VINAY TARACHAND CHAWLA,MUMBAI vs. PRINCIPAL COMMISSIONER OF INCOME TAX - 6, MUMBAI

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 27.03.2025 passed by the Ld. Pr. Commissioner of Income-tax Mumbai-6 [in short ‘the Ld. PCIT’] for assessment year 2020-21, raising following grounds:

Ground 1 & 2 - PCIT erred in passing the order u/s 263 of the Act which is bad in law, illegal, ultra-virus, in excess of and/or in want of jurisdiction and otherwise void.

Ground 3 - The PCIT erred in holding that the loss on cancellation The PCIT erred in holding that the loss on cancellation The PCIT erred in holding that the loss on cancellation and extinguishment of shares of Kamani Foods Private Limited and extinguishment of shares of Kamani Foods Private Limited and extinguishment of shares of Kamani Foods Private Limited ('KFPL') of Rs.42,12,27,550/ ('KFPL') of Rs.42,12,27,550/- as claimed by the Appellant does not as claimed by the Appellant does not constitute "transfer' constitute "transfer' within the meaning of section 2(47) of the Act. within the meaning of section 2(47) of the Act. Ground Ground 4 4 - The The PCIT PCIT erred erred in in holding holding that that loss loss of of Rs.29,95,00,000/ Rs.29,95,00,000/- on waiver of loan given to KPFL does not constitute 'transfer' within the meaning of section KPFL does not constitute 'transfer' within the meaning of section KPFL does not constitute 'transfer' within the meaning of section 2(47) of the Act. 2(47) of the Act. Ground 5 - The PCIT erred in The PCIT erred in holding that the claim of bad debt of holding that the claim of bad debt of Rs.3,42,57,549/ Rs.3,42,57,549/- is inadmissible u/s 36(1)(vii) of the Act as there is inadmissible u/s 36(1)(vii) of the Act as there is no evidence to establish that the debt has become wholly is no evidence to establish that the debt has become wholly is no evidence to establish that the debt has become wholly irrecoverable and thereby directed the AO to make an enquiry in irrecoverable and thereby directed the AO to make an enquiry in irrecoverable and thereby directed the AO to make an enquiry in the above issue and reasse the above issue and reassess the income.

(i) Loss of Rs. 42,12,27,550/ (i) Loss of Rs. 42,12,27,550/-on capital reduction of share in on capital reduction of share in Kamani Foods Private Limited (Kamani), Kamani Foods Private Limited (Kamani), (ii) Capital loss of Rs. 30 Crores on waiver o (ii) Capital loss of Rs. 30 Crores on waiver of right to receive the f right to receive the loan given to Kamani loan given to Kamani (iii) Deduction of bad debt of Rs. 3,42,57,549/ (iii) Deduction of bad debt of Rs. 3,42,57,549/- being interest being interest receivable from a partnership firm namely M/s Chinmaya receivable from a partnership firm namely M/s Chinmaya receivable from a partnership firm namely M/s Chinmaya Associates (Chinmaya). Associates (Chinmaya). 2.1 The Ld. PCIT in his show cause notice invoked Explanation 2 The Ld. PCIT in his show cause notice invoked Explanation 2 The Ld. PCIT in his show cause notice invoked Explanation 2 to section 263 of the Act wherein it is provided that an order shall tion 263 of the Act wherein it is provided that an order shall tion 263 of the Act wherein it is provided that an order shall be deemed to be erroneous in so far as prejudicial to the interest of be deemed to be erroneous in so far as prejudicial to the interest of be deemed to be erroneous in so far as prejudicial to the interest of the Revenue if in the opinion of the PCIT, the order passed was the Revenue if in the opinion of the PCIT, the order passed was the Revenue if in the opinion of the PCIT, the order passed was without making inquiries or verification which ought to have been without making inquiries or verification which ought to hav without making inquiries or verification which ought to hav made. The assessee vide assessee vide its letter dated 28.02.2025 made detailed its letter dated 28.02.2025 made detailed submission on merits as well as jurisdiction which are summarized submission on merits as well as jurisdiction which are summarized submission on merits as well as jurisdiction which are summarized as under:

