TaxTMI 
TaxTMI 
2025 (8) TMI 1314
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....4 has also been issued on 25.1.2025 and therefore the appeal does not survive. 3. On examination of the above Form, it is correct that the dispute in appeal filed by the assessee has been settled and therefore ITA No.1082/Bang/2024 is dismissed as withdrawn. 4. Now only appeal in ITA No.1160/Bang/2024 filed by the ld. AO survives, wherein the appeal filed by the assessee against the assessment order passed by the AO u/s. 143(3) of the Act dated 20.9.2022 was partly allowed. 5. The grievance of the ld. AO is as per the following grounds of appeal :- "1. Based on the facts and circumstances of the case, the learned CIT(A) was not correct in deleting the addition made by the AO 2. The CIT (A) erred in deleting the addition made on account of write off of Sundry Advances given to M/s Adarsh Reality and Hotels P Ltd (ARHPL) without appreciating the fact that the advances had not become bad as the advances was being regularly repaid by ARHPL and the outstanding was reducing year on year. 3. The CIT(A) erred in deleting the addition made on account of write off of Sundry Advances u/s 37 when the advances made related to capital advances given on account....
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....he amount outstanding as on 31.3.2020 is less than the amount outstanding as on 31.3.2019 and further the amount outstanding as on 31.3.2021 is also lower than the amount outstanding as on 31.3.2020. Therefore, according to the AO, there is no basis for write off as part of the advances is duly recovered during the current year and next financial years. The AO further noted that the assessee has further advanced the amounts to the company even after write off of advances during the year clearly indicating that assessee expects the that company to do well and repay the amount. 8. The assessee answered the query stating that the above advances are given to ARHPL for expansion of the business of the assessee and same were written off and claimed as deduction u/s. 37 as that company could not do the business profitably. It was stated that the subsidiary was funded with share capital of Rs. 15 crores and loan of Rs. 746 crores to set up for creating infrastructure in hotels and tied up with reputed brand of hotels to enhance the business. Being a new entity and on account of intense competition the business could not run successfully and subsidiary could not even break even resulting....
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....he assessee that part write off is possible. Thus, the ld. AO did not allow the above claim of Rs. 468,80,84,462 for the following 5 reasons: - i. The assessee has not submitted any evidence that the loans accrued in AY 2020-21 to consider write off in that year. ii. The subsidiary started having cash profit from the year ending 2019 which is within 5 years of starting of operation. iii. The subsidiary has started repayment which reduces the outstanding liability by Rs. 119.61 crores over a period of 4 years. iv. There is no valid basis for writing of Rs. 468.81 crores. v. The only reason for write off in FY 2019-20 is to avoid payment of tax as the assessee has received certain unexpected receipts in FY 2019-20. 11. The assessee aggrieved with the same challenged this issue before the ld. CIT(Appeals) which has been dealt in as per ground no.6 in para no.8 of the appellate order. The ld. CIT(A) allowed the claim of the assessee as under :- 8.0 Ground of number 6: disallowance of advances to subsidiary written off. 8.1 During the course of the assessment proceedings, the AO noticed that in The P & L account, the appe....
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....x [2023], REFEX Industries Ltd. V Deputy Commissioner of Income-tax [2022], Bombay HC in an earlier case CIT v. Colgate Palmolive (India) Ltd.& Honourable Supreme Court in the Case of Principal Commissioner of Income Tax -6 Vs Khyati Realtors Private Limited, SA Builders etc. 8.4 Upon careful perusal and analysis of the assessment order, appellant's submissions, material available on record and the legal pronouncements, the case is adjudicated as under: Legal basis for the disallowance: The AO has relied on the judgment of the Hon'ble ITAT Hyderabad's decision in the case of VST industries Limited V/s ACIT. The AO concludes that "the Hon'ble ITAT by relying on the decisions of the apex court has held that the advances given to subsidiary cannot be allowed either u/s 36 or u/s 37 of the Income Tax Act 1961". 8.5 The appellant on the other hand during the course of appellate proceedings has submitted an analysis of the above judgment of the Hon'ble Hyderabad ITAT. It is the appellant's submission that the Hon'ble ITAT Hyderabad's judgment is distinguishable on various accounts and he submits as under: "The l....
