TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 1065
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....ess deduction. 2. The Learned CIT(A) erred in upholding the observation of the AO that granting of advances to the wholly owned subsidiary has not directly sprung from the business of the appellant. 3. The Learned CIT(A) erred in confirming the addition of interest income amounting to INR 2,56,442/- received from Kotak Mahindra Bank ('the Bank') to the income of the appellant. 4. The Learned CIT(A) has failed to appreciate that the appellant has consistently followed the policy of recognizing the interest income on the basis of the TDS certificates and not on the basis of form 26AS and on the basis of such policy, the aforesaid interest has been accounted and offered for tax in the subsequent AY i.e AY 2015-16. 2. Facts in brief of the case are that the assessee is a company engaged in the business of manufacturing and trading of stationary and art material products, filed its return of income for Assessment Year 2014-15 on 30.11.2013 declaring loss of Rs. 11.27 crore (Approx). The assessee declared book profit was declared at (-) Rs. 10.77 crore. The case was selected for scrutiny. The Assessing Officer while passing the assessment order disallowed write off of Rs. ....
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....f of the advances and disengage itself from the activities of CAL was taken by new management of the assessee as the new management/Board of Directors was of the view that making continuous loss year after year, there was no hope that the subsidiary can be revived which is evident from the financial position of the subsidiary. 5. The ld. AR of the assessee submits that the case law of Hon'ble Bombay High Court relied by Assessing Officer in Salem Magnesite Pvt. Ltd vs. CIT [(2009) 180 Taxman 545 (Bom)] is distinguishable on the fact. In the said case the money advanced to subsidiary was realized for purchase of capital asset, write off of capital asset, write off of those amount by holding companies are not allowed as revenue deduction. However, in the case of assessee, the advances were made to meet the working capital. Further, the case law relied upon by CIT(A) in DCM Ltd. 9123 TTJ 145 (Del.) is also not applicable on the facts of the present case as in the said case, the loan was given by the assessee to subsidiary company to acquire the share of Joint Venture Partner. Thus, loan was given to enhance the capital base. However, in the present case, the assessee has given advan....
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....written off of loans advances to its subsidiary of Rs. 305.32 lakhs. The assessee was issue show-cause notice and to explain the gist of its claim on write off. The assessee filed its reply dated 28.01.2016. The Assessing Officer has recorded that content of reply in paragraph-4.2 of his order. In the reply, the assessee in sum and substance stated that considering growth in the industry, the assessee expected with is subsidiary will reap the benefit of start of near future. However, during the Financial Year 2012-13 & 2013-14, the assessee's performance was not encouraging and the assessee incurred losses and it became difficult to continue funding the CAL and it was also relied that losses in CAL were deteriorating the assessee's financial position. Looking on the financial position of CAL and assessee, the assessee did not foresee any turn out of business near future. Therefore, the Board of Directors decided to disengage from the activity of advancing and write off of the advances of Rs. 305.32 lakhs. It was further stated that the assessee given advance to CAL for its business and therefore, the write off of such advance is incidental to the business and should be allowed as b....
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....subsidiary company. The loss in Salem Magnesite Pvt. Ltd. (supra) was treated as capital loss and in case of appellant/assessee; the loss is also capital loss. 10. Before us, the ld. AR of the assessee vehemently argued that the new management has decided to write off of the advances and disengage itself from the activities of the assessee. However, no documentary evidence in the form of any communication or resolution of Board of Director is placed on record. The ld. AR of the assessee though filed a number of decisions in support of his submission; however, the ld. AR of the assessee mainly relied upon the decision of Mumbai Tribunal in Jackie Shroff (supra) and Delhi Tribunal in ACIT vs. OSN Infrastructure & Projects Pvt. Ltd. (supra). 11. In our view, both the decision are distinguishable on the facts of the present case in Jackie Shroff (supra) case the money was advanced for business expediency, however in the case in hand the assessee funded the capital working requirement of CAL. Further, in ACIT vs. OSN Infrastructure & Projects Pvt. Ltd. (supra), the said assessee was engaged in the business of development of infrastructure, construction and real estate trading, advance....