVING IN THE QUARTERS IN THE SAME COMPLEX AND THER E WERE A HOSTEL, A GYMNASIUM, AS ALSO A TEMPORARY ACCOMMODATION OF THE EDUCATION DEPARTMENT, INCLUDING A TEMPLE AND AN OPEN-AIR STAGE, ETC., WHI CH NEEDED TO BE VACATED BEFORE CONSTRUCTION/DEVELOPMENT OF PROPERTY COULD B EGIN. THEREFORE, THE APPELLANT REQUESTED SHREE KEDAR TO OBTAIN NECESSARY APPROVALS FROM THE CONCERNED GOVERNMENT AUTHORITIES, AS EARLY AS POSSI BLE, SO THAT THE CONSTRUCTION COULD BE PROCEEDED WITH. HOWEVER, APPARENTLY, NO PR OGRESS COULD BE MADE BY SHREE KEDAR, TILL MARCH, 2009, AS THE MATTER WAS CO MPLICATED AND THEY WERE FINDING IT DIFFICULT TO MAKE PROGRESS. LATER ON, IT WAS NOTICED BY THE APPELLANT THAT OUT OF THE TOTAL AREA OF 7901.40 SQ. MTRS., ON LY A PORTION OF 4,056 SQ. MTRS. WAS DECLARED AS SLUM, AND NOT THE REMAINING AREA. I T WAS ALSO NOTICED THAT CONSENT OF THE EMPLOYEES OF G.T. HOSPITAL, WHO WERE OCCUPYING THE MAJOR PORTION OF THE REMAINING LAND, WAS ALSO NECESSARY. IN THIS BACKGROUND, SHREE KEDAR FOUND IT EXTREMELY DIFFICULT TO OBTAIN APPROV AL FOR THE DEVELOPMENT OF THE SAID AREA. LATER, SHREE KEDAR COMMUNICATED TO THE A PPELLANT THAT THE ORIGINAL DEVELOPER, SHREELEKHA, WAS NOT CO-OPERATING WITH TH EM. HOWEVER, IN A SWIFT DEVELOPMENT, IN MAY, 2010, IT WAS GATHERED THAT THE ORIGINAL DEVELOPMENT AGREEMENT BETWEEN M/S.SHREELEKHA ENTERPRISES AND M/ S.SHREE KEDAR INFRA PROJECTS PVT. LTD. WAS BEING CONSIDERED FOR TERMINA TION, AND SHREE KEDAR ALSO COMMUNICATED TO THE APPELLANT COMPANY THAT THEY HAD CONVINCED SHREELEKHA TO REFUND THE MONEY PAID BY THE APPELLANT COMPANY TOWA RDS THE PROJECT. ACCORDINGLY, THE APPELLANT RECEIVED CHEQUES WORTH R S.12 CRORES FROM SHREELEKHA, AS FULL AND FINAL SETTLEMENT, BUT THE C HEQUES GOT DISHONOURED ON ACCOUNT OF INSUFFICIENT FUNDS. THE APPELLANT COMPAN Y AGAIN INSISTED TO SHREE KEDAR TO REFUND THE MONEY, BUT SHREE KEDAR EXPRESSE D THEIR INABILITY, AS SHREELEKHA HAD NO ASSETS LEFT. IN THE ABOVE BACKGRO UND, THE APPELLANT COMPANY SOUGHT LEGAL OPINION FROM AN ADVOCATE, WHO, VIDE HI S OPINION DATED 3/1/2012, MENTIONED THAT SHREELEKHA AND SHREE KEDAR HAD NEITH ER THE AUTHORITY OF THE STATE GOVERNMENT, NOR THE GOVERNMENT HAD GRANTED TH EM ANY PERMISSION, TO REDEVELOP THE SAID PROPERTY AND, THEREFORE, THE APP ELLANT COMPANY COULD CLAIM ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 35 NO RIGHTS OF DEVELOPMENT THEREIN. IT WAS IN THIS BA CKGROUND THAT THE APPELLANT CHOSE TO WRITE OFF THE SUM OF RS.19 CRORES, IN ITS BOOKS AND CLAIM RELEVANT LOSS IN THIS REGARD. 