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....n the CGCL become sick owing to non recovery of the debt. Anticipated enduring benefits and substantial return on investments to appellant, when shares are divested in ARHPL as and when there is a Sale/Exit scheme / opportunity for Parent Adarsh Developers, (appellant). 6 The investments are made to commence new commercial activities by GGCL as per requisition of GGCL, which had no nexus with the existing business of VST Industries The investments are made with ARHPL is for expansion of business activities of the appellant with commercial expedience of a similar business carried on by the appellant. 7 There is no single instance of Parent is a regular investor in subsidiary for expansion of its main activities. The appellant is regular investor in shares of its various group entities (Special Purpose Vehicles) engaged in similar or identical activities (Special Purpose Vehicle) and the same is held as stock in trade and generally investments are held for longer duration of time and profits on sale of the same is regularly offered as business income in the hands of the appellant 8 There is no single instance of Parent has made profit after divesting the in....
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....the Appellant. 3. Therefore, it is submitted that ARHPL is an alter ego of the Appellant carrying on hospitality business on its behalf. The Appellant has been advancing funds to ARHPL to carry out its day to day business activities. 4. The appellant is a partnership firm, engaged in real estate, infrastructure and hospitality business. The appellant has in circa 2007-2010 moved its hospitality business to ARHPL). 5. The appellant initially in the years 2002-03, 2004-05 and 2005-06 had purchased land at palace Road in its name to commence Infrastructure hospitality unit "Palace Shangri la." The details are furnished hereunder, SI No Date Name of the owner Doc registration Sy No Extent (Sq ft) Nature of Document 1 1 10/11/2005 Skand Pvt Ltd 1-02972 56/3 16,326 Sale Deed 2 29/07/2002 V Nathan 1-1719 56/1 15,510 Sale Deed 3 31/12/2004 Sandur Manganese and Iron ore Ltd 1-2441 56 55,831 Sale Deed Total 87,217 6. Subsequent to acquisition of land, the appellant had obtained approvals from various Statutory / regula....
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....forced by circumstances have opted to migrate the Hospitality business from its existing partnership firm under M/s Adarsh Developers to ARHPL for raising funds, better and effective administration and for giving corporate out look to investors, customers and operators. 12. The appellant firm inter alia transferred the land owned by the Firm, agreements, licenses, clearances and all approvals connected with setting of Hotel is assigned, transferred, NOC obtained to shift to ARHPL. The details of land transfer is given as under, SI No Date Name of the owner Doc registration Sy No Extent (Sq ft) Nature of Document 1 11/11/2009 Adarsh Developers & its partners GAN- 1-01390/2009-10 56/1,2,3,4, & 5 87217 Sale Deed 13. After moving all the infrastructures, assets and licenses to ARHPL Punjab National Bank (the leader of consortium of lenders) inter alia had given sanction letters for Rs. 395 crores on 22/03/2010 and funded the project. The details of the loan sanctioned to the project post transfer of projects to the Subsidiary Company are as under; SI. No. Bank Date of sanction ROI INR (in Crore) 1 ....
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....he Appellant places the following reasons for the development of the Star Hotel in the Group and its perceived, intended advantages for the Parent/Group and Commercial benefits it can reap over the decades" (i) Continues Annual Cash (ii) Appreciating asset: (iii) Diversification (iv) Mixed use development (v) Enhance prestige and appeal (vi) Destination Creation 22. In the case of the appellant the activities of both the investor and investee entities are identical, the same has been evidenced from the objects of both entities. The appellant has also established that the business activities and assets are transferred from appellant to investee company for the purpose of expansion of the activities of the appellant. Having said so the appellant has established the commercial expediency in making the investments in subsidiary company and the entire write off is allowable u/s. 37(1) of the Act ....... " 8.8 Based on an appreciation of the above facts submitted by the appellant, it can be seen that in the case on hand, there is enough material to show that the expenditure incurred for the subsidiary is incidental t....
