TaxTMI 
TaxTMI 
2021 (10) TMI 790
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....in confirming the addition of Rs. 1,28,30 1 U/S 41 of the Act. 5. The learned CIT (A) ought to have appreciated that merely because trading liability is being known by Appellant in his book of Accounts for years and further merely because Assessee is unable to provide confirmation, section 41 is not attracted as long as the liability is not written off in books of Assessee or there is any benefit derived by Assessee by cessation of liability 6. The learned CIT (A) ought to have appreciated the case law relied by the Appellant and ought to have deleted the same. 7. The CIT (A) erred in confirming levying of the interest u/s 244A of the Act. 8. For these and such other grounds that may be urged at time of hearing, the Appellant prays that the appeal may be allowed." 3. The first ground for our consideration is with regard to allowability of sum of Rs. 5 crores advanced to Blue Ocean Cruises Lines Pvt. Ltd., for the purpose of getting 30% shareholding in a joint venture to be set up between assessee-company and Mr.Oneil Raina for investing into M/s Blue Ocean Crusies Lines Pvt. Ltd. 4. The contention of the learned AR is that the said amount h....
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....garded as trading loss. 7. In the backdrop of aforesaid well settled legal position, the facts of the case in hand may be adverted to. From the perusal of the note annexed to the income filed before the assessing officer, it is evident that assessee had set up an establishment in USA during Financial Year 1992-93 for the exclusive purpose of marketing assessee's products and for promoting its business in US and Latin America. It has further been stated in the note that looking to the stringent norms of product liability in US market, the assessee decided to have a separate Wholly Owned Entity in the US having limited liability. The approval for aforesaid purpose was obtained from the Reserve Bank of India. The assessee therefore, invested funds in equity for meeting the revenue expenses of Wholly Owned Subsidiary Company's balance sheet. However, WOS could not perform upto company's expectations and therefore, it was decided to wind up WOS operations in USA. While granting approval for closure of WOS, RBI permitted the company to write off the whole of investment made in WOS and unrealized export receivables. The assessee therefore, made a claim to write off th....
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....ng shares. However, in the present case, the facts shows that assessee made investment of Rs. 5 crore by the shares of M/s Blue Ocean Cruises Lines Pvt. Ltd. and written off the claim as loss. The present facts of the assessee's case shows that the investment was made not for the purpose of expansion of business activity but it was made with a view to creating capital asset in the form of holding shares. Being so, the judgment relied on by the ld.Counsel of the assessee supported the case of revenue rather than assessee's case. 8. We also find that in the case of CIT(A) Vs. United Breweries Ltd., 321 ITR 546 wherein, Hon'ble Karnatka judicial high court held as follows:- "Even on the accepted legal principles, a 'debt' is an expression well-known in legal parlance and is an amount which is a legal obligation which if not discharged will give rise to a claim in favour of the creditor. An amount which is said to be simply advanced for helping a business associate definitely cannot constitute a debt when the assessee had not placed any material to indicate that the business associate or any associate of the subsidiary of the assessee had a legal obligation for repa....
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....sing this ground on earlier occasion. Accordingly relying on the judgment of Hon'ble Supreme Court in the case of NTPC 229 ITR 383, we admit the additional grounds, as there is no question of investigation of fresh facts on this issue. Accordingly additional ground is admitted. 12. The additional ground in this appeal is with regard to treatment of investment in shares, lee deposits - MDLR airlines and miscellaneous deposits as 'business loss'. With regard to investment in shares as 'business loss', we have already held in earlier paragraph that it is a 'capital loss' and hence there is no question of adjudicating this ground on this issue by way of additional ground. Accordingly, with regard to the treatment of loss of investment is a 'capital loss', therefore, additional ground related to this issue is dismissed. 13. With regard to treatment of loss of Lee deposits and miscellaneous deposits, we will adjudicate this issue along with the main ground of appeal. 14. Next ground is with regard to treating below mentioned amount as capital loss. 1) Lee deposits - MDLR Airlines - Rs. 29,35,650/- 2) Miscellaneous deposits - Rs. 24,73,681/- 15. An amount of ....