The Commissioner Of Income Tax – 6, Mumbai v. Khandwani Export Private Limited, Mumbai

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.2292 OF 2009 The Commissioner of Income Tax – 6, Mumbai..Appellant. VersusKhandwani Export Private Limited, Mumbai..Respondent. Mr.Suresh Kumar for the appellant. Mr.J.D. Mistri, Senior Advocate with Mr.Atul K. Jasani for the respondent. CORAM : J.P. Devadhar &K.K. Tated, JJ. P.C. : DATE : 8th September 2011 1.Whether the Income Tax Appellate Tribunal was justified in holding that the loss of Rs.75,00,000/- written off by the assessee in the assessment year in question was allowable as business loss, is the question raised in this appeal. 2.The assessment year involved herein is AY 2001-02. 3.The assessee is engaged in the real estate business and also the business of import and export. During the assessment year 1993-94 and 1994-95, the assessee had an order for export of garments and with a view to export garments, the assessee placed an order with a party at Gaziabad for procuring garments and paid Rs.75,00,000/- as advance. As the Gaziabad party failed to make delivery of the goods, the assessee filed a suit for recovery of the amount and the said Suit is pending. As the chances of recovery of the amount was bleak, the assessee in the assessment year in question has written off the said amount and claimed the same as business loss. The assessing officer disallowed the claim on the ground that there being no purchases or sales, the expenditure was a capital expenditure and since the suit was pending, it cannot be said that the debt had become bad. 4.The Commissioner of Income Tax (Appeals), held that the assessee was carrying on export business, however, since the assessee had entered into a Joint Venture Agreement with the Gaziabad party for sharing the profits the loss incurred could not be allowed as business loss. 5. On further appeal filed by the assessee, the Income Tax Appellate Tribunal allowed the claim of the assessee by holding that the advance was paid by the assessee to procure garments so that the same could be exported. The Income Tax Appellate Tribunal held that merely because the assessee had agreed to share the profits with the Gaziabad party, it cannot be said that the amounts advanced during the assessment years 1993-94 and 1994-95 were not for the purposes of business. As the chances of recovering the said amount was bleak, the assessee wrote off the said amount and claimed the same as business loss, which the Income Tax Appellate Tribunal held was allowable as business loss in AY 2001-2002. 6.In our opinion, the decision of the Income Tax Appellate Tribunal is based on finding of fact. No substantial question of law arises from the order of the Income Tax Appellate Tribunal. Hence, the appeal is dismissed with no order as to costs. (K.K. Tated, J.) (J.P. Devadhar, J.)