11. I HAVE CONSIDERED THE FACTS OF THE CASE. IT APP EARS THAT THE APPELLANT ENTERED INTO A JOINT DEVELOPMENT AGREEMENT WITH SHREE KEDAR ON 19/2/2008, WITH A VIEW TO CO-DEVELOP THE PROPERTY 'STATE TEACHERS COLLEGE COMPOUND' AT FORT, MUMBAI. PRIOR TO THAT, SHREE KEDAR HAD ENTERED INTO AN AGREEMENT DATED 29/5/2007 WITH SHREELEKHA, THE ORIGINAL DEVELOPER O F THIS PROPERTY. IT IS FURTHER RELEVANT TO MENTION OVER HERE THAT SHREELEKHA HAD E NTERED INTO AN AGREEMENT DATED 21/4/2006 WITH SIDDHIVINAYAK CO-OP. HOUSING S OCIETY, A SOCIETY OF THE RESIDENTS OF THE PARTICULAR AREA OF LAND. HOWEVER, LATER ON, IT WAS GATHERED THAT THIS LAND WAS OWNED BY THE GOVERNMENT OF MAHARASHTR A, WHICH WAS NOWHERE A PARTY TO ANY OF THESE DEVELOPMENT AGREEMENTS, NOR D ID IT GRANT ANY PERMISSION FOR ANY JOINT DEVELOPMENT AGREEMENT TO BE ENTERED I NTO BY ANY PARTY ON ITS BEHALF. THEREFORE, THE RIGHTS ACQUIRED EITHER BY SH REELEKHA OR BY SHREE KEDAR OR BY THE PRESENT APPELLANT WERE ON A SHAKY WICKET. TH ESE FACTS HAVE BEEN VERY CLEARLY SPELT OUT BY SHRI ABHIJIT Z. PARAB, ADVOCAT E, HIGH COURT, IN HIS LEGAL OPINION DATED 3/1/2012 GIVEN TO THE APPELLANT, IN R ESPECT OF RECOVERY OF RS.19 CRORES. FOR CLARITY, THE RELEVANT PORTION OF THE LE GAL OPINION IS REPRODUCED AS UNDER: - WE HAVE PERUSED THE SAID COPIES OF THE DOCUMENTS. IT APPEARS THAT THE STATE GOVERNMENT OF MAHARASHTRA IS THE OWNER OF THE LARGE CAPTIONED PROPERTY WHEREIN CERTAIN STRUCTURES ARE STANDING. S OME OF THE STRUCTURES ARE DULY CONSTRUCTED BY THE STATE GOVERN MENT OF MAHARASHIRA FOR ITS VARIOUS DEPARTMENTS AND THE REM AINING SCATTERED STRUCTURES ARE IN THE POSSESSION OF VARIOUS OCCUPAN TS. IT APPEARS THAT THE OCCUPANTS HAVE FORMED A CO-OPERATIVE HOUSING SO CIETY NAMELY 'SIDDHI VINAYAK CO-OPERATIVE HOUSING SOCIETY' AND, WITH A VIEW TO RE- DEVELOP THE SAID PROPERTY UNDER THE SAID RE-DEVELOP MENT SCHEME, THE SAID SOCIETY HAS EXECUTED A DEVELOPMENT AGREEMENT D ATED 21ST APRIL, 2006 IN FAVOUR OF THE ABOVE NAMED SHREELEKHA ENTERP RISES PVT. LTD. WHICH WAS THEN A SOLE PROPRIETARY FIRM. IT ALSO APP EARS THAT THE SAID SHREELEKHA ENTERPRISES PVT. LTD. EXECUTED AN AGREEM ENT DATED 29TH MAY, 2007 IN FAVOUR OF THE ABOVE NAMED SHREE KEDAR INFRA PROJECTS PVT. LTD. AND THEREIN HAS AGREED TO RE-DEVELOP THE SAME LAND JOINTLY WITH THE SAID SHREE KEDAR. RELYING ON THE SAID AGRE EMENT AS ENTITLING IT TO CERTAIN RIGHTS, SHREELEKHA HAS APPROACHED SHIVAL IK VENTURES PVT. LTD. AND HAS OFFERED TO ADMIT SHIVALIK AS A CO-DEVE LOPER WITH A PROMISE THAT THE SAID PROPERTY SHALL BE JOINTLY CO- DEVELOPED BY THREE DEVELOPERS, SHREELEKHA, SHREE KEDAR AND SHIUALIK: T HE SAID SHREE KEDAR HAS FORMALIZED THE SAID UNDERSTANDING BY EXEC UTING IN FAVOUR OF ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 36 SHIUALIK: BY A FURTHER