M/S Pragati Constructions Co. vs Dy. Commissioner Of Income Tax
2011 Latest Caselaw 2910 Del

*                      THE HIGH COURT OF DELHI AT NEW DELHI

                                                Judgment reserved on : 09.05.2011
%                                               Judgment delivered on: 31.05.2011

+                                      ITR No. 5/1996


M/S PRAGATI CONSTRUCTION CO.                                 ...... APPELLANT

                                              Vs


DY. COMMISSIONER OF INCOME TAX                               ..... RESPONDENT

Advocates who appeared in this case:

For the Appellant:     Mr R. M. Mehta, Advocate
For the Respondent:    Ms Rashmi Chopra & Mr Chandramani Bhardwaj, Advocates.

CORAM :-
HON'BLE MR JUSTICE SANJAY KISHAN KAUL
HON'BLE MR JUSTICE RAJIV SHAKDHER

1.      Whether the Reporters of local papers may
        be allowed to see the judgment ?                     Yes
2.      To be referred to Reporters or not ?                 Yes
3.      Whether the judgment should be reported              Yes
        in the Digest ?

RAJIV SHAKDHER, J

1. This is a reference filed under Section 256(1) of the Income Tax Act, 1961

(hereinafter referred to as the „I.T. Act‟) against the judgment dated 24.01.1995 passed by

the Income Tax Appellate Tribunal (hereinafter referred to as „Tribunal‟) pertaining to

assessment year 1989-90. The question of law which has been referred to us for

adjudication is as follows:

"Whether, on the facts and in the circumstances of the case the ITAT has erred in law in disallowing the loss of Rs 31.05 lakhs claimed by the assessee as a trading loss in its business of purchase and sale of flats."

2. The aforementioned question of law arises in the background of the following

facts which we have culled out from the orders of the authorities below:

2.1 The assessee at the relevant point in time, was carrying on the business of

construction, purchase and sale of flats. It appears that the assessee‟s sister concern, i.e.,

Pragati Construction Co. (P) Ltd. (hereinafter referred to as „PCL‟) had made a bid, in an

auction, held by the Slum Wing of the Delhi Development Authority (in short „DDA‟), in

respect of, plot no. 8 situate at Asaf Ali Road, New Delhi. PCL had hoped that if it were

to succeed in the auction, it would construct a multi-storey building thereon under the

name and style of Ambika Tower House. It is important to note that the auction was held

on 12.03.1982. On the same day, the assessee evidently issued a cheque in the sum of

` 44.50 lacs to purchase a bank draft of an equivalent amount. The bank draft was

evidently handed over to PCL on 12.03.1982, ostensibly to purchase commercial space in

the proposed multi-storey building, i.e., Ambika Tower House.

2.2 Since PCL tendered a bid in the sum of ` 1.92 crores, which was the highest bid,

it was declared as the successful bidder. The terms of the auction, however, required

payment of 25% at the fall of the hammer PCL evidently paid a sum of ` 48 lacs as

earnest money to the DDA. On 30.03.1982, DDA had issued a demand notice to PCL

calling upon it to deposit the balance amount of ` 1.44 lacs. The said amount was

payable by 29.05.1982 (as per the record, the balance amount somehow appears to be

shown as 1,44,00,035/- to be paid by 29.05.1982). Evidently PCL did not pay the

balance amount and instead filed a suit in this court being: CS(OS) no. 766/1982. The

said suit was dismissed on 01.02.1983. During the pendency of the said suit, a second

suit being CS(OS) No. 993/1983 was filed again in this court seeking an injunction

against DDA from forfeiting the earnest money. It appears that an injunction initially

granted by this court was subsequently vacated by an order dated 25.02.1985.

Consequently, the DDA, after obtaining approval of the Lt. Governor, forfeited the

earnest money. The forfeiture was effected on 04.04.1985.

2.3 It is pertinent to note that even though the assessee had initially paid a sum of

` 44.50 lacs to PCL, the said sum was adjusted to recover a payment of ` 36.5 lacs. It

has also emerged from the record that PCL‟s dispute with DDA revolved inter alia

around the issue of "control drawings"; which according to PCL were inaccurate. It has

further emerged from the record that for each such transfer of space in the building PCL

had to obtain a prior permission of the DDA against prescribed fee of ` 100.

