| The Tax Publishers2020 TaxPub(DT) 1830 (Chen-Trib) INCOME TAX ACT, 1961
Section 45
Where issue arose as regards allowability capital loss incurred by assessee on sale of debts due from certain debtors, it was held that merely because assignee company did not disclose business income in their income tax returns for subsequent years in year of recovery of debts, that would not prejudice right of assessee company to claim capital loss in year of extinguishment of their right in favour of assignee company.
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Capital gains - Allowability of short-term capital loss - Assignment/sale of debts due from certain debtors -
Assessee was engaged in business of marketing of building materials, commercial vehicles, etc. Assessee-company entered into an agreement assigning debts to a private limited company and assigned debts worth Rs. 57,01,55,180 due from debtors for a sum of Rs. 53 lakhs. By said process, assessee incurred capital loss of Rs. 56,48,52,180. It claimed capital loss on sale of debts due from certain debtors, and sought set off of same with long-term capital gains. Only effective issue to be decided in instant appeal was as to allowability of capital loss claimed by assessee on debts in the sum of Rs. 56,48,55,180. Held: Merely because assignee company did not disclose business income in their income tax returns for subsequent years in year of recovery of debts, that would not prejudice right of assessee company to claim capital loss in year of extinguishment of their right in favour of assignee company. Transactions in respect of assignment of debt recoverable from a debtor (API), was remitted back to AO and transactions in respect of debt recovery from another debtor (MCC Finance Ltd.), was decided in favour of assessee.
REFERRED : UOI & Anr. v. Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC) : 2003 TaxPub(DT) 1429 (SC), McDowell and Co. Ltd. v. CTO (1985) 154 ITR 148 (SC) : 1985 TaxPub(DT) 1186 (SC), CIT v. A. Raman and Company 1968 TaxPub(DT) 0197 (SC), MCC Finance Ltd. v. Reserve Bank of India (2002) 38 SCL 1106 (Mad.), Banyan and Berry v. CIT (1996) 222 ITR 831 (Guj) : 1996 TaxPub(DT) 0767 (Guj-HC), MV Valliappan & Ors. v. ITO & Ors. (1988) 170 ITR 238 (Mad) : 1988 TaxPub(DT) 0927 (Mad-HC), Asstt. CIT v. GKN Sinter Metal (P) Ltd. 2015 TaxPub(DT) 1964 (Pune-Trib), ACIT v. Torrent Pharmaceuticals Ltd. [ITA No. 333 & 346/Ahd/2006, ITA No. 4343 & 4356/Ahd/2007, dt. 31-1-2011]
FAVOUR : Matter remanded.
A.Y. : 2011-12
IN THE ITAT, CHENNAI BENCH
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