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CIT vs. Preetam Singh Luthra (2016) 386 ITR 408 (SC)
The Assessing Officer (AO) denied
to set off the loss on account of forfeiture of licence fee of Rs.3,93,67,000,
against income as claimed by the assessee and added the said amount of Rs.3,93,67,000
as unexplained investment.
In appeal preferred by the assessee,
the Commissioner (appeals) held that the addition made by the assessing Officer
at Rs.3,93,67,000, which was actually Rs.2,32,33,500 was not sustainable on
account of later confiscation of the amount so deposited and accordingly, the
entire addition was directed to be deleted.
Dissatisfied with the order of
the Commissioner (Appeals), the Revenue filed appeal before the Tribunal. The
Tribunal, after considering the arguments of for the parties, placing reliance
on the judgment passed by the madras high Court in the case of CIT vs. Chensing
Ventures [2007] 291 ITR 258 (Mad) held that since the assessee was allotted the
licence by the excise department, which was later on transferred to one Shankar
lal Patidar but the said licence was cancelled by the excise department and the
amount of licence fees deposited by the petitioner was forfeited by the excise
department, the assessee was entitled to set off on account of such forfeiture.
The High Court dismissed the
appeal filed by the Revenue holding that no question of law arose in the
matter.
On further appeal by the revenue, the Supreme
Court held that if the licence fee stood forfeited, the licensee/ assessee may
be entitled to claim the forfeited amount as a business loss. However in the
present case, from the grounds urged before the high Court which facts had not
been controverterd by the assessee, it appeared that the respondent had transferred
the licence on 25th june, 2005 to one Shankarlal Patidar and the forfeiture of
the said licence took place thereafter on 1st august, 2005. According to the
Supreme Court, if that be so, the loss, if any, on account of forfeiture was
sustained not by the respondent-assessee but by the transferee-Shankarlal
Patidar.
The Supreme Court therefore
concluded that the tribunal and the high Court had overlooked the aforesaid
vital fact, and therefore the orders passed by the learned tribunal and the
high Court were required to be reversed. Consequently, the Supreme Court set
aside the order of the High Court affirming the order of the Tribunal and the
Commissioner of income-tax (appeals) passed in favour of the assessee and
affirmed the order of the Assessing Officer disallowing the aforesaid claims of
the assessee.