Furthermore, as is obvious, the space in the building could not have been sold till the

dispute regarding the control drawings was settled. From the documents filed by PCL, it

emerges that the PCL received the control drawings only on 11.05.1982 and that PCL had

written to the Lt. Governor on 17.05.1982, detailing out the flaws in the control drawings

supplied by DDA. As a matter of fact in PCL‟s communication to the Lt. Governor, it

had been pointed out that the flaws which obtained in the control drawings would hamper

PCL‟s negotiation with the prospective buyers. This dispute was obviously not resolved.

2.4 Curiously, the assessee appears to have entered into an agreement with PCL on

02.06.1992, despite the aforesaid circumstances obtaining. It has also emerged from the

record that for the space that the assessee had booked as per the terms of its own

agreement, it would be required to pay to PCL a total amount of ` 95 lacs, against which,

it was required to pay earnest money equivalent to 25% of the said amount which would

ordinarily come to a sum of ` 23.25 lacs. The said calculation was worked out on the

basis that the rate would be about ` 2500 per sq. ft.

2.5 Even though, as indicated above, the forfeiture of the earnest money of the PCL

by the DDA took place on 04.05.1985, the assessee debited the sum of ` 31.50 lacs in its

accounts only on a receipt of the letter from PCL dated 14.12.1988. By this letter, PCL

apparently communicated to the Assessee, the factum of forfeiture of ` 48 lacs paid to

DDA and also the fact that since it does not have any tangible assets which could be

encashed in the market, it would not be possible for it to refund the money to the

assessee. It may however be noted at this juncture that it has been found as a matter of

fact that, in assessment year 1984-85, at the request of the assessee a sum of ` 5.50 lacs

was returned by PCL to the assessee, which is why, the outstanding dues had come down

from ` 36.55 lacs to ` 31.05 lacs. The authorities below also found as a matter of fact

that in the accounting year prior to the one in issue, regular transactions had taken place

between assessee and PCL. The assessee had received rent from PCL while PCL in turn,

had purchased flats from the assessee.

2.6 It is also not disputed that out of the six directors on the board of PCL, three

individuals at the relevant point in time were partners in the assessee‟s firm. It is also an

admitted fact that at the relevant point in time when the assessee paid monies to PCL, the

share capital of PCL was a mere sum of ` 24,000/-.

3. The assessee, in the first instance, before the Assessing Officer had claimed that

the sum of ` 31.05 lacs should be allowed as bad debts. The Assessing Officer after

dwelling into the facts came to the conclusion that the amount in issue could not be

written off as a bad debt as it had not been shown as a trading receipt either in the

previous year in issue or prior to that, for the purposes of either swelling its profits, or to

reduce its losses in any of the years, including the previous year in issue. The Assessing

Officer, therefore, concluded by his order dated 31.05.1991, that the amount in issue, was

paid by the assessee to PCL as an advance. This being so, he came to the conclusion

that, the assessee‟s case was not covered under the provisions of Section 36(1)(vii) of the

I.T. Act since the amount paid to PCL could not be treated as a debt in the first place and

hence, the amount in issue, could not be allowed to be deducted even if the assessee had

written it off in its accounts. Therefore, the sum of ` 31.05 lacs was added in the

assessee‟s income.

4. Being aggrieved, the assessee preferred an appeal with the Commissioner of

Income Tax (Appeals) [hereinafter referred to as „CIT(A)‟]. Before the CIT(A) even

though the assessee had raised a ground, in the alternative, that the amount in issue

should be treated as a trading loss, it went on to seek a deduction on the ground that it

was a bad debt, in respect of which it ought to be allowed a deduction under the

provisions of Section 36(1)(vii) of the I.T. Act.

4.1 As a matter of fact, by a letter dated 17.12.1991, the assessee had sought a

modification in the grounds of appeal as filed initially with the CIT(A). The ground in

the modification application/letter, as extracted in the order of the CIT(A), suggests that

the assessee gave up its alternative ground that the amount in issue be treated as a trading

loss. Therefore, the CIT(A) after perusing the record came to the conclusion that since

the assessee had not reflected the amount in issue, as income either in the previous year

in issue or in the earlier year in which it was sought to be written off, the assessee‟s claim

for deduction was not maintainable. The CIT(A) analysis was based on the amendment

brought about in Section 36(2)(i) by the Direct Taxes law (Amendment) Act, 1987 w.e.f.

01.04.1989. By virtue of the said amendment clause (i) of Section 36(2) of the I.T. Act

was substituted for the following:

"No such deduction shall be allowed unless such debt or part thereof has been taken into account in computing the income of the assessee of the previous year in which the amount of such debt or part thereof is written off or of an earlier previous year, or represents money lent in the ordinary course of the business of banking or money-lending which is carried on by the assessee."