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....tion deals with allowability of provision for doubtful debts. Therefore, the contention of the appellant that its case is not covered by the Hon'ble Supreme Court's decision mentioned supra and that it falls u/s. 37(1) of the IT Act has merit. 8.13 Having thus analyzed the judicial aspect of the case, the following conclusions are drawn: 1. The decision of the Hon'ble Hyderabad ITAT in the case of VST Industries (supra) does not apply to the instant case per-se because in that case, it has been factually held that the subsidiary and the parent were not in the similar line of business and the investment was in the nature of capital expenditure. Whereas, in the instant case, the appellant has fairly demonstrated that the said expenditure is for the purpose of the business of the appellant and it is revenue in nature. Further, it can be seen that in the case on hand, the appellant has fairly demonstrated that the expenditure incurred for the subsidiary is incidental to the business of the appellant and is for the purposes for the business of the appellant. 2. The AO's reliance on the Hon'ble Supreme Court's judgment in the case of Sou....
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....ppellant on a particular manner in which the business decisions are to be made. 2. The subsidiary as per assessee's own estimation started having cash profits from year ending 2019 which is with 5 years of starting operation. The appellant had projected / estimated the breaking even and flow cash profits at the end of 5 years from the commencement of Shangri la, Palace Road, operation. On the contrary the same could not be achieved owing to various underlying circumstances. This was the only estimate / projections at the time of commencement of operation of the Shangri la, Palace Road. 3. The subsidiary had started repayment as indicated by the amount outstanding which reduced by an amount of Rs. 119,60,94,365 over period of 4 years It is evident from the statement of accounts furnished, there is back and forth movement of funds as and when ARHPL is in need of funds the appellant has transferred to meet its day to day requirements. It is evident that ARHPL after meeting its requirements for day to day expenses and servicing of principal and interest to the lenders has transferred back the remaining funds and tried to establish the fa....
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.... 468,80,84,462 5. The only reason for write off in FY 2019-20 is to avoid payment of taxes as the assessee had received certain unexpected receipts in the FY 2019-20 As explained earlier outbreak of covid 19, pandemic, Circa 2019-20, the hospitality industry took a big jolt / hit owing to worldwide restriction on travelling and tourism related activities has resulted in further strain on ARHPL, this has been witnessed across the globe. Further to submit that, the transaction is revenue neutral as the same amount is offered by ARHPL as revenue no adverse implication to the revenue per se. In the case of the appellant Covid outbreak and lockdowns was a last nail on the coffin meaning that the hope of any further recovery dashed with suspension of travel globally and closure of business indefinitely for a period of two years plus, hence the decision of the Partners to write off advances and investments made to ARHPL was taken on impenitent crystallization of the liabilities during the financial year 2019-2020. Even though there is a negative net worth from the past previous years something extra in the form of Covid-19 outbreak during the financial ....
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....mited in favour of Abhishaya Infrastructure Private Limited vide through Share Purchase Agreement dated 5th April 2017. The consideration received / income derived from the same is treated as business Income and offered to tax at maximum rate of tax during the financial years 2018-19 and 2019-20. Copy of the sale deed is attached herewith as Annexure J. 27. Initially the appellant has intended to commence "Palace Shangri la" at Palace Road, Bangalore in its own name. Further to submit that, the appellant is in the business real estate sector, infrastructure, hospitality and allied activities for a period more than two decades and is constantly offering income in the returns of income filed for various preceding assessment years and paid taxes accordingly, the appellant is furnishing herewith the turnover of past 9 preceding assessment years along with the financial year relevant assessment year under consideration to establish the fact that there were no surprise incomes and charge off along with the Profit and Loss account; Financial Year Total Revenue Book (+)Net Profit / (-)Net Loss Status of Asst 2010-11 322,75,48,984 59,06,46,652 u/s 143(3) rws....
