TaxTMI 
TaxTMI 
2022 (7) TMI 532
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....ied on by the appellant under the facts and in the circumstances of the appellant's case." 2. Facts of the issue are that the assessee is in his profit & loss account claimed expenses in the nature of "investment in companies written off" amounting to Rs.5,55,20,973/-. The A.O. asked the assessee to explain why these expenses to be allowed. The assessee vide letter dated 11.8.2015 replied as under:- "The assessee, in his profit and loss account, claimed an expense in the nature of "Investment in companies written off" amounting to Rs.5,55,20,973/-. The assessee vide letter dated 14.7.2015, was asked to explain why this expense be allowed. The assessee vide letter dated- 11.08.2015, replied that- "Mr Santosh S Lad is the promoter and the majority share holder of M/s. Lad's Technologies Private Limited literally holding 9999 of equity of the company. The company was incorporated 27th July, 2009 with objects of develop computer software, render computer consultancy service & develop and market other related products connected information technology industry. The entire funding for the day to day activities of company was done by Mr. Sallt0S11 S. L....
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....ad being the majority share holder. The amount of Rs.2,50,00,000/- write off by the company has been taken as its income which is discernible from its Profit & Loss Account and Balance Sheet for the year ended 31sr March 2013. As the investment made was treated as irrecoverable in the books of the company and consequently treated as its income, t1 investment made by Mr. Santosh S Lad in the said company is treated as loss in his books of account.." 2.1. Thereafter, the AO observed that advance made to M/s. Lad Technologies Pvt. Ltd. & M/s. Connect Films Media Pvt. Ltd. is not for the purpose of carrying out any business of the assessee and it is not a trade advance. More so, the assessee is not in the money lending business so as to claim the write off advances as trading loss. Further, he observed that advance made to these two companies were just advance to have to meet their expenses in the field of capital outlay and it is an investment in the hands of the assessee not being a trading advances which cannot be claimed as business loss. Further, he observed that the assessee is not in money lending business and advance to these two companies were not made in the course of mone....
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.... Ld. A.R. in the case of Ace Designers Vs. ACIT (275 Taxmann 138 dated 9.9.2020), wherein it was held that "Where assessee-company made investment in its wholly owned subsidiary outside India for business purpose i.e. for enhancement of its business activity in global market, however, said subsidiary could not perform upto company's expectations and same was wound up, loss arising from investment made in subsidiary was to be allowed as business loss of assessee." 2.5. In that case, the amount invested by Ace International Inc. was allowed as "business loss" on account that amount was invested for the enhancement of business activity of the assessee in global market, which primarily related to business exigencies of the assessee and it was wholly owned subsidiary of assessee company, which had suffered loss, therefore, the assessee treated the amount as business loss. The investment was made for the purpose of expansion of business activity of the assessee not with a view to creating "capital asset" in the form of holding shares. However, in the present case, the facts shows that the assessee made investment for these two companies namely M/s. Lad Technologies Pvt. Ltd. ....
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.....7. The other contention of the assessee's counsel is that the assessee namely M/s. Lad Technologies Pvt. Ltd. & M/s. Connect Films Media Pvt. Ltd. were offered this amount by written back this amount to P&L account in the respective assessment years and the write off in the hands of those assessees has been suffered taxes. Hence, the write off cannot be added in the hands of assessee. This argument of assessee is totally misconceived. We have to see how the investment has been treated in the hands of assessee not in the hands of recipient of the advances. In the hands of assessee, this advance amount of Rs.5,55,20,973/- has been treated as a capital investment and it is not in trading asset in nature, so as to claim the written off as business expenditure. In the hands of the present assessee, it is an investment, if the same has to be considered as a capital loss not as a trading loss or business loss so as to claim the same as business expenditure. In our opinion, the assessee has not satisfied the condition laid down in section 36(1)(vii) r.w.s. 36(2) of the Act. As per section 36(2) of the Act, deduction shall not be allowed unless such debt or part there of has been taken int....