5. This amendment was applicable for the assessment year in issue, i.e., 1989-90. It

may however be noted that the CIT(A) while passing the order took into account the

contention of the Assessing Officer that the agreement executed with the PCL by the

assessee was erroneous. The CIT(A) took note of the agreement dated 02.06.1982, to

which, we have made a reference hereinabove.

6. Being aggrieved by the order of the CIT(A), the assessee escalated the matter

further and accordingly, preferred an appeal with the Tribunal. The Tribunal, after a

detailed examination of the facts, sustained the orders of the authorities below.

Resultantly, the present reference has been made at the behest of the assessee, by the

Tribunal.

7. Before us, arguments on behalf of the assessee have been addressed by Mr R.M.

Mehta, whereas on behalf of revenue, Ms Rashmi Chopra has advanced submissions.

7.1 At the outset we may note that Mr Mehta claimed deduction before us in respect

of the sum in issue, under Section 37 of the I.T. Act which was also the stand of the

assessee before the Tribunal. Mr Mehta has argued before us that the authorities below

have erred in law, in as much as, having returned a finding of fact that the transaction

between the assessee and the PCL was not collusive, it should not have disallowed the

deduction merely on the ground that it lacked business prudence.

7.2 Mr Mehra submitted that the lack of wisdom or otherwise was not the test

applicable for allowance of deduction under Section 37 of the Income Tax Act.

7.3 It was contended that since PCL was unable to recover the earnest money, which

stood forfeited on 04.04.1985; upon taking suitable legal advice the assessee had

proceeded to write off the amount in its accounts and hence the claim for deduction. Mr

Mehra in support of his submissions has cited the following judgments:

S.A. Builders Ltd. vs CIT (Appeals) & Anr. (2007) 288 ITR 1; M/s Ramchandar Shivnarayan vs CIT (1977) 4 SCC 529; CIT, Madras vs S.N.A.S.A. Annamalai Chettiar (1973) 3 SCC 339 and CIT vs Crescent Films (P) Ltd. (2001) 248 ITR 670.

8. Ms Rashmi Chopra who appeared for the revenue rebutted the contention of the

counsel for the assessee. The learned counsel largely relied upon the orders passed by the

authorities below. It was Ms Chopra‟s submission that the amount in issue had been paid

as an advance which was not relatable to the business of the assessee. She further

submitted that the deduction could be allowed only if it was connected or was incidental

to the business of the assessee. In order to demonstrate the same she drew out attention

to the findings of the Tribunal on this aspect.

9. Having heard the learned counsel for the assessee as well as the revenue, we are

of the view that the deduction ought not to have been allowed. The reasons for the same

are as follows: As already noticed by us while recording the facts, which have emerged

from the record, it is quite clear that at the point in time when cheque in the sum of `

44.50 lacs was remitted by the assessee to the PCL, it was not in a position to allot any

space in the proposed multi-storey complex. The amount was remitted on 12.03.1982

which is the very date on which the plot was auctioned. It has emerged from the record

that PCL had joined issue with the DDA with regard to defects in the control drawings.

This dispute obtained in May 1982 and even thereafter. It was precisely for this reason

that a suit bearing no. 766 /1982 was filed in 1982. During the pendency of the said suit,

a second suit being CS(OS) No. 993/1983 was filed. This suit is pending even today.

Commercial space, if any, could have been booked by PCL only after it had acquired the

control drawings. The record also shows that any sale of commercial space had to have

the permission of the DDA for which a fee of ` 100 had to be paid. Curiously, the

assessee has trotted out an agreement evidently executed between itself and PCL dated

02.06.1982. There was admittedly no written agreement in existence on 12.03.1982,

when initially a sum of ` 44.50 lacs was paid by the assessee to the PCL. This amount,

as noticed above, got adjusted and consequently, what was shown in favour of the

assessee was of sum ` 36.55 lacs. This sum after refund of ` 5.50 lacs got scaled down

to ` 31.05 lacs; which is presently the amount in issue. The aforesaid facts do show

therefore that the amount in issue was not expended to purchase a commercial space in a

proposed building. The purpose of payment was subsequently morphed to suit the

situation. Thus the condition, required to be fulfilled to sustain a deduction under Section

37 of the I.T. Act that the expense should be incurred for the purpose or should be

incidental to the business of the assessee is not fulfilled in the instant case.