“1.3 Loss on capital reduction in share capital of Kamani: 1.3 Loss on capital reduction in share capital of Kamani: 1.3 Loss on capital reduction in share capital of Kamani: The assessee is shareholder of Kamani and was holding The assessee is shareholder of Kamani and was holding The assessee is shareholder of Kamani and was holding 1,43,33,060 shares for Rs 42,83,67,000/ 1,43,33,060 shares for Rs 42,83,67,000/-. Pursuant to NCLT . Pursuant to NCLT order dated 21/09/2021, Kamani reduced its capital held by all order dated 21/09/2021, Kamani reduced its capital held by all order dated 21/09/2021, Kamani reduced its capital held by all shareholders. Resultantly, the Kamani reduced the shares held shareholders. Resultantly, the Kamani reduced the shares held shareholders. Resultantly, the Kamani reduced the shares held by the assessee fr by the assessee from 1,43,83,060 number of equity share to om 1,43,83,060 number of equity share to 1.04,160 number equity shares whereby the Kamani cancelled 1.04,160 number equity shares whereby the Kamani cancelled 1.04,160 number equity shares whereby the Kamani cancelled and extinguished 1,42.78.900 number of equity shares, each and extinguished 1,42.78.900 number of equity shares, each and extinguished 1,42.78.900 number of equity shares, each having face value of Rs. 10 each. On capital reduction, the having face value of Rs. 10 each. On capital reduction, the having face value of Rs. 10 each. On capital reduction, the assessee received consideration of Re assessee received consideration of Re. 0.50 per equity share . 0.50 per equity share aggregating to Rs. 71,39,450 (i.e. 1,42,78,900 number of equity aggregating to Rs. 71,39,450 (i.e. 1,42,78,900 number of equity aggregating to Rs. 71,39,450 (i.e. 1,42,78,900 number of equity shares X 0.50 Paisa). As a result, the assessee claimed short shares X 0.50 Paisa). As a result, the assessee claimed short shares X 0.50 Paisa). As a result, the assessee claimed short term capital loss of Rs. 42,12,27,550/ term capital loss of Rs. 42,12,27,550/- (Rs. 42,83,67,000 (Rs. 42,83,67,000 - Rs. 71,39,450) which is duly allowable as expl 71,39,450) which is duly allowable as explained by the Hon'ble ained by the Hon'ble Supreme Court in the case of PCIT vs Jupiter Capital (P) Ltd PCIT vs Jupiter Capital (P) Ltd Supreme Court in the case of (472 ITR 616) (472 ITR 616) wherein Hon'ble Supreme Court at paragraph 18 wherein Hon'ble Supreme Court at paragraph 18 has held that "In view of the aforesaid, we are of the view that has held that "In view of the aforesaid, we are of the view that has held that "In view of the aforesaid, we are of the view that the reduction in share capital of the subsidiary the reduction in share capital of the subsidiary company and company and subsequent proportionate reduction in the shareholding of the subsequent proportionate reduction in the shareholding of the subsequent proportionate reduction in the shareholding of the assessee would be squarely covered within the ambit of the assessee would be squarely covered within the ambit of the assessee would be squarely covered within the ambit of the expression "sale, exchange or relinquishment of the asset" used expression "sale, exchange or relinquishment of the asset" used expression "sale, exchange or relinquishment of the asset" used in Section 2(47) the Income Tax Act, 1961". in Section 2(47) the Income Tax Act, 1961". 1.4 Capital los 1.4 Capital loss on waiver of right to receive the loan given s on waiver of right to receive the loan given to Kamani: The The The assessee assessee assessee had had had an an an amount amount amount of of of receivable receivable receivable for for for Rs. Rs. Rs. 42,06,30,032/ 42,06,30,032/-. The assessee signed a 'Deed of Settlement' on . The assessee signed a 'Deed of Settlement' on 28.02.2020 with Kamani whereby he agreed to waive or settle 28.02.2020 with Kamani whereby he agreed to waive or settle 28.02.2020 with Kamani whereby he agreed to waive or settle his loan of Rs. 30 Crores f his loan of Rs. 30 Crores for an amount of Rs.5 lakhs and or an amount of Rs.5 lakhs and claimed the loss of Rs. 29.95 Crores as short claimed the loss of Rs. 29.95 Crores as short-term capital loss. term capital loss. This loss is also allowed as explained by the Hon'ble This loss is also allowed as explained by the Hon'ble This loss is also allowed as explained by the Hon'ble jurisdictional High Court in the cases of CIT vs Siemens Nixdorf jurisdictional High Court in the cases of CIT vs Siemens Nixdorf jurisdictional High Court in the cases of CIT vs Siemens Nixdorf Information Systeme GmbH [2020] 114 Taxma Information Systeme GmbH [2020] 114 Taxmann.com 531 Bom nn.com 531 Bom and PCIT vs Reliance Natural Resource Ltd [2019] 111 and PCIT vs Reliance Natural Resource Ltd [2019] 111 and PCIT vs Reliance Natural Resource Ltd [2019] 111 Taxmann.com 413 Bom, wherein Hon'ble jurisdictional High Taxmann.com 413 Bom, wherein Hon'ble jurisdictional High Taxmann.com 413 Bom, wherein Hon'ble jurisdictional High Court has held that 'Loan given by assessee to its subsidiary Court has held that 'Loan given by assessee to its subsidiary Court has held that 'Loan given by assessee to its subsidiary company would be covered by meaning of 'capital asset' under company would be covered by meaning of 'capital asset' under company would be covered by meaning of 'capital asset' under section 2(14)' [headnote from taxmann.com]. SLP filed by 2(14)' [headnote from taxmann.com]. SLP filed by 2(14)' [headnote from taxmann.com]. SLP filed by department against above two decisions have been dismissed by department against above two decisions have been dismissed by department against above two decisions have been dismissed by the Hon'ble Apex Court in 453 ITR 741 and 286 Taxmann 435 the Hon'ble Apex Court in 453 ITR 741 and 286 Taxmann 435 the Hon'ble Apex Court in 453 ITR 741 and 286 Taxmann 435 respectively. 1.5 Deduction of bad debt being interest receivable from 1.5 Deduction of bad debt being interest receivable from 1.5 Deduction of bad debt being interest receivable from Chinmaya: The assessee is a partner in Chinmaya. The assessee introduced sessee is a partner in Chinmaya. The assessee introduced sessee is a partner in Chinmaya. The assessee introduced fund from time to time in Chinmaya on which interest receivable fund from time to time in Chinmaya on which interest receivable fund from time to time in Chinmaya on which interest receivable was Rs. 3,42,57,549/ was Rs. 3,42,57,549/-. This interest was offered to tax year on . This interest was offered to tax year on year on accrual basis as business income and accepted by the year on accrual basis as business income and accepted by the year on accrual basis as business income and accepted by the department. Other partners also infused the funds in Chinmaya. . Other partners also infused the funds in Chinmaya. . Other partners also infused the funds in Chinmaya. Due to embezzlement in the firm, the firm showed its inability to Due to embezzlement in the firm, the firm showed its inability to Due to embezzlement in the firm, the firm showed its inability to pay the interest accrued by writing back the same in books of pay the interest accrued by writing back the same in books of pay the interest accrued by writing back the same in books of account and offering for tax. Resultantly, all the partners account and offering for tax. Resultantly, all the partners account and offering for tax. Resultantly, all the partners including the a including the assessee written off the amount of interest ssessee written off the amount of interest receivable from Chinmaya and claimed the same receivable from Chinmaya and claimed the same as bad bad debt.”

