TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 793
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....e case are that the assessee is running a hospital filed its return of income by admitting loss of Rs. 1,11,55,985. Initially, the return filed by the assessee was processed under section 143(1) of the Income-tax Act, 1961 and thereafter the assessee's case was selected for scrutiny and assessment was completed under section 143(3) of the Act dated December 27, 2011. In the assessment order, the Assessing Officer has observed that in the annual report submitted by the assessee for the previous year relevant to the assessment year 2009-10, it was found that the assessee has claimed an amount of Rs. 2,89,43,000 as "advances written off" in the profit and loss account after the net profit (Rs. 1,61,06,570). After deducting this extraordina....
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.... 20, 2011, the assessee submitted that, The Fortis Malar Hospitals Ltd. (formerly known as Malar Hospitals Ltd.) has written off Rs. 2,89,43,158 as not recoverable from two companies, with whom we had financial transactions. These amounts were advanced in the ordinary course of business. All these transactions happened about more than 10 years prior to the financial year and the arbitration was pending for more than four years. Instead of carrying amount in the book as receivable, and not utilising the funds, it was agreed to settle the dispute and realise the money. Hence, during the course of the arbitration it was decided to realise a part and write off the balance. The amount written off is not a capital loss, but only revenue in nat....
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....tiny proceedings as well as from the written submissions, the following facts were ascertained : Two companies Malar Finance P. Ltd. and Malar Gautham Hotels P. Ltd. had been established specifically to source funds for Malar Hospital for the hospitals project expansion. Funds were borrowed by these two companies as short-term funds from the market and advanced certain portion to Malar Hospital. The funds received from the two companies were used by Malar Hospital for the project expansion (i.e., expansion of hospital from 150 beds to 250 beds), which is for the purpose of capital acquisitions. When circumstances arose to repay the funds in the market, Malar Hospital repaid the sum on behalf of these two companies and the difference in th....
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....he learned Commissioner of Income-tax (Appeals). The learned Commissioner of Income-tax (Appeals) confirmed the order passed by the Assessing Officer by observing that the advance written off by the assessee-company amounting to Rs. 2,89,43,000 is neither bad debt nor does it fall in the category of a business loss. The learned Commissioner of Income-tax (Appeals) has further observed as under : "* The aforesaid two companies though are sister concerns of the appellant-company, but for all legal purposes they are two different and independent legal entities incorporated under the Indian laws. * These companies borrowed money from the market, a portion of which was advanced to the appellant-company. * Whatever money was borrowed by the ap....
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....in the business of money lending. * The purpose for which these two companies were incorporated or created would not alter the position of law. In view of the above discussion, I hold that the claim of the appellant with regard to 'advances written off' amounting to Rs. 2,89,43,000 cannot be allowed either under section 28 or under section 36(1)(vii) or even under section 37 of the Act. I therefore confirm the action of the Assessing Officer in disallowing the above said claim of the appellant and the grounds of appeal taken by the appellant are dismissed." 6. On being aggrieved, the assessee carried the matter in appeal before the Tribunal. 7. Learned counsel for the assessee has submitted that the assessee Malar Hospital to ra....
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.... for the purpose of borrowing funds from the market to expand the hospital of the assessee. The assessee has repaid the amount in excess to the amount borrowed from the two companies, namely, M/s. Malar Finance Pvt. Ltd. and M/s. Malar Gautham Hotels Pvt. Ltd. to third parties on behalf of the two companies. We find that the assessee Malar Hospital is a different legal entity and M/s. Malar Finance Pvt. Ltd. and M/s. Malar Gautham Hotels Pvt. Ltd. are two different legal entities. The amount disallowed by the Assessing Officer is not relating to the loan borrowed from the above two companies. The Assessing Officer has disallowed only the repaid amount to third parties on behalf of the two companies. Before us, learned counsel for the assess....