Loss from Equity Shares eligible to deduct as a Business Loss: ITAT [Read Order]

While considering various grounds in an appeal, the Chennai bench of the Income Tax Appellate Tribunal (ITAT)has held that loss from equity shares is eligible to deduct as business loss.

The assessee, Seshasayee Paper and Boards Ltd challenged the order of the commissioner of income tax (appeals) on various grounds.

The AO during assessment proceedings noticed from the computation of income that the assessee has reduced a sum of Rs.48,86,557/- being interest received under section 244A of the Act for the reason that it was not a taxable pending final decision by the appellate authorities. 

The AO, as well as CIT(A), noted that the assessee has incurred an expenditure of Rs.16,04,118/- under extraordinary circumstances and they have to interact with various Govt. Departments on day to day basis and for that purpose, it was incurring expenses like customary and like entertainment expenses like providing tea, snacks, lunch etc. 

The assessee contended that these expenses are like the business expense and the AO disallowed them by stating that the expenses did not fall under any regular head of expenditure under financial accounting. The assessee could not substantiate its claim and the Tribunal dismissed this issue of the assessee’s appeal and confirmed the order of CIT(A).

It was observed that the assessee has made investments in Ponni Sugars & Chemicals Ltd., and the assessee referred the matter to BIFR for the reconstruction of the assessee as a sick industrial unit. Further viewed that the BIFR declared the assessee as a sick unit and the loss or losses of investment claimed by the assessee as the write-off of investment u/s.37 of the Act can be allowed. 

Shri Mahavir Singh, vice president and Shri Manoj Kumar Aggarwal, accountant member viewed that “the claim of loss accruing or arising as an investment in equity shares, non-convertible debentures and zero coupon redeemable preference shares is not a capital loss but eligible for deduction in the computation of business income as business loss.”

The appeal filed by the assessee was partly allowed. The appellant was represented by Shri G. Baskar and the respondent was represented by Shri P. Sajit Kumar.

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