2.2 But the Ld. PCIT rejected the contention of the assessee and But the Ld. PCIT rejected the contention of the assessee and But the Ld. PCIT rejected the contention of the assessee and held that (i) relinquishment held that (i) relinquishment (extinguishment) of shares due to capital reduction is not capital reduction is not transfer; (ii) loan given cannot be treated as (ii) loan given cannot be treated as capital asset as the same was not held as stock capital asset as the same was not held as stock-in in-trade; and (iii) since the firm ‘Chinmaya’ ‘Chinmaya’ was continue to exist, the fund infused was continue to exist, the fund infused was recoverable hence, bad debt recoverable hence, bad debt written off was not allowable as was not allowable as deduction. The relevant finding of the Ld. PCIT is reproduced as The relevant finding of the Ld. PCIT is reproduced as The relevant finding of the Ld. PCIT is reproduced as under:

“6. The submissions of the assessee with respect to claim of short 6. The submissions of the assessee with respect to claim of short 6. The submissions of the assessee with respect to claim of short- term capital loss amounting to Rs.76,07,27,550/ term capital loss amounting to Rs.76,07,27,550/ term capital loss amounting to Rs.76,07,27,550/- have been considered carefully and found unacceptable. Claim of short considered carefully and found unacceptable. Claim of short considered carefully and found unacceptable. Claim of short-term capital loss amounting to Rs.76,07,27,550/ ital loss amounting to Rs.76,07,27,550/- includes Short includes Short-Term Capital Loss on M/s. Kamani Foods Pvt Ltd (KMFL) Share Reduction Capital Loss on M/s. Kamani Foods Pvt Ltd (KMFL) Share Reduction Capital Loss on M/s. Kamani Foods Pvt Ltd (KMFL) Share Reduction and Loan Waiver. and Loan Waiver. Capital Reduction of Shares: Capital Reduction of Shares: Assessee sold his 50% share of M/s. Kamani Oil & realize a Capital Assessee sold his 50% share of M/s. Kamani Oil & realize a Capital Assessee sold his 50% share of M/s. Kamani Oil & realize a Capital Gain. Gain is off Gain. Gain is offset against the loss of Rs.42,12,27,550/ set against the loss of Rs.42,12,27,550/- arising due Capital Reduction of in M/s M/s. Kamani Foods Pvt Ltd. In this due Capital Reduction of in M/s M/s. Kamani Foods Pvt Ltd. In this due Capital Reduction of in M/s M/s. Kamani Foods Pvt Ltd. In this regard, it is noted that the Hon'ble NCLT regard, it is noted that the Hon'ble NCLT- approved capital reduction approved capital reduction resulted in the cancellation and extinguishment of shares held by resulted in the cancellation and extinguishment of shares held by resulted in the cancellation and extinguishment of shares held by the assessee. However, for a transaction to qualify as a "transfer" assessee. However, for a transaction to qualify as a "transfer" assessee. However, for a transaction to qualify as a "transfer" under Section 2(47) of the Income Tax Act, 1961, there must be a under Section 2(47) of the Income Tax Act, 1961, there must be a under Section 2(47) of the Income Tax Act, 1961, there must be a relinquishment or conveyance of a capital asset to another entity. relinquishment or conveyance of a capital asset to another entity. relinquishment or conveyance of a capital asset to another entity. The mere extinguishment of shares without a transfer to a t The mere extinguishment of shares without a transfer to a t The mere extinguishment of shares without a transfer to a third party does not constitute a "transfer" as defined under the Act. The party does not constitute a "transfer" as defined under the Act. The party does not constitute a "transfer" as defined under the Act. The Hon'ble Supreme Court in CIT vs. Grace Collis [248 ITR 323] Hon'ble Supreme Court in CIT vs. Grace Collis [248 ITR 323] Hon'ble Supreme Court in CIT vs. Grace Collis [248 ITR 323] clarified that extinguishment of rights in shares, without a clarified that extinguishment of rights in shares, without a clarified that extinguishment of rights in shares, without a conveyance, does not attract capital gains/loss. Consequently conveyance, does not attract capital gains/loss. Consequently conveyance, does not attract capital gains/loss. Consequently, the loss of Rs.42,12,27,550/ loss of Rs.42,12,27,550/- claimed under