AGREEMENT DATED 19TH FEBRUAR Y, 2008. FROM THE ABOVE NARRATION IT IS CLEAR THAT THE RIGHTS OF SHIV ALIK ARE DEPENDENT ON THOSE CLAIMED BY SHREE KEDAR THROUGH THE ABOVE REFE RRED COMMITMENTS MADE BY SHREELEKHA UNDER THE SAID ORIGI NAL AGREEMENT DATED 29TH MAY, 2007. IT APPEARS THAT, DURING THE SAID PERIOD SHIVALIK HA S PAID TO SHREE KEDAR A SUM OF RS.18 CRORES DURING FEBRUARY 2008 TO JULY 2008 AND HAS PAID TO SHREELEKHA A FURTHER SUM OF RS.1 CRORE ON 12TH M AY, 2008, THEREBY INVESTING IN THE SAID PROJECT A SUM OF RS.19 CRORES . THEREAFTER IT APPEARS THAT SOMEWHERE IN THE MONTH O F MAY 2010 THE SAID TRANSACTION HAS BEEN JEOPARDIZED LEADING TO TH E TERMINATION OF THE ARRANGEMENT. IN VIEW OF THE TERMINATION IT APPEARS THAT SHREELEKHA HAD COMMITTED TO REFUND THE MONEY AND HAD ISSUED CHEQUE S DIRECTLY TO SHIUALIK: OSTENSIBLY TO REFUND THE MONIES RECEIVED BY IT. THESE CHEQUES HOWEVER BOUNCED AND YOU HAVE INFORMED US THAT, INSP IIE OF THE SAID COMMITMENTS, NO REFUND HAS BEEN RECEIVED BY SHIVALI K AS YET AND THEREBY A LOSS HAS BEEN CAUSED. FROM THE FILE PERUSED BY US, IT IS IMMEDIATELY BEEN SEEN THAT THE RE- DEVELOPMENT OF THE SAID PROPERTY IS HINGED ON THE S LUM DEVELOPMENT AUTHORITY DECLARING THE SAID PROPERTY AS A SLUM LAN D. IT APPEARS THAT CERTAIN APPLICATIONS WERE MADE BY THE SAID SOCIETY TO THE SAID AUTHORITY TO INITIATE THE RE-DEVELOPMENT PROCESS. HOWEVER THE SAID AUTHORITY HAS NOT GRANTED ANY CLEARANCE FOR THE DEVELOPMENT OF TH E SAID LAND. SINCE THE SAID LAND IS OWNED BY STATE GOVERNMENT OF MAHAR ASHTRA AND ALREADY HOUSES VARIOUS GOVERNMENT ESTABLISHMENTS, A CCORDING TO US THERE IS NO IMMEDIATE MATERIAL ON RECORD TO ACCEPT THAT SUCH A LAND CAN BE DECLARED AS SLUM LAND UNDER THE EXISTING NORMS A S FORMED UNDER MAHARASHTRA SLUM IMPROVEMENT ACT 1971. WE HOWEVER P OINT OUT THAT OUR OBSERVATION IS ENTIRELY GENERAL AND IS BASED ON THE DOCUMENTS WE HAVE PERUSED. FURTHER, ACCORDING TO US GRANT FOR PERMISSION FOR D EVELOPMENT OF SAID LAND THROUGH THE RE-DEVELOPMENT SCHEME WOULD BE POS SIBLE ON THE STATE GOVERNMENT IF ONLY THE HIGHEST/CABINET LEVEL CLEARS THE SAID PROPOSAL SINCE ON THE SAID LAND AN EDUCATIONAL ESTA BLISHMENT HAS ITS PREMISES AND ALSO IN THE DEVELOPMENT PLAN THE SAID ENTIRE LAND IS FOR COLLEGE/ EDUCATION PURPOSES. TO REMOVE THE SAID EDU CATIONAL INSTITUTIONS FROM THE SAID PLOT AND TO DE-RESERVE F ROM THE DEVELOPMENT PLAN SHALL REQUIRE AMENDMENT OF THE DEVELOPMENT PLA N AND THE SAME SHALL INTEND LAYING THE PROCEEDINGS UNDER MAHARASHT RA REGIONAL TOWN PLANNING ACT. ON THIS BACKGROUND IT CAN BE SEEN THAT THE DOCUMENT ATION EXECUTED BY THE SOCIETY, SHREELEKHA, SHREE KEDAR AN D SHIVALIK DO NOT