AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (12) TMI 1348
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....ved upon the assessee. Thereafter, the Commissioner of Income Tax issued notice under section 263 of the Act by observing that the order passed by the AO was erroneous and prejudicial to the interest of revenue as the AO has failed to examine the claim by way of writing off the advance to subsidiary of Rs. 74,13,000/- and hence the order of AO was erroneous and also prejudicial. The contents of show cause notice are reproduced as under: "NOTICE UNDER SECTION 2563 OF THE IT Act, 1961 To The Principal Officer, M/s Raptakos Brett & Co. l.td.. 21-A Mittal Tower.A-wing. Narirnan Point, Mumbai -400 021. Sir, Sub.: Proceedings for revision of order u/s 263 in your case for A.Y.2011-12 - In this case, assessment order was passed u/s 143(3) of the Income- tax Act 1961 on 23/10/13 in which the total income was assessed at RS.92.57 crores as against the returned income of Rs. 89.94 crores. Perusal of the assessment folder reveals that the assessee debited a sum of Rs. 74,13,000/- as advance to subsidiary company written off. The deduction claimed was duly allowed by the AO. It appears that the AO has allowed the claim which is not in accordance with the provision of law. The d....
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....ted and eroded completely due to continuous losses from year to year. The assessee also argued that the advances written off were allowable and admissible as deduction under the Act as being given out of business exigencies and therefore the revisionary powers as provided by the provisions of section 263 of the Act were wrongly assumed to disturb the assessment. During the course of proceedings u/s 263 of the Act, the ld.AR submitted that the AO had called for the details as to the advances written off by the assessee and after examining all the relevant details allowed the same. The assessee, therefore, submitted that the order of the AO was neither erroneous nor prejudicial to the interest of the revenue. 3. The ld. PCIT did not find any merit in the contentions of the assessee and rejected the same by cancelling /setting aside the order of the AO with a direction to withdraw the deduction allowed after providing fair and reasonable opportunity of hearing to the assessee by observing and holding as under : "4. I have carefully considered the above facts and do not find any merit in the contention of the assessee company. The advances made by the assessee to its foreign based s....
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....identical issue has been decided in favour of the assessee. 5. On the other hand, the ld.DR submitted before us that the AO has not examined the details as observed by the Commissioner after examination of the case record and noted that the AO did not call for any advance details from the assessee and there was nothing on the assessment records or in the order sheet to this effect. Therefore, the contention of the ld.AR that the AO has called for all the details and applied his mind fully was incorrect and therefore the Commissioner has rightly held that the deduction of Rs. 74,13,000/- was allowed without verification of facts and without application of mind by the AO. The ld. DR also relied on the decisions of the Hon'ble Apex Court in the cases of (a) CIT V Amitabh Bachchan [2016] 384 ITR 200 (SC) (b) Rampyari Devi Saraogi V/s CIT [1968] 67 ITR 84 (SC) (c) Decision of Full Bench of Hon'ble Gauhati High Court in the case of CIT V/s Jawahar Bhattachagee (341 ITR 434), (d) the decision of Hon'ble Karnatak High Court in the cae of CIT V/s Infosys Technologies Ltd reported in 17 Taxmann.com 203 (Kar) and (e) the Decision of the Special Bench of the Tribunal in the case of Rajyalaksh....
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.... and assessee extended financial help to Camelot from time to time and the said financial help was clearly in assessee's own business interests. Therefore, the loans and advances so given by the assessee were therefore wholly incidental to its business and could not be treated in isolation of its legitimate business interest. Granting of loan itself is justified ground for commercial expediency and the decision only corroborative to writing off is incidental to business purpose. The operative part of the decision is reproduced below: "7. We find that Camelot was set up to manufacture toothbrushes exclusively for the assessee company and that it had no other customer than the assessee. It was said to have been set up as a small scale industrial undertaking with a view to certain preferential treatment in the excise laws, but whatever it manufactured was bought by the assessee company alone. Camelot did incur the losses but the assessee company extended financial help to Camelot from time to time. This financial help was clearly in assessee's own business interests because, if the assessee company was not to do so, Camelot could not have continued to exist, and all these lo....
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....as long as shares are acquired on the grounds of business expediency, any loss on sale thereof is also required to be treated as an admissible business deduction. Hon'ble Supreme Court's judgment in the case of Patnaik & Co (supra) deals with a situation in which the assessee had subscribed to certain Government security but incurred a loss on sale of that security. The stand of the assessee was that the assessee had made the said investment with a view to promote its business ITA No. 5485/Mum/2009 Assessment year: 2003-04 interests and as subscription to the Government Loan was conducive to its business, the loss arose in the course of the business, and that, therefore, the assessee was entitled to a deduction of the loss claimed by it. A coordinate bench of this Tribunal upheld the claim made by the assessee. The Tribunal found that having regard to the sequence of events and the close proximity of the investment with the receipt of the Government orders, the conclusion was inescapable that the investment was made in order to further the sales of the assessee and boost its business. In the circumstances, the Tribunal held that the investment was made by way of commercial ....