Section 45 is inadmissible. claimed under Section 45 is inadmissible. Settlement of Loan to KMFL: Settlement of Loan to KMFL: Further, also set off was claimed to the extent of Rs.29,95,00,000/ Further, also set off was claimed to the extent of Rs.29,95,00,000/ Further, also set off was claimed to the extent of Rs.29,95,00,000/- against his waiver of loan (foregoing the loan) which was given by against his waiver of loan (foregoing the loan) which was given by against his waiver of loan (foregoing the loan) which was given by him (earlier) to KMFL. For such a waiver to qualify as a "transfer" him (earlier) to KMFL. For such a waiver to qualify as a "transfer" him (earlier) to KMFL. For such a waiver to qualify as a "transfer" under Section 2(47), the loan must constitute a "cap under Section 2(47), the loan must constitute a "capital asset" as per ital asset" as per Section 2(14). Loans or receivables are excluded from the definition Section 2(14). Loans or receivables are excluded from the definition Section 2(14). Loans or receivables are excluded from the definition of "capital asset" unless held as stock of "capital asset" unless held as stock-in-trade in a money trade in a money-lending business. The assessee, being an individual not engaged in money business. The assessee, being an individual not engaged in money business. The assessee, being an individual not engaged in money- lending, cannot treat the waived lo lending, cannot treat the waived loan as a capital asset. Thus, the an as a capital asset. Thus, the loss of Rs.29,95,00,000/ loss of Rs.29,95,00,000/- is not allowable under Section 45. is not allowable under Section 45. 6.1 In light of the above, the assessee's claim of short 6.1 In light of the above, the assessee's claim of short 6.1 In light of the above, the assessee's claim of short-term capital loss arising from (i) capital reduction of KMFL shares and (ii) loan loss arising from (i) capital reduction of KMFL shares and (ii) loan loss arising from (i) capital reduction of KMFL shares and (ii) loan waiver to KMFL is unsus waiver to KMFL is unsustainable in law. For capital loss to be tainable in law. For capital loss to be allowable under Section 45, there must be a 'transfer' of 'capital allowable under Section 45, there must be a 'transfer' of 'capital allowable under Section 45, there must be a 'transfer' of 'capital asset' as defined under Sections 2(14) and 2(47). The capital asset' as defined under Sections 2(14) and 2(47). The capital asset' as defined under Sections 2(14) and 2(47). The capital reduction involved mere extinguishment of shares without any reduction involved mere extinguishment of shares without any reduction involved mere extinguishment of shares without any transfer to another party, transfer to another party, which doesn't constitute a 'transfer'. which doesn't constitute a 'transfer'. Similarly, the loan waiver cannot be treated as transfer of capital Similarly, the loan waiver cannot be treated as transfer of capital Similarly, the loan waiver cannot be treated as transfer of capital asset since the loan was not held as stock asset since the loan was not held as stock-in-trade. The AO erred in trade. The AO erred in accepting these claims without proper examination of these legal accepting these claims without proper examination of these legal accepting these claims without proper examination of these legal aspects. Thus, aspects. Thus, the Assessing Officer's decision is erroneous both on the Assessing Officer's decision is erroneous both on merits and on the grounds that no further inquiries were conducted merits and on the grounds that no further inquiries were conducted merits and on the grounds that no further inquiries were conducted despite the facts on record warranting further examination. The despite the facts on record warranting further examination. The despite the facts on record warranting further examination. The failure to conduct a proper inquiry into the assessee's claims failure to conduct a proper inquiry into the assessee's claims failure to conduct a proper inquiry into the assessee's claims renders the assessment order erroneous and prejudicial to the the assessment order erroneous and prejudicial to the the assessment order erroneous and prejudicial to the interest of revenue. interest of revenue.