CREATE ANY RIGHTS TO ANY PER SE. AT THE MOST IT CAN BE SAID THAT, BY RESOLVING TO RE-DEVELOPMENT THE PROPERTY UNDER T HE SAID SCHEME, THE SAID SOCIETY GRANTED TO SHREELEKHA THE RIGHTS TO MAKE DEVELOPMENT APPLICATION TO SLUM RE-DEVELOPMENT AUTH ORITY. AS ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 37 CAN BE SEEN NEITHER THE AUTHORITY NOR THE STATE GOV ERNMENT OF MAHARASHTRA GRANTED ANY PERMISSION TO RE-DEVELOP TH E SAID PROPERTY AND HENCE, ACCORDING TO US, SHIVALIK CAN C LAIM NO RIGHT OF DEVELOPMENT THEREIN. SO FAR AS PAYMENT OF RS.L CRORE TO SHREELEKHA AND R S.18 CRORES TO SHREE KEDAR IS CONCERNED, SHIVALIK PAID THE SUM OF RS.19 CRORES TO OBTAIN CO-DEVELOPMENT RIGHTS. IN OUR OPINION SINCE THESE TWO ENTITIES DID NOT HAVE CO-DEVELOPMENT RIGHTS, THE MA TTER OF RECOVERY OF THE SAID SUM, SHIVALIK CANNOT CLAIM ANY RELIEFS PERTAINING TO THE SAID LAND OR THE ALLEGED DEVELOPMENT RIGHT HELD BY SHREELEKHA. IN OUR OPINION THE SAID PAYMENT DOES NOT CREATE ANY EQ UITY IN FAVOUR OF SHIVALIK EITHER SINCE THE SAID SUM WAS PAID WITH AN EXPECTATION THAT NECESSARY PERMISSION SHALL BE OBTAINED. IN VIEW OF SHREELEKHA CANCELLING THE WHOLE ARRANGEM ENT IN 2010, THE LAST STAGES OF RIGHTS THAT SHIVALIK COULD HAVE CLAI MED HAVE COME TO AN END AND HENCE ACCORDING TO US SHIVALIK CANNOT CALL ITSELF A CO-DEVELOPER ON THE SAID PROJECT. IN VIEW OF THE ABOVE, WE ADVICE YOU TO TAKE PEREMPT ORY STEPS TO FILE RECOVERY PROCEEDINGS AGAINST SHREELEKHA ENTERPRISES PUT. LTD. AND SHREE KEDAR INFRA PROJECTS PUT. LTD. AS STATED ABOV E, IN THE SAID RECOVERY PROCEEDINGS, NO RELIEF CAN BE CLAIMED AGAI NST THE SAID GOVERNMENT LAND.' FROM THE ABOVE LEGAL OPINION, IT IS QUITE CLEAR THA T AS THE AGREEMENT BETWEEN THE APPELLANT COMPANY ON THE ONE HAND AND SHREELEKHA EN TERPRISES AND SHREE KEDAR INFRA PROJECTS PVT. LTD. ON THE OTHER CREATED NO LE GAL RIGHTS IN FAVOUR OF THE ASSESSEE, AS IT WAS BASED ON APPROVAL, ETC. FROM TH E GOVERNMENT AUTHORITIES, WHICH NEVER CAME. THE LAND WAS IN ANY CASE OWNED BY THE GOVERNMENT, WHICH WAS NOT A PARTY TO ANY OF THESE AGREEMENTS. FURTHER , THE BASE AGREEMENT BETWEEN SHREELEKHA AND SHREE KEDAR HAD ALREADY BEEN TERMINA TED IN THE YEAR 2010, THEREFORE, THERE WAS NO POSSIBILITY OF THE APPELLAN T GETTING ANY DEVELOPMENT RIGHTS IN THE SO-CALLED CONSTRUCTION PROJECT AT FOR T. IT IS GATHERED THAT SHREELEKHA GAVE CHEQUES WORTH RS.12 CRORES TO THE ASSESSEE WIT H A VIEW TO SETTLE THIS DISPUTE, BUT SUCH CHEQUES GOT BOUNCED. IT IS FURTHE R GATHERED FROM THE COMMUNICATIONS BETWEEN THE PARTIES THAT SHREELEKHA HAD NO ASSETS FOR RECOVERY OF MONEY. IT IS IN THIS BACKGROUND THAT RECOVERY OF FUNDS BECAME PRETTY DIFFICULT FOR