10. There is another aspect of the matter which is that the assessee had sought and

obtained a refund of ` 5.50 lacs from PCL, in the assessment year 1984-85. It has also

come on record that the assessee had been receiving rent from PCL and as a matter of

fact PCL had purchased certain flats from the assessee in the assessment year preceding

the assessment year in issue. The picture portrayed that PCL did not have the necessary

funds at hand to return the money paid by the assessee to it, seems nebulous to say the

least. The only ground which was raised before the authorities below to justify writing

off the amount in issue, as a trading loss, was the receipt letter dated 14.12.1988, issued

by PCL to the assessee, expressing therein its inability to refund the money and its

apparent paucity of solvent tangible asset to repay the amount in issue to the assessee.

10.1 Given the circumstances referred to above, we are unable to appreciate the basis

of the legal opinion sought by the assessee, suggesting that PCL was not in a position to

return the funds and hence the justification for a write off. It is not in doubt that PCL is

still prosecuting the suit. Reliance is placed on conclusions of such tenuous legal

opinion oblivious of the fact that the management of both the assessee and PCL has on

board a common set of persons. For the foregoing reasons, we are of the view that the

money paid by the assessee to PCL was neither for the purposes of business nor for a

purpose which was incidental to the assessee‟s business. As correctly found, the money

had been paid to PCL as an advance. Given the fact that there is every likelihood that the

money may be recovered, we concur with the view of the authorities below that the

amount cannot be written off.

DISCUSSIONS OF JUDGMENTS CITED BY COUNSEL

11. In support of his submissions Mr Mehta has cited several judgments. Mr Mehra

began with the judgment of the Supreme Court in the case of S.A. Builders (supra). In

the said case the Supreme Court was called upon to decide whether the assessee would be

entitled to deduction under Section 36(1)(iii) of the I.T. Act in respect of interest paid by

the assessee to the bank on funds borrowed by it, which were, in turn advanced by it to its

sister concern in the form of interest free loan. The Assessing Officer had disallowed a

proportionate amount of interest out of the interest paid by the assessee to the bank, to the

extent, the assessee had diverted borrowed funds to its sister concern. In principle, the

CIT(A), in that case, had upheld the decision of the Assessing Officer though had

reduced the disallowance, as he came to the conclusion that, out of the funds borrowed

from the bank by the assessee, a lesser portion could be clearly related as funds diverted

to the sister concern.

12. In appeals, preferred both by the revenue and the assessee, the Tribunal allowed

the appeal of the revenue and dismissed that of the assessee.

12.1 The High Court of Punjab & Haryana in a reference filed by the assessee affirmed

the view of the Tribunal.

13. The Supreme Court after discussing the law on the subject remanded the matter to

the Tribunal for a fresh decision in the light of observations made by it. The Supreme

Court directed the Tribunal to ascertain, in the given facts and circumstances, whether the

assessee had advanced money to the sister concern as a measure of commercial

expediency. In this regard the Supreme Court observed that the expression commercial

expediency is an expression of wide import, which includes, every such expenditure that

a prudent businessman may incur for the purposes of his business. Even though the

expenditure may not have been incurred under a legal obligation, yet it may be allowable

as business expenditure. The court went on to observe that the expression "for the

purpose of business" is wider in scope than the expression for earning profits; therefore,

the Income Tax Authorities while ascertaining as to whether or not an expenditure is

commercially expedient should look at the matter not, from their own point of view, but

that of a prudent businessman. The Supreme Court concluded by saying that whether

interest on borrowed loan ought to be allowed if advances are made by the assessee to the

sister concern would depend on the facts and circumstances of each case. Therefore,

taking cue from the principle enunciated by the Supreme Court it is clear that much

would depend on the facts of each case.

14. The second case cited was that judgment of the Supreme Court in the case of

S.N.A.S.A. Annamalai Chettiar (supra). This judgment pertains to a claim by the

assessee with regard to losses suffered by him during the second world war on account of

bombing by the Japanese. The assessee, who was a member of Hindu Undivided Family

carried on money-lending business in India and abroad. In the course of settlement of

debts often the properties were taken over. The Hindu Undivided Family was disrupted,

and consequently, the assessee acquired shares in companies, properties and gardens in

Malaya. After partition, assessee continued in money-lending business in Malaya. Due

to the bombing carried out by the Japanese, the assessee suffered damages. The losses

suffered on account damages reflected was claimed by the assessee as business loss.

14.1 The issue travelled to the Supreme Court for consideration as to whether loss

suffered on account of the aforementioned circumstances was incidental to the business

carried out by the assessee in Malaya during the war.