3.1 Further, the Ld. counsel for the assessee referred to Paper Further, the Ld. counsel for the assessee referred to Paper Further, the Ld. counsel for the assessee referred to Paper Book page 6 and submitted that notice u/s 142(1) of the Act dated Book page 6 and submitted that notice u/s 142(1) of the Act dated Book page 6 and submitted that notice u/s 142(1) of the Act dated 14.11.2021 was issued to the assessee to explain the deduction of 14.11.2021 was issued to the assessee to explain the deduction of 14.11.2021 was issued to the assessee to explain the deduction of any other amount claimed as well as deduction of capital loss any other amount claimed as well as deduction of any other amount claimed as well as deduction of claimed by him. The assessee referred to Paper Book page aimed by him. The assessee referred to Paper Book page aimed by him. The assessee referred to Paper Book pages 8 to 33 and submitted that assessee filed reply on 16.11.2021 explaining and submitted that assessee filed reply on 16.11.2021 explaining and submitted that assessee filed reply on 16.11.2021 explaining the deduction claimed on account of (i) bad debt written off of the deduction claimed on account of (i) bad debt the deduction claimed on account of (i) bad debt interest receivable (ii) loss of capital reduction and (iii) loss on interest receivable (ii) loss of capital reduction and (iii) lo interest receivable (ii) loss of capital reduction and (iii) lo waiver of loan receivable waiver of loan receivable. Along with this letter, the assessee filed long with this letter, the assessee filed copy of (a) deed of settlement (a) deed of settlement for loan waiver (b) affidavit of the (b) affidavit of the assessee towards waiver of loan receivable (c) order dated assessee towards waiver of loan receivable (c) order dated assessee towards waiver of loan receivable (c) order dated 21.09.2020 of National Company Law Tribunal (NCLT) allowing the 21.09.2020 of National Company Law Tribunal (NCLT) al 21.09.2020 of National Company Law Tribunal (NCLT) al capital reduction.

