TaxTMI 
TaxTMI 
2015 (12) TMI 560
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....4) The learned CIT(A) erred in disallowing the loss on account of unrecoverable advance on the basis of an erroneous conclusion that it is an assessee's fault when first advance is outstanding (which was given for against first Order) and still it gave further order and also paid advance against such order. 2.1) The learned CIT-A erred in holding that Revised Return was filed when there was no omission or wring statement in the original Return of Income. 2.2) The learned CIT-A erred in concluding that non-claiming of a loss in original Return of Income is not an omission or wrong statement which entitles an assessee to file a Revised Return of Income. 3) The learned A.O. (and learned CIT-A erred in confirming) erred in not accepting the Income as per the revised Return of Income the assessee. 4) The appellant craves its right to add to or alter the Grounds of Appeal at any time before or during the course of hearing of the case. 3. The issue raised vide ground of appeal No.1 is against the disallowance of loss on account of unrecoverable advance totaling Rs. 43.35 lakhs. The assessee by way of ground of appeal No.2 is aggrieved by the order of CIT(A) in holding th....
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.... covered under sections 28, 29 and/or 37 of the Act. The assessee, in turn explained the factual aspect and pointed out that the deduction claimed was not bad debt referred to in section 36 of the Act, but was loss incurred in the course of carrying on of the business and the same should be allowed as deduction, unless there was prohibition for the said allowance. Reliance was placed on series of decisions of Hon'ble Supreme Court in this regard, which are part of reply given by the assessee before the Assessing Officer, which in turn, are incorporated at pages 3 to 5 of the assessment order. Further, reliance was placed on the decision of Hon'ble High Court of Rajasthan in CIT Vs. Anjani Kumar Co. Ltd. (supra) and Pik Pen Private Limited Vs. ITO in ITA No.684 7/Mum/2008, order dated 28.01.2010. The Assessing Officer thereafter, individually considered the reliance placed upon by the learned Authorized Representative for the assessee on various decisions and was of the view that in view of the ratio laid down by the Apex Court in Hasimara Industries Ltd. Vs. CIT (1998) 231 ITR 842 (SC), the loss suffered had to be treated as capita loss. Consequently, the claim of the assessee vis-....
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....he basis of provision for 30% of the amount advanced for purchase of machinery being not written off originally and being claimed in the revised return, could neither be considered omission or wrong statement. As per the CIT(A), the conditions under section 139(5) of the Act were not satisfied and the said ground of appeal was rejected. 6. The assessee is in appeal against both the findings of CIT(A). 7. After taking us through the factual aspects of the case, the learned Authorized Representative for the assessee pointed out that the provision for writing off of the said advance to the extent of 30% was made in the original return of income, but no deduction was claimed on account of said provision. However, on a later date, the assessee furnished revised return of income after recognizing omission made in the original return of income and wrote off sum of Rs. 43,34,640/-, which was duly allowable in the hands of the assessee. He further pointed out that the Assessing Officer while computing the income in the hands of assessee, had computed the same on the basis of revised return of income. However, the CIT(A) rejected the same. The case of the assessee before us was that omissi....
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....deduction @ 30% of the total advance was on an adhoc bais. Since the amount not received by the assessee, was not trading loss, the same could not be allowed under sections 28 and 29 of the Act. Further, it was stressed by the learned Departmental Representative for the Revenue that the assessee had made a provision in the books of account and had not written off the said amount in the books of account. 9. The learned Authorized Representative for the assessee in rejoinder pointed out that the advance paid for purchase of machinery in the year 2006 and 2008 did not materialize in the delivery of the machinery, which were technical machines and were the requirement of business of the assessee company. Since the Italian company had gone into liquidation, the assessee company took a decision to write off part of the amount as unrecoverable and the business loss was to be allowed in the year when it was claimed. 10. We have heard the rival contentions and perused the record. The assessee was engaged in the business of automobiles, signaling lights and other electric items. Originally, the return of income filed by the assessee on 27.09.2009 was Rs. 16.41 crores. Thereafter, the revis....