THE APPELLANT. FURTHER, SHREE KEDAR ALSO REFUSE D TO PAY MONEY TO THE ASSESSEE, AS IT ALSO LOST LOT OF MONEY IN THE PROJE CT. THEREFORE, THE APPELLANT COMPANY THOUGHT IT NECESSARY AND APPROPRIATE TO WRI TE OFF THE AMOUNT, AS NEITHER ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 38 IT WAS GETTING THE DEVELOPMENT RIGHTS IN THE PROPER TY, NOR WAS IT GETTING THE MONEY BACK. 12. THE LEARNED AO IN THIS REGARD HAS RELIED UPON T HE STATEMENT GIVEN BY SHRI VIJAY B. MASURKAR, DIRECTOR OF SHREE KEDAR, THAT HE WAS HOPEFUL OF REVIVAL OF THE PROJECT, BUT IT IS A FAR-FETCHED THING, ESPECIA LLY WHEN THE ORIGINAL AGREEMENT HAD ALREADY BEEN TERMINATED AND THERE WAS NO EXPRES S PERMISSION OR CONSENT FROM THE GOVERNMENT TOWARDS REDEVELOPMENT OF THE PA RTICULAR LAND. IN MY OPINION, THE APPELLANT HAD MADE REASONABLE EFFORTS TO RECOVER THE MONEY AND SINCE IT WAS UNSURE OF GETTING BACK THE MONEY, IT C HOSE TO WRITE IT OFF IN ACCORDANCE WITH THE PROVISIONS OF LAW, WHICH IS PER MISSIBLE UNDER THE PROVISIONS OF I.T. ACT. IF IN FUTURE THE APPELLANT RECOVERS ANY SUCH AMOUNT FROM THE PARTIES, THE SAME IS LIABLE TO BE TAXED IN THE HANDS OF THE APPELLANT, IN THE YEAR OF RECEIPT. HOWEVER, AS STATED BY THE APPELLAN T, SO FAR, THEY HAVE NOT MADE ANY RECOVERY IN RESPECT OF THE SUM OF RS.19 CRORES PAID TO SHREELEKHA AND SHREE KEDAR. ACCORDINGLY, TAXING SUCH AMOUNT IN THE HANDS OF THE APPELLANT WAS NEITHER REASONABLE NOR JUSTIFIED. THE HON'BLE ITAT, MUMBAI, IN CASE OF PREMA REAL ESTATES P. LTD. VS. ITO HELD THAT THE AO CANNO T STEP INTO THE SHOES OF THE BUSINESSMAN AND DECIDE AS TO WHAT SHOULD A BUSINESS MAN DO. SIMILAR VIEW WAS TAKEN BY ITAT, MUMBAI, IN CASE OF SAVOM REMEDIES PU T. LTD. VS. ITO, WHEREIN IT WAS HELD THAT THE AO CANNOT STEP INTO THE SHOES OF THE BUSINESSMAN AND DECIDE WHETHER A PARTICULAR EXPENDITURE SHOULD BE WRITTEN OFF. ACCORDINGLY, CONSIDERING THE OVERALL FACTS OF THE CASE, I FEEL THAT CLAIM OF THE APPELLANT TOWARDS WRITE OFF OF RS.19 CRORES SHOULD BE ALLOWED. CONSEQUENTLY, TH E DISALLOWANCE OF CLAIM OF LOSS OF RS.19 CRORES MADE BY THE AO IS DIRECTED TO BE DELETED. THIS GROUND OF APPEAL IS, ACCORDINGLY, ALLOWED. 30. DURING THE COURSE OF HEARING, THE LD D.R CONTENDED THAT THE ASSESSEE SHOULD HAVE CARRIED OUT DUE DILIGENCE EXERCISE TO F IND OUT THE TITLE TO THE LAND, AS THE LAND BELONGED TO THE GOVERNMENT. HE F URTHER SUBMITTED THAT THE EARLIER PARTIES HAVE ALSO NOT ENTERED INTO ANY AGREEMENT WITH THE GOVERNMENT. ACCORDINGLY THE LD D.R EXPRESSED THE V IEW THAT THE LOSS MAY BE A STAGE MANAGED OR CREATED LOSS. ON THE CONTRAR Y, THE LD A.R SUBMITTED ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 39 THAT