IN THE ITAT HYDERABAD BENCH ‘A’
Gulf Oil Corpn. Ltd.
v/s.
Assistant Commissioner of Income-tax
IT APPEAL NO. 649 (HYD.) OF 2010
[ASSESSMENT YEAR 1997-98]
FEBRUARY 29, 2012
ORDER
Smt. Asha Vijayaraghavan, Judicial Member – This appeal by the assessee for the assessment year 1997-98 is directed against the order of the Commissioner of Income-tax(Appeals)-III, Hyderabad dated 15.3.2010.
2. Assessee is in the business of manufacture and supply of explosives and detonators. Since most of the coal fields are located at West Bengal and as there was huge demand for explosives for coal-mining operations in that state, the West Bengal Government showed keen interest to start an explosive company locally to go into this business. The assessee company was interested in not losing its existing business in West Bengal and so, for protecting and retaining its existing business in the State of West Bengal. it negotiated with the State Government of West Bengal and became a co-promoter of a new company to be incorporated in West Bengal with the assistance of the West Bengal Industrial Development Corporation Ltd. Accordingly, a new joint venture company, by the name, Eastern Explosives and Chemicals Ltd., was incorporated. The main objective of the new company, Eastern Explosives and Chemicals Ltd.(EECL), is manufacture of detonators, The assessee subscribed to the extent of Rs.96 lakhs towards share capital of the new company, which is equal to 48% of the equity capital of that company. The ECCL required funds periodically and therefore, the assessee was compelled to advance money to ECCL for looking after the aforesaid company and for retaining its existing business.
3. The company, ECCL, could not run profitably and became sick company, which could not be rehabilitated and finally BIFR directed winding up of the same, by its order dated 31.3.1997. The investment in the shares of ECCL made by the assessee company is as follows-