14.2 The Supreme Court decided the issue in favour of the assessee. In coming to a

conclusion, the Supreme Court observed that since it is not disputed that the assessee was

carrying on business in Malaya which was a war zone carrying with it every possibility of

the area being bombed. Thus, if the assessee had earned profits out of this business,

undoubtedly profits earned would have been included in the assessee‟s assessable income

then could it be said that the loss occurring in such a situation was not a loss incidental to

the business carried on by the assessee in Malaya during war.

15. The third case cited is the judgment in Ramchandran Shivnarayan (supra).

Facts pertaining to this case are briefly as follows: The assessee was a registered firm

carrying on business in gold, silver and guineas and also earning income from investment

in government securities. During the assessment year in question, a sum of ` 50,000/-

was brought to the shop of the assessee for purchase of government securities. Out of

this, a sum of ` 30,000/- was stolen. A police complaint was made, however, the amount

stolen was not recovered. The assessee claimed the loss of ` 30,000/-, on account of

theft, as a trading loss. The matter travelled to the Supreme Court. The Supreme Court

in coming to the conclusion whether the loss in the circumstances obtaining in the case

would amount to a trading loss applied the test of direct and proximate connection and/or

nexus between the business operation and the loss. The Supreme Court observed that if

such a nexus is established or, the loss is incidental to the business operation it would be

deductable as trading loss. In the background of this the Supreme Court observed that the

assessee having borrowed a sum of ` 50,000/- from a creditor, which was brought to a

particular place by its employee, and such mode of business operation being common and

well known, the loss of ` 30,000/- on account of theft out of the sum of ` 50,000/- which

was meant for purchase of government securities, had to be allowed as a trading loss

being directly connected with the assessee‟s business operation.

16. The last case referred to by Mr Mehta was Crescent Films (supra). The facts

briefly were as follows: The assessee was in the business of film distribution. In the

course of his business the assessee had advanced a sum of ` 7.50 lacs to a producer to

obtain distribution rights for a film under production. The producer of the film

apparently ran into difficulty. A situation emerged which seemed to suggest that the

producer would be unable to complete the film. Consequently, the producer requested

the assessee to lend him further sum of ` 1.10 lacs. The said sum was dealt with in a

manner, different from the way in which the initial sum of ` 7.50 lacs was treated which,

as noticed above, was given as consideration for procuring distribution rights of the film.

The said sums were ultimately not paid. The assessee claimed the amounts paid to the

producer, as trading loss. The High Court sustained the view of the Tribunal which had

sustained the claim of trading loss made by the assessee on the ground that had the

assessee not paid, that is, lent money, the assessee could not have realized his investment

made to acquire distribution rights in the film. Since the money lent became

irrecoverable by reason of picture failing at the box office and the producer being unable

to repay his debts, the money so lost by the assessee was rightly held by the

Commissioner and the Tribunal to be a trading loss. The court distinguished its earlier

judgment in the case of CIT vs Coimbatore Pictures (1973) 90 ITR 452 on facts.

17. It is, therefore, important to focus, in our opinion, on the facts obtaining in the

instant case. In the instant case before the Assessing Officer a claim was made for

deduction of the amount in issue, on the ground that it had become a bad debt. This

contention continued till the matter reached the CIT(A). There was, however, a flip flop

before the CIT(A) as noticed by us hereinabove. Before the Tribunal the assessee gave

up its claim that the amount in issue should be allowed as a deduction on the ground that

it had become a bad debt. The assessee claimed a deduction on the ground that it was a

trading loss and hence deductable under Section 37 of the I.T. Act. Section 37 of the I.T.

Act is a residuary provision which, provides for deduction in respect of any expenditure

which is not an expenditure of the nature described in Sections 30 to 36 of the I.T. Act

and not in the nature of a capital expenditure or a personal expense of the assessee but is

laid out or expended wholly or exclusively for the purposes of business or profession;

while computing income chargeable to tax under Section 28 of the I.T. Act.

18. In order to deal with the submissions of the assessee we will assume that first two

conditions are fulfilled, which is, that the expenditure in issue is not of the nature

described in Sections 30 to 36 of the I.T. Act and that it is neither an expenditure in the

nature of capital expenditure or a personal expense of the assessee. This leaves us with

the last limb of the section, which is, that the expenditure in issue, can only be allowed if

it is laid out or expended wholly or exclusively for the purposes of the business. As held

in S.A. Builders (supra) the expression for the purposes of business is wider than the

expression for the purposes of earning income, profits or gains. Therefore, it ought to be

an expenditure, which is, incurred voluntarily for commercial expediency.