IT IS NOT THE CASE OF THE AO THAT THE TRANSACT ION IS NOT GENUINE ONE. THE LD A.R ALSO SUBMITTED THAT THE LD D.R IS TRYING TO IMPROVE THE CASE, WHICH HE IS NOT PERMITTED TO DO SO. 31. WE ALSO NOTICE FROM THE ASSESSMENT ORDER THAT THE AO HAS NOT DOUBTED THE GENUINENESS OF THE TRANSACTIONS. FURTHER THE SEQ UENCE OF EVENTS NARRATED ABOVE BY US AS WELL AS BY LD CIT(A) WOULD SHOW THAT THERE WERE AGREEMENTS BETWEEN M/S SHREELEKHA ENTERPRISES AND S IDHDHI VINAYAK CO- OP HOUSING SOCIETY. THERE IS NO DISPUTE THAT THE L AND WAS OCCUPIED BY SLUM DWELLERS AND THEY HAVE FORMED THE SIDDHI VINAY AK CO-OP HOUSING SOCIETY. SINCE THE RIGHTS OF SLUM DWELLERS AND THE DEVELOPMENT OF SLUMS ARE QUIET COMMON IN MUMBAI, M/S SHREELEKHA ENTERPRI SES HAS VENTURED INTO THIS PROJECT, AS THE SAME LOOKED LUCRATIVE. T HERE AFTER M/S SHREE LEKHA HAS JOINED HANDS WITH M/S SHREE KEDHAR INFRA. AFTE RWARDS THE ASSESSEE HAS BEEN ROPED IN. THUS WE NOTICE THAT THREE BUILDERS ARE INVOLVED IN THIS PROJECT ON THE ONE SIDE AND ABOUT 138 SLUM PEOPLE A RE INVOLVED IN THE OTHER SIDE. AS RIGHTLY POINTED OUT BY LD A.R, WE NOTICE THAT THESE PARTIES HAVE ENTERED INTO AGREEMENT WITH SLUM INHABITENTS FOR DE VELOPMENT OF THE LAND ONLY, I.E., WHAT THEY PROPOSE TO ACQUIRE WAS ONLY D EVELOPMENT RIGHTS AND NOT OWNERSHIP RIGHTS. HENCE THE FACT THAT THE LAND BELONGED TO GOVERNMENT MAY NOT BE RELEVANT, WHEN THE FACT THAT THE SAID LA ND WAS OCCUPIED BY SLUM PEOPLE IS NOT DISPUTED. THE PROJECT WAS STARTED W AY BACK IN 2007 AND THE PARTIES ARE SAID TO BE NOT RELATED TO EACH OTHER. HENCE, WE ARE UNABLE TO ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 40 AGREE WITH THE CONTENTIONS OF THE LD D.R THAT THE L OSS CLAIMED BY THE ASSESSEE MAY BE A MANAGED OR CREATED ONE, AS THE TI ME GAP BETWEEN THE PAYMENT AND WRITE OFF IS ALMOST FOUR YEARS. IN ANY CASE, IT IS NOT THE CASE OF AO AT ALL. WE NOTICE THAT THE LD D.R HAS NOT BROUGH T ON RECORD ANY MATERIAL TO SUPPORT HIS VARIOUS CONTENTIONS, IN WHI CH CASE, THEY ARE ONLY HIS PRESUMPTIONS, WHICH CANNOT BE TAKEN COGNISANCE OF A T THIS STAGE. 32. THE LD D.R PLACED HIS RELIANCE ON VARIOUS CASE LA WS TO CONTEND THAT IT IS THE RESPONSIBILITY OF THE ASSESSEE TO PROVE THE CLA IM FOR DEDUCTION. MOST OF THOSE DECISIONS HAVE BEEN RENDERED IN THE CONTEXT O F EXPENDITURE CLAIMED U/S 37(1) OF THE ACT. ON THE CONTRARY, THE ASSESSE E HEREIN IS CLAIMING DEDUCTION OF BUSINESS LOSS (AKIN TO TRADING LOSS) U /S 28 OF THE ACT. WE NOTICE THAT THE ASSESSEE HAS FURNISHED ALL THE RELE VANT DETAILS RELATING TO THE CLAIM BEFORE THE AO. WE HAVE ALSO NOTICED THAT THE ASSESSEE HAS OBTAINED LEGAL OPINION ABOUT ITS RIGHT OVER THE PROPERTY AND THE