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of <h1>ITAT Decision: Appeal Partially Allowed, Disallowed Loss & Restricted Disallowance</h1> <h3>Biological E Ltd., Hyderabad Versus Dy. Commissioner of Income-tax, Circle – 1 (3), Hyderabad And (Vice-Versa)</h3> Biological E Ltd., Hyderabad Versus Dy. Commissioner of Income-tax, Circle – 1 (3), Hyderabad And (Vice-Versa) - TMI Issues Involved:1. Disallowance of long-term capital loss.2. Disallowance under Section 14A.3. Allowance of bad debts.4. Disallowance of write-off of deposits/advances.Detailed Analysis:1. Disallowance of Long-Term Capital Loss:The assessee claimed a long-term capital loss (LTCL) of Rs. 24,76,342, which the AO disallowed on the grounds that the land transfer did not occur in the assessment year 2010-11, as no sale deed was produced. The CIT(A) upheld the AO's disallowance, stating no sale deed was presented to prove the transfer. The ITAT, after considering the rival submissions and the material on record, confirmed the disallowance, citing the Supreme Court's decision in CIT Vs. Balbir Singh Maini, which mandates a registered sale deed for the transfer of property under Section 2(47) of the Act. The ITAT concluded that mere receipt of consideration and handing over possession without documentary evidence is insufficient to claim LTCL.2. Disallowance under Section 14A:The AO disallowed Rs. 12,83,188 under Section 14A, comprising Rs. 12,05,664 under Rule 8D(2)(ii) and Rs. 77,524 under Rule 8D(2)(iii). The CIT(A) deleted the disallowance under Rule 8D(2)(ii), noting that the assessee had sufficient own funds compared to the investments made. However, the CIT(A) upheld the disallowance under Rule 8D(2)(iii) for administrative expenses. The ITAT, after reviewing the submissions, restricted the disallowance to Rs. 26,518, being 0.5% of the average value of investments that yielded exempt income, thus partly allowing the assessee's appeal.3. Allowance of Bad Debts:The AO allowed only Rs. 59,85,437 of the claimed Rs. 1,49,86,880 as bad debts, disallowing Rs. 90,01,443 on the grounds that the latter were relatively younger debts. The CIT(A) allowed the entire claim, referencing the Supreme Court's decision in TRF Ltd. Vs. CIT, which states that establishing that debts have become bad is unnecessary post the amendment to Section 36(1)(vii). The ITAT upheld the CIT(A)'s decision, noting no infirmity in allowing the claim of bad debts of Rs. 90,01,443.4. Disallowance of Write-off of Deposits/Advances:The AO disallowed Rs. 97,96,233 written off as deposits/advances, stating these were not revenue items and had never been part of income in earlier years. The CIT(A) deleted the disallowance, citing that these were business-related deposits/advances written off, referencing ITAT Visakhapatnam's decision in DCIT vs. Friends Shoes Company. The ITAT, however, reversed the CIT(A)'s decision, noting that the assessee failed to provide documentary evidence that the parties refused to pay back the advances, and these amounts were never considered as income. Thus, the ITAT restored the AO's disallowance.Conclusion:Both the assessee's and the revenue's appeals were partly allowed. The ITAT upheld the disallowance of LTCL and restricted the disallowance under Section 14A. It confirmed the CIT(A)'s allowance of bad debts but reinstated the AO's disallowance of the write-off of deposits/advances.
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