19. Thus, the underlying principle is that, the expenditure should be incurred for the

assessee‟s own business irrespective of the fact that it benefits a third party, which could,

in given circumstances be a sister concern. In coming to this conclusion the revenue

ought to apply the approach which would have been adopted by a prudent businessman

and not what the revenue thought was prudent. With this principle in mind let us

examine the facts which emerged in this case.

20. The assessee paid a sum of ` 4.50 lacs to the PCL on 12.03.1982. At the stage at

which the money was paid to PCL auction had not been held. Therefore, the assessee,

who is in the business of sale and purchase of flats, could not have incurred the said

expense for its own business as there was no commercial space acquired by PCL which it

could sell to the assessee. The auctioning authority accepted PCL‟s bid and raised a

demand on PCL only on 30.03.1982. PCL admittedly did not pay the monies beyond

what it had paid as earnest money and instead got inveigled with the auctioning authority

on the issue of flaws in the control drawings. This position undoubtedly obtained till

17.05.1982. The dispute inter se DDA and PCL has not been adjudicated upon as yet.

The suit filed is pending adjudication. It has also emerged that PCL could not have sold

any commercial space without the permission of the lessor (DDA). Another aspect to be

noticed is that despite the dispute obtaining between PCL and DDA with regard to the

control drawings the assessee curiously entered into an agreement with PCL on

02.06.1982. Given these facts it is quite evident that the transaction between the assessee

and PCL was one where perhaps money had been lent to enable PCL to bid. At that stage

contrary to what the assessee had sought to portray there was no intention to purchase

commercial space in the proposed building as the plot which PCL sought to bid for was

nowhere on the scene. Therefore, the expense was certainly not incurred for the purposes

of the assessee‟s business notwithstanding the fact that it may or may not have earned

income or profits. Furthermore, if the test of prudence is applied and that too from the

point of view of a businessman, and not that of the revenue, the assessee in our view fails

to pass the test. The reason being: that a prudent businessman would not have committed

his money for purchase of commercial space at a stage when there were no rights

acquired by PCL. By their own admission PCL was a company which had at the relevant

point a share capital of ` 24000/-. No prudent businessman would have committed such

a large sum of money without ensuring that the vendor had something tangible offer in its

hands; in the instant case PCL being the vendor.

21. There is another aspect which is, as noticed above, that the suit filed by PCL is

still pending adjudication. As noticed hereinabove by us Mr Mehta has not been able to

tell us, as to the treatment which PCL has meted out in its books of accounts to the sum

forfeited by the DDA. It is not understood as to why the assessee would suddenly choose

to claim a deduction in the assessment year 1989-90 based on a letter of PCL dated

14.12.1988 followed by a legal opinion received from its lawyer when the amount stood

forfeited on 04.05.1985. Admittedly the assessee has made no demands to recover the

amount from PCL. This is despite the fact that both the Assessing Officer and the

CIT(A) have returned finding of fact that PCL has not only paid rents to the assessee but

also purchased flats from it in the years preceding the assessment year in issue.

22. Before we part with judgment as a footnote we would like to observe the

following :

22.1 After the judgment had been reserved Mr Mehta, counsel for the assessee sought

to mention the matter, though in the absence of counsel for the revenue. We were

informed that even though he had informed the counsel for revenue she had not remained

present at the time of mentioning. The methodology adopted according to us was unique.

22.2 Nevertheless Mr Mehta during mentioning sought to bring to our notice

observations in paragraph 4.3 of the impugned judgment. The observation being to the

effect that the assessee had shown the amount in issue, in respect of which the deduction

was claimed, as advance towards purchase of flats in the assessment year 1989-90. In

our opinion this would not help the cause of the assessee since the point in issue is,

whether the amount was advanced on 12.03.1982, by the assessee, to PCL was for the

purpose of the assessee‟s business or even for a purpose incidental to its business. As

discussed above from the facts which have emerged in the instant case this was definitely

not the case.

22.3 According to us PCL was good for its money at least in the assessment year in

issue. Therefore, the claim of the assessee for deduction of the amount in issue in the

relevant assessment year even on this ground is not sustainable.

23. For the reasons given hereinabove we are of the view that the judgment of the

Tribunal has to be sustained. It is ordered accordingly. The question of law is answered

in the negative against the assessee. The reference is accordingly disposed of; cost shall

follow the result.

RAJIV SHAKDHER, J

SANJAY KISHAN KAUL,J MAY 31, 2011 kk