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....delivery of the equipments were delayed and the assessee deputed its Engineers to visit Italy, who in turn reported that the concern M/s. Galileo Vacuum System had filed Insolvency and liquidation petition. The assessee, in turn took legal recourse and filed bankruptcy claim of the said concern before the PRATO. The copy of the Insolvency petition filed by the assessee on Galileo Vacuum System in SPA, is placed at pages 4 to 6 with its English translation at pages 1 to 3 of the Paper Book - II. The assessee, in view of the said scenario made provisions of 30% of the advance recoverable as doubtful totaling Rs. 43,35,000/- in the original return of income. No claim of deduction was made in the original return of income on account of the said provision for doubtful advance. However, subsequently, the asses see furnished revised return of income claiming the said deduction of write off of Rs. 43.35 lakhs as business loss. The present appeal filed by the assessee is against the non-allowance of the aforesaid business loss. 11. The claim of the assessee before us is two-fold that first it was a loss while carrying on of the business activities and hence, allowable under sections 28 and....
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.... CIT Vs. Anjani Kumar Co. Ltd. (supra), wherein, it was held as under:- "5. The admitted facts are that the advance was paid for acquiring the agricultural land to set up a factory, but when the agricultural land was not acquired, no capital asset came into existence, therefore, there is no question of allowing depreciation on such asset. If any asset is required and if it is a benefit of enduring nature, then of course assessee cannot get the deduction of amount for acquisition of land as revenue expenditure. When land was not acquired, no capital asset has been acquired, therefore, the payment of Rs. 50,489/- is to be allowed as business loss" 12. Further, Mumbai Bench of Tribunal in Pik Pen Private Limited Vs. ITO (supra) had held as under:- "8. We have heard the parties. The assessee has debited to the Profit & Loss A/c. an amount of Rs. 2,96,135/- on account of bad debts/balance written off. The assessee explained that the said amount represented the amount advanced to Balaji Pens Pvt. Ltd., for machinery and as the machinery was not supplied, and hence, the un-recovered amount was written of treating the same as an expenditure for the purpose of business u/s. 37(1) of t....
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....d by the Mumbai Bench of the Tribunal in its order dated 28th January 2010, in ITA No:6847/Mum/2008, in the case of M/s. Pik Pen Private Limited vs. ITO. There advances were made for the purchase of machinery, which was not supplied. The assessee wrote off the advances and claimed deduction as revenue expenditure, which claim was allowed by the Tribunal. In the present case, we are of the opinion that even if the websites had materialized, the expenditure could not have been viewed as capital expenditure because the website is put up for the purposes of day-to-day running of the business and even if one were to view that some enduring benefit is obtained by the assessee, the benefit cannot be said to accrue to the assessee in the capital field. A website is something where full information about the assessee's business is given and it helps the assessee's customers in dealing with it. A website constantly needs updating, otherwise it may become obsolete. It helps in the smooth and efficient running of the day-to-day business. The expenditure would have been allowable as revenue expenditure; as a corollary, when the website did not materialize, the amounts advanced to the companies ....
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....e loss suffered by the assessee was a capital loss. However, in the facts of the present case as pointed out by us in the paras hereinabove, the assessee had made the aforesaid advance for purchase of equipment / machinery, which in turn was to be utilized by the assessee in its Chakan plant. Even the terms of contract between the assessee and the Italian company reflect that the equipment had to be installed at the Chakan Plant, against which it was also agreed that M/s. Galileo Vacuum System would send personnel from Italy for its installation and also for start up of the unit. The facts of the present case before us are at variance to the facts before the Apex Court and consequently, the ratio laid down by the Hon'ble Supreme Court is not applicable to the present case before us. However, the facts before the Hon'ble High Court of Rajasthan are identical to the facts before us and following the same parity of reasoning, we hold that the assessee is entitled to the claim of deduction on account of write off of the advance paid to Italian company against purchase of machinery, which was never delivered to the assessee. 16. Another objection raised by the Assessing Officer was tha....