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....ed or wound up. The provisions of income tax law accepts and acknowledges the allowance of full or part amount as bad or irrecoverable, as the case may be, based on the facts and circumstances. 8.16 Taking into consideration the assessment order and the above submissions of the appellant, the issue that remains to be adjudicated in this case is whether the write off of the advances paid to the subsidiary is allowable under section 37(1) of the IT act. Section 37(1) reads as follows: Any expenditure (not being expenditure of the nature described in sections 30 to 36 [* * * ] [Certain words omitted by Act 32 of 1985, Section 11 (w.e.f. 1.4.1986).] and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession". Explanation 1 .- For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for t....
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....ts wholly own subsidiary company. d. It invested Rs. 150 crores as share capital in this company. e. The subsidiary took funding from Banks/Financial Institutions and started operations. f. The appellant firm kept supporting its wholly owned subsidiary by way of advances to meet out its expenses. g. Over a period of time, the advances given to subsidiaries mounted up and become irrecoverable. h. During the relevant year, a part of these advances was written off. 8.19 The appellant submits that since the nature of its business and of its subsidiaries are similar and the advances given are in the normal course of business, it is wholly and exclusively for the purpose of business. The relevant portion of the appellant's submission is as follows: "In the case of the appellant the activities of both the investor and investee entities are identical, the same has been evidenced from the objects of both entities. The appellant has also established that the business activities and assets are transferred from appellant to investee company for the purpose of expansion of the activities of the appellant. Having said so the appe....
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.... held that decision taken by assessee to write off trade advance was based on commercial sense and cogent reasoning and deleted disallowance. 34. In the case of Mahindra and Mahindra Ltd v. Commissioner of Income-tax [2023] 151 taxmann.com 332 (Bombay), it was held that, (para 27) 27. In the case at hand also the expenditure incurred were wholly incurred for the purpose of commercial expediency because MMC was a group company of appellant and appellant was, as could be seen from the orders passed by BIFR, keen in the preservation of MMC and to keep it as a going concern. The nexus between appellant and MMC is also not disputed. The Assessing Officer failed to appreciate the claim in the proper perspective. Appellant participated in the rehabilitation scheme of MMC and lent rehabilitation assistance by paying amounts to MMC as well as by converting its existing ICDs with MMC into rehabilitation assistance. Appellant also provided a guarantee of Rs. 200 lakhs to IDBI for the rehabilitation assistance disbursed by IDBI to MMC. If there was no commercial expediency, there was no reason for appellant to incur these amounts or participate in the rehabilitation scheme of....
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....llant or the debts that were recoverable from MMC, in our view, therefore, would certainly be deductible expenditure under section 28 of the Act. 35. A reference is also made in its earlier decision in the matter of Mahindra and Mahindra Ltd. v. CIT [2023] 151 taxmann.com 332/456 ITR 723 (Bom.) this Court has referred to the judgment in CIT v. Malayalam Plantations Ltd. [1964] 53 ITR 140 (SC) wherein the Apex Court has held as under, (para 26) "The aforesaid discussion leads to the following result: The expression for the purpose of the business' is wider in scope than the expression for the purpose of earning profits. Its range is wide: it may take in not only the day to day running of a business but also the rationalization of its administration and modernization of its machinery; it may include measures for the preservation of the business and for the protection of its assets and property from expropriation, coercive process or assertion of hostile title; it may also comprehend payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business; it may comprehend many other acts incidental to the carrying on of a busi....
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....an be claimed as deduction are not exhaustive - which is the precise reason for the existence of Section 37. Therefore, in a given case, if the expenditure relates to business, and the claim for its treatment under other provisions are unsuccessful. application of Section 37 is per se not excluded. 39. The appellant places further reliance on the ratio of decision of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. v. CIT [2007] 288 ITR 1/158 Taxman 74 (SC)wherein the Hon'ble Apex Court held as under : "if there is any nexus between the expenditure and purpose of the business (which need not necessarily be the business of the assessee itself), the revenue cannot justifiably claim to put itself in the arm-chair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits" 40. The Appellant places further reliance on the ratio of the decision of Hon'ble Madras High Court in the case of Commissioner of Income Tax Vs Spencer and Co Ltd., [2014] 47 taxmann.com 55 (Madr....
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....ns 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 the loss of Rs. 3,41,23,200/- as revenue expenses allowable under the provisions of the Act. 8. Thus, from perusal of the aforesaid facts, it is evident that the issue involved in this appeal is covered by decision of Bombay High Court in Colgate Palm Olive (India) Ltd. supra, which has been upheld by the Supreme Court. The ratio of aforesaid decision is where the assessee makes investment in its 100% subsidiary for business purpose, loss or sale of investment has to be treated as business loss of the assessee. In the instant case, the assessee made investment in the shares of WOS for the business purpose i.e., for the enhancement of business activity of the assessee in global market which primarily related to business operation of the assessee. The WOS suffered losses and therefore the assessee wrote off the assessment of Rs. 3,41,23,200/- as business loss. The investment was made for the purpose of extension of business activity and not with a view to creating....
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....ssing officer. 4 Whether incurred during the year The assessing officer has done a thorough analysis of the case and has observed that there is no valid reason for stating these advances become irrecoverable during the year. The relevant portion of the assessment order is as below: "Further the assessee has not supported with any reasoning why the amount became irrecoverable during the AY 2020-21, the assessee has not submitted any evidence to support that how the expenditure could be considered as accrued during the year. On verification of ledger account of ARHPL, the entire year there is consistent transaction of amount being given and amount being received by the assessee, hence it is a running account wherein the assessee lends the amount whenever the subsidiary requires funding and receives back the amount whenever the subsidiary has funds. " 8.23 With respect to the above contention of the AO, the appellant during the course of appellate proceedings has submitted as follows: "As explained earlier outbreak of covid 19, pandemic, Circa 2019-20, the hospitality industry took a big jolt / hit owing to worldwide restriction on travelli....
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....com 325 (Hyd.), wherein it was held as under - for the purpose of protecting the interests of business of the assessee. [Para 21] The advance made by the assessee to EECL is incidental to carrying on the business by the assessee itself and, consequently, the borrowed money should be considered as having been utilized for the purpose of business of the assessee. The advance, thus, having been made in the normal course of business of the assessee, when written off, has to be held as falling in the revenue field, and, consequently, such amounts of advances written off, are allowable as deduction either as bad debt or as business loss, incidental to carrying on the business by the assessee. [Para 19] In the light of the above discussion, applying the ratio of the Apex Court in the case of S.A. Builders Ltd. (supra), we allow the claim of the assessee for deduction of Rs. 1,41,21,000 being advances given by the assessee to its subsidiary company, M/s. EECL, since the same is written off as irrecoverable. consequent upon the latter company having been ordered to be would up by the BIFR. However, the company was not would up. Assessee's grounds on this issue....
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....dicial pronouncements also buttress the argument of the appellant that "the moment debts have been written off in the books, it is to be allowed without expecting the assessee to demonstrate whether debts have actually become bad or not". 8.26 Therefore, it can be seen that the advances written off is allowable u/s. 37(1) of the Act as all the conditions are met considering the facts of the case. 8.27 More importantly in the case on hand, corresponding income equivalent to the write off in the appellant's books has been offered as income in the subsidiary's hands, as a result of which accumulated losses of the subsidiary have been wiped off resulting in a positive networth. As a result of this, disallowance of the write off in the appellant's hands would amount to the double addition. Therefore, based on the above analysis, it is held that write off of advances given to the subsidiaries by the appellant is allowable expenditure u/s 37(1) of the IT Act. 8.28 Therefore, the AO is directed to allow the same. The ground of appeal no. 6 filed by the appellant is allowed. 12. The ld. AO aggrieved with the above order is in appeal before ....
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....s given to the subsidiary to avoid payment of taxes. The Ld.CIT(A) has not examined this issue as there is no mention of this crucial evidence brought on record by A.O. (b) Therefore, the order of Ld.CIT(A) suffers from failure to examine all details brought on record by the A.O in the assessment order dtd. 20.09.2022. III. DECISION OF Ld. CIT(A) IN PARA 8.26 IS IN CONTRAVENTION TO THE PRINCIPLE LAID DOWN BY HON'BLE SUPREME COURT (a) The conclusion made by Ld.CIT(A) in PARA 8.26 on the basis of which the addition made by the A.O was deleted is that the income equivalent to the write-off in the appellant's book has been offered as income in subsidiary's hand and the disallowance made in the appellant's hands would amount to double addition is against the decision rendered by Hon'ble Supreme Court in the following case, which are applicable to the case of appellant too, where in it is held that- i. loan liability is on CAPITAL ACCOUNT and is not in the nature of income. ii. It is "NOT A TRADING LIABILITY". iii. There as no allowance or deduction claimed by the assessee in any assessment for any year in respect ....
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....red into agreements with another company for management and setting of hotel project. On 11.11.2009, assessee transferred hospitality business to AHPRL. In 2010 Consortium of Banks lent Rs. 395 crores to AHPRL. The assessee also contributed Rs. 150 crores towards share capital and also advances given to that company of Rs. 468.80 crores. The partners of the assessee firm written off the above amount on 16.3.2020 by passing the resolution and therefore on the above events, the amount was written off by the assessee. The ld. AR referred to the written submissions containing 66 pages to support his contention. 16. The ld. AR firstly submitted that ground nos. 3 & 5 should not be admitted for the reason that by raising these grounds, the appellant is trying to improve the case of the ld. AO which is not permitted. He submitted that grounds 3 & 5 are referring to capital advance and allowing the claim of assessee for the reason that amount is offered by the subsidiary as income in its hands. It was the claim of the ld. AR that the AO disallowed the claim u/s. 37 for the reasons mentioned in page 13 of the assessment order and those reasons are not discussed at all which are raised in....
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.... was already offered by the assessee as income in FY 2018-19 and 2019-20 and therefore did not have any impact in AY 2020-21 at all. 19. He further submitted that if the above business of hospitality was carried out by the assessee in its own name and not through the wholly owned Special Purpose Vehicle of the subsidiary company, such loss would have been recorded in the books of assessee and could be allowable for set off against other income. Therefore write off of the advances is a revenue neutral transaction which the ld. AO failed to appreciate. 20. He submitted that the decision relied upon by the ld. AO in the case of Hyderabad Bench of the Tribunal is on different facts and he tabulated 10 reasons to submit that the decision in that case was on different facts and therefore does not apply. 21. The Id. AR specifically referred to the decision of the Hon'ble Rajasthan High Court in the case of Vaibhav Global Ltd., 138 taxmann.com 506, wherein on identical facts and circumstances, deduction was allowed. He further submitted that the revenue's SLP against that decision has been dismissed by the Hon'ble Supreme Court. He further referred to the decision of B....
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....business of SPvs. 27. Assessee has one such special purpose vehicle namely Adarsh reality and Hospitalities Limited with a share capital of Rs. 15 crores and a loan of Rs. 746.15 crores. This company has created infrastructure hotels and tied up with the brand of hotels to enhance its business. As on 31st of March 2020, the assessee holds 99.826 percentage in the equity share capital of Adarsh reality and hotels private limited represented by it managing partner. This company was in fact established on 26th day of August 1996. 28. Further the assessee during financial year 2002-03 to 2005-06 to construct and infrastructure project for Hotel acquired various land parcels . Subsequently, the assessee also obtained various approvals from the competent authorities for setting up of a five-star category hotel. For this, assessee entered into a memorandum of understanding and agreement with a Hong Kong-based company to set up and manage the Hotel project in 2005. Somewhere in 2009 the assessee transferred the hospitality business to the Adarsh reality and hotels private limited along with land and all such licenses and approval. Consortium bank funding of app. Rs 395 crores were al....
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....nt to avoid such payment of taxes. 34. Aggrieved with the above order the assessee preferred an appeal before the learned CIT(A) allowed the claim of the assessee. 35. The learned departmental representative categorically challenges the appellate order stating that the learned CIT(A) has recorded incorrect facts that assessee is in construction business and hospitality business therefore the advances are related to the business activity of the assessee. According to the revenue the advances given by the assessee company are not related to or have any nexus with the business activity of the assessee and therefore such advances written off could not be considered eligible for deduction. However, we find that the Adarsh reality and hotels private limited was incorporated as 100% owned private limited company of the assessee on 26/8/ 1996. Prior to that in 2002 - 2004 and 2005 the assessee has acquired various land parcels to construct infrastructure hotel. The assessee also obtained various approvals from the competent authorities for setting up the new infrastructure hotel. A memorandum of understanding was also entered into by the assessee for setting up and management of the ....
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....red to taxation in assessment year 2019-20 and party was to be offered in this assessment year. Therefore, it is not correct that the write-off of the losses on claim of the assessee is to avoid payment of taxes. 38. We further note that the learned and CIT DR has stated that that such loan liability is on capital account and not a trading liability. To Support this contention, the learned CIT DR relied upon the decision of the honourable Supreme court in case of Mahindra and Mahindra Limited (2018) 93 taxmann.com 32 citing paragraph number 15-17 of that decision. We have carefully considered and found that the above decision was squarely on the issue of taxability of income on account of waiver of loan and is in an altogether different context and does not deal with issue of allowance of business losses or bad debt. Further the fact shows that income arising on sale of shares of SPVS, is always offered by the assessee as business income and not capital gains. Therefore this argument of the ld. DR does not hold any water. 39. No further infirmities could be pointed out by the ld. CIT DR in the appellate order passed by the ld. CIT (A) in her written submission. 40. Now fur....
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....e business expediency is allowable as a revenue expenditure under section 37(1) of the act or not. The honourable High Court held it to be allowable under section 37(1) of the act as a business loss. In the present case also the writing of the amount given by the assessee to the subsidiary company written off in books of accounts of the assessee company would also be entitled on the same corollary as allowable deduction under section 37(1) of the Act. 44. Even the alternative claim allowable as bad debts, Honourable Supreme Court in case of Khyati Realtors private limited in civil appeal 672 of 2020 paragraph number 22 has categorically held that even if the claim for deduction under section 36 is not allowable, the alternative claim under section 37 can also be entertained. Thus, the claim of the assessee either as bad debt or as a business loss can be allowed. 45. Further the claim of the assessee can also be allowed as a deduction as bad debt because of the reason that assessee has offered part of the amount as income which is demonstrated by submitting the Ledger account of the borrower company at page number 400-409 of the paper book part of the submission before the ass....
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....es which was not received. Therefore, even if a part of debt is offered to tax, Section 36(2)(i) of the Act, stands satisfied. The test under the first part of Section 36(2)(i) of the Act is that where the debt or a part thereof has been taken into account for computing the profits for earlier Assessment Year, it would satisfy a claim to deduction under Section 36(1)(vii) read with Section 36(2)(i) of the Act. In fact, the Revenue also does not dispute the above provisions as no submission in that regard were made during the course of hearing before us." 47. Thus, the claim of the assessee to write off the amount advances of Rs 468 Crores to the subsidiary company is allowable under section 37(1) of the act as well as under section 36(1)(vii) of the Act. 48. Though ld. AR has relied up on the several judicial precedents, which we have considered while deciding the issue but same are not separately dealt with each of them as only the principle governing the allowability of claim of the loss is required to be decided, which was well enshrined in the decision of the honorable jurisdictional high court, which we have followed. 49. We have also noted the objection of the assess....