Case Law Details
WGF Financial Services Pvt. Ltd. Vs ACIT (ITAT Delhi)
The assessee is engaged in the business of financing which included lending, advancing money, standing guarantor etc. and in its ordinary course of business, the assessee gave guarantee to the borrowings made by CIPL. As per the Agreement, CIPL was supposed to transfer shares held by it in the listed companies after repayment of its loan from IBFSL. Since IBFSL sold the shares held by it as security, CIPL was not in a position to transfer the shares to the assessee. CIPL was in debt to the assessee to the tune of Rs.64.26 crores and since CIPL defaulted in its obligation, the assessee had to settle the quarrel by way of Memorandum Deed dated 16.03.2015 and could recover only Rs.36.50 crores. The assessee was left with no choice but to write off the balance Rs.27,76,92,000/-.
In our considered view, the entire transaction cannot be considered as the colorable device as the same was never entered with any intent to defraud the Revenue. We find that all the transactions were undertaken with third parties through bank accounts or registered Mortgage Deeds etc. in the regular course of business and were duly recorded in the books of accounts. Nothing could be managed as the transactions were spread over a period of five years.
Due to mayhem in the stock market in the year 2008, the stocks of the listed companies nose-dived and the borrowers suffered huge losses, nothing was recoverable from them and there was no point in filing legal suit. It is true that no guarantee commission has been received by the assessee from CIPL but CIPL was not in a position to make any payment to the assessee. It is true that CIPL made certain donations but that cannot be considered against the assessee as the assessee could not be held responsible for the business module of CIPL. The assessee could recover only Rs.36.50 crores out of Rs.64.26 crores, the balance written off may not fulfill the condition of section 36(2) of the Act but definitely a business loss suffered by the assessee in carrying out its ordinary course of business. Considering the facts of the case in totality, the write off of Rs.27,76,92,000/- is definitely a business loss and deserve to be allowed. We accordingly direct the Assessing Officer to delete the addition of Rs.27,76,92,000/-, Ground No.2 is accordingly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
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