TaxTMI 
TaxTMI 
2026 (8) TMI 1839
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....ed (for short "the GNAL") to Gujarat Mineral Development Corporation (for short "the GMDC") to the Profit & Loss Account. The Assessing Officer did not allow the deduction in the impugned Assessment Order passed under Section 143(3) read with Section 250 of the Income Tax Act, 1961 (for short "the Act") for the Assessment Year 1998-99 when the matter was remanded back by the Tribunal vide order dated 30.09.2008 passed in ITA No. 1753/AHD/2001 to reconsider the claim of the assessee for the year under consideration. 2.2 Being aggrieved, the assessee preferred an appeal before the Commissioner of Income Tax (Appeal), who allowed the appeal by observing as under: "5.4 On a specific query in the course of appellant proceedings, it was explained by the appellant that the Official Liquidator is left with very nominal amount. In other words, no funds are available with Official Liquidator out of which the appellant can be paid off in respect of amount paid by it under the Corporate Guarantee given by it to GMDC. These facts clearly indicate that though formal closing of account of the Official Liquidator may be pending, there is effectively no balance left and no potential of ....
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....tion of the Honourable ITAT and decision in the case of Commissioner of Income Tax vs. Amalgamations Pvt Ltd. (226 ITR 188), I direct Assessing Officer to allow claim of the assessee. The addition is therefore deleted. The ground No.2 is thus allowed." 2.3 The respondent - revenue being aggrieved by the order of the CIT(Appeal) for the Assessment Year 1998-99, preferred an appeal before the Tribunal. The Tribunal after considering the facts of the case and documents placed on record, narrated the history of the first round as under: "6. We have heard rival submissions and perused the orders of the lower authorities and material placed on record. In the instant case, the assessee with a view to diversify from its controlled product area and considering great demand and potential for two wheelers, the assessee took over a running concern and made it a wholly owned subsidiary company, namely, Gujarat Narmada Auto Ltd. (GNAL). The assessee, as a holding company of GNAL, had agreed with the financial institutions by way of an undertaking dated 21.3.1988 that if there is any shortfall in the resources of the borrower i.e. GNAL for completing its projects and/or for the workin....
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....dated 2.8.1994 directed that GNAL be wound up in accordance with law and Official Liquidator be appointed for this It was contended that advances were made to GNAL in the purpose. course of business of the assessee and non-recoverability of these advances is incidental to business and should be allowed as a loss. The advances were made to earn profit and money was advanced in accordance with accepted commercial practice. The aim of the assessee was not to avoid taxes but was purely commercial i.e. earning of income in future. No lumpsum payment was made but funds were furnished in order to augment income in the ordinary course of business. The assessee submitted that nature of advantage expected from investment in GNAL was commercial earning 9. As regards the objections of the Revenue authorities that loss does not arise directly from carrying out of the business operation, was submitted that the AO's observation that scooter and fertilizers are two different businesses, and therefore, it is not the same business, is not correct, and there is error in the application of the above test. There is clear interlacing, inter-connection and interdependence, and the fertilizer....
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....On the above facts, the AO disallowed the claim of deduction made by the assessee in the Asstt. Year 1998-99 on the ground that the Tribunal in the case of the assessee vide its order dated 31.3.2000 passed in ITA No.832 to 834/Ahd/1998 in the Asstt. Yer 1992-93 to 1994-95 has held that the deduction is allowable in the year of final settlement by the Official Liquidator and for want of complete details of liquidation and settlement from the Official Liquidator. 17. On appeal, the CIT(A) allowed the claim of the assessee purportedly following the said decision of the Tribunal and of the Hon'ble Gujarat High Court in the case of CIT Vs. Amalgamations Pvt. Ltd., (1997) 226 ITR 188 (SC). According to the CIT(A), the loss was crystallized on 3.3.1997 when meeting between the assessee-company and GMDC took place. 18. We find that even if the version of the CIT(A) taken as correct, then also, the loss being crystallized on 3.3.1997, the same was in the Asstt. Year 1997-98 and not during the assessment year under consideration i.e. Asstt. Year 1998-99. Therefore, the CIT(A) was not justified in deleting the disallowance on the above count. Further, no material was br....
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.....3 It was therefore submitted that the order of the Tribunal may be set aside and the order of the CIT(A) may be restored. 4 On the other hand, learned Senior Standing Counsel Mr. Rutvij Patel for the respondent - revenue, submitted that the Tribunal has given cogent reasons to set aside the order passed by the CIT(Appeal) as admittedly the Consent Terms were filed before the City Civil Court on 12.05.1999 and accordingly at the best such claim, if any, would be allowable for the Assessment Year 2000-01, and therefore, the Tribunal has rightly restored the order passed by the Assessing Officer denying the deduction for the year under consideration i.e. the Assessment Year 1998-99. 4.1 It was further submitted that the Tribunal referred to and relied upon its order dated 31.03.2000 passed in ITA Nos. 832 to 834/Ahd/1998 for the Assessment Year 1992-93 to 1994-95, wherein, the assessee claimed the loss of the GNAL on being taken to the BIFR was not allowed and the assessee agreed to claim such loss in the year in which the BIFR passed an order. It was, therefore, submitted that no interference is called for in the impugned order of the Tribunal. 5 Having heard the learned ad....