ADVOCATES HAVE EXPRESSED THE VIEW THAT THE ASSESSEE DOES NOT HAVE ANY RIGHT OVER THE PROPERTY. WITH REGARD TO THE RECOVERY OF AMOUNT, I T HAS BEEN STATED THAT M/S SHREELEKHA ENTERPRISES DOES NOT HAVE ANY ASSETS AND M/S SHREE KEDAR INFRA HAS ALSO SUFFERED HEAVY LOSS. HENCE, IN THE BOARD OF DIRECTORS MEETING, IT HAS BEEN STATED TO THE DIRECTORS AS UND ER:- IT IS NEITHER EXPECTED TO EARN ANY RETURN NOR EXPE CTED TO RECOVER THE AMOUNT SPENT. IT IS NOT VIABLE TO PUT IN MORE MONE Y IN THE PROJECT. RECOMMENDED TO WRITE OFF. ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 41 ACCORDINGLY THE BOARD OF DIRECTORS HAVE RECOMMENDE D FOR WRITE OFF OF THE IMPUGNED AMOUNT OF RS.19 CRORES. AS NOTICED EARLIE R, THE BOARD OF DIRECTORS HAVE RECOMMENDED WRITE OFF OF RS.117.08 C RORES AND THE AO HAS ACCEPTED WRITE OFF OF RS.83.08 CRORES. WE ALSO NOT ICE THAT THE ASSESSEE HAS FOLLOWED A DUE PROCESS IN ARRIVING AT THIS DECISION TO WRITE OFF AND HENCE, IN OUR VIEW, THE BUSINESS PRUDENCE AND WISDOM OF THE A SSESSEE SHOULD NOT HAVE BEEN DOUBTED WITH. THE LD. COMMISSIONER (APPE ALS) HAS ALSO EXPRESSED THE VIEW THAT IN CASE THE MONEY IS RECOVE RED IN FUTURE, THE SAME IS LIABLE TO BE TAXED IN THE HAND OF ASSESSEE IN TH E YEAR OF RECEIPT. THE LD. COMMISSIONER (APPEALS) HAS ALSO REFERRED TO THE DEC ISION OF MUMBAI TRIBUNAL IN PRERNA REAL ESTATE P. LTD. VS. ITO AND SAVON REMEDIES PVT. LTD. VS. ITO ON THE PRINCIPLE THAT THE ASSESSING OF FICER CANNOT STEP INTO SHOES OF BUSINESSMAN AND DECIDE WHETHER ANY PARTICU LAR EXPENDITURE SHOULD BE WRITTEN OFF OR NOT. WE NOTICE THAT THE LD. COMMI SSIONER (APPEALS) HAS DULY CONSIDERED THE LEGAL OPINION OBTAINED BY ASSES SEE IN THIS REGARD. WE HAVE NOTED THAT THERE IS NO DISPUTE THAT ASSESSEE P AID THE AMOUNT IN THE COURSE OF ITS BUSINESS. THE CASE LAW RELIED BY LD. DR IN MAMTA ENTERPRISES (SUPRA) HAS NO RELEVANCE ON THE FACT OF PRESENT CAS E. IN THE SAID CASE, THE EXPENDITURE WAS INCURRED BY ASSESSEE TO DEFEND AN A CTION WHICH IS AN OFFENCE AND IS NOT DEDUCTIBLE. THE OTHER CASE LAW R ELIED BY LD. DR HAS ALREADY BEEN DISTINGUISHED BY US WHILE DECIDING THE APPEAL OF ASSESSEE (SUPRA). ITA NO. 5407 & 5613 MUM 15 - MS SHIVALIK VENTURES PVT. LTD. 42 33. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT F IND ANY INFIRMITY IN THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND ACCORDI NGLY AFFIRM THE SAME. 34. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.09.2018. SD/- SD/- B.R. BASKARAN PAWAN SINGH ACCOUNTANT MEMBER JUDIC IAL MEMBER MUMBAI, DATE: 19.09.2018 SK COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR E BENCH, ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI