TaxTMI 
TaxTMI 
2001 (2) TMI 274
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....im of capital loss of Rs. 7,50,000 on the view that the write off of the loan amounted to a capital loss. The appellate authority ought to have noticed that for allowing as a deduction for income-tax purpose the loss should have arisen on the transfer of a capital asset effected during the year and that in this case the assessee had only written off as irrecoverable a loan advanced during the previous year relevant to the assessment year 1989-90. The CIT(A) ought to have upheld the disallowance of the claim as capital loss as in this case there was no transfer of a capital asset within the meaning of section 45." 2. The respondent-company advanced some amount to M/s. Fort William Co. Ltd., Calcutta and returned the interest received ther....
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.... Industrial and Financial Reconstruction (BIFR) in the case of Fort William Co. Ltd., on the basis of which the advance made by the assessee to the said company had been regarded as irrecoverable, was passed on 8-11-1989, i.e. in the year of account relevant for the assessment year 1990-91 and so the claim of loss under the head 'capital gains' is allowable for the assessment year 1990-91. He further observed as under: "On a consideration of the facts, I am of the opinion that the claim of the appellant has to be allowed. I would agree with the contention of the learned representative that the write off of the loan amounts to a capital loss. As regards the year in which it is to be allowed, I would agree with the learned representative t....
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....FR and so the advance became irrecoverable and the amount had been written off by the assessee-company and written back to the P&L account by the debtor-company. Therefore, the amount must be regarded as irrecoverable and so it must be allowed as a deduction as a loss under the head 'capital gains'. To a specific query from the Bench as to why it should not be held that there was no transfer of the said capital asset in terms of section 2(47) of the I.T. Act in view of the decision of the Apex Court in the case of Vania Silk Mills (P.) Ltd v. CIT [1991] 191 ITR 647, the Id. counsel pleaded that the said decision of the Apex Court is distinguishable and the case of the assessee falls within the ratio of another decision of the Apex Court, i.....
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....IT(A) has also mentioned that the assessee has accepted the write back of the loan in the books of the debtor-company in the year of account relevant for the present assessment year. We do not see how the assessee can accept the write back of a loan due to it in the books of the debtor-company. At any rate, no such evidence of acceptance has been referred to before us. 5. Secondly, the contention of the assessee that the relevant order of the BIFR dated 8-11-1989, on the basis of which the amount had been written off, falls in the year of account relevant for the assessment year 1990-91 does not also seem to be of much relevance because there is nothing in the said order which authorises the assessee to write off the amount of Rs. 7,50,0....
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....he Tribunal, as a fact-finding body, is also entitled to go into the question whether there is any evidence in support of its claim that the amount had actually become irrecoverable warranting its write off. We are of the view that no such evidence is available on file, and on this ground also the write off of the amount is unwarranted and so we are of the view that there is no transfer of the capital asset within the meaning of section 2(47) of the Income-tax Act. 7. The next question is to consider the effect of a mere write off of a debt in the books of account of the assessee and whether such write off amounts to a transfer. Simply because a debt is written off in the books, it does not follow that the assessee has no right to recove....
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....btor-company. The meaning of a write off of a debt in accounting terms is not that it is transferred in favour of the debtor-company; it only means at the most, that it is regarded by the creditors as irrecoverable or as extinguished. All cases of extinguishments of rights in a capital asset are not cases of transfer within the meaning of section 2(47), as held by the Apex Court in the case of Vania Silk Mills (P.) Ltd. In this case, the Apex Court was considering the liability to capital gains tax in a case where machinery was destroyed by fire and insurance amounts were received in excess of the cost of machinery. The Apex Court held that extinguishment of rights on account of destruction or loss of an asset is not transfer within the mea....