3.2 The Ld. counsel for the assessee further referred to Paper The Ld. counsel for the assessee further referred to Paper The Ld. counsel for the assessee further referred to Paper Book pages 34 and 35 which is a notice u/s 142 and 35 which is a notice u/s 142(1) of the Act along (1) of the Act along with query letter issued on 31.12.2021 and submitted that assessee with query letter issued on 31.12.2021 and submitted that assesse with query letter issued on 31.12.2021 and submitted that assesse was asked to explain and fil was asked to explain and file documentary evidence for (i) bad debt documentary evidence for (i) bad debt written off claim (ii) loss due to capital reduction (iii) loss due to claim (ii) loss due to capital reduction (iii) loss due to claim (ii) loss due to capital reduction (iii) loss due to waiver of loss receivable. Further, the assessee was also issued waiver of loss receivable. Further, the assessee was also issued waiver of loss receivable. Further, the assessee was also issued notice on 07.02.2022 notice on 07.02.2022, a copy of which is available on Paper Book a copy of which is available on Paper Book page 36. In response to the notice ponse to the notices, the assessee filed the relevant , the assessee filed the relevant information, which is available on Paper Book page which is available on Paper Book pages 38 to 52. In which is available on Paper Book page said information, the assessee filed said information, the assessee filed (i) return and audit financial return and audit financial statement of ‘Chinmaya Chinmaya’ to show that interest which is claimed as to show that interest which is claimed as bad debt by the assessee was credited to profit and loss account of debt by the assessee was credited to profit and loss account of debt by the assessee was credited to profit and loss account of ‘Chinmaya’ and offered to tax and offered to tax (ii) other documents for deduction of other documents for deduction of loss on share capital reduction and waiver of loan. loss on share capital reduction and waiver of loan.

3.3 The Ld. counsel further referred to a subsequent notice issued The Ld. counsel further referred to a subsequent notice issued The Ld. counsel further referred to a subsequent notice issued by the Assessing Officer on 02.03.2022 and 15.03.2022 the Assessing Officer on 02.03.2022 and 15.03.2022 the Assessing Officer on 02.03.2022 and 15.03.2022, a copy of 53 and 58 of the Paper which is available on Paper Book page which is available on Paper Book pages 53 and 58 of the Paper Book. In the said notices, the assessee was asked for more Book. In the said notices, the assessee was asked for more Book. In the said notices, the assessee was asked for more documents in relation to bad debt claimed of interest receivable documents in relation to bad debt claimed of interest receivable documents in relation to bad debt claimed of interest receivable from the ‘Chinmaya Chinmaya’. The said notice was also complied by the . The said notice was also complied by the assessee, a copy which is available on Paper Book page 55. The Ld. copy which is available on Paper Book page 55. The Ld. copy which is available on Paper Book page 55. The Ld. counsel for the assessee further referred to Paper Book page 61 counsel for the assessee further referred to Paper Book page 61 counsel for the assessee further referred to Paper Book page 61 which is a notice issued on 19.03.2022 which is a notice issued on 19.03.2022, interalia, asking for various asking for various details and documents on loss claimed due to capital reduction. The details and documents on loss claimed due to capital reduction. The details and documents on loss claimed due to capital reduction. The reply filed by the assessee in this respect is available on Paper Book reply filed by the assessee in this respect is available reply filed by the assessee in this respect is available page 63 to 90.

3.4 In view of the above notices and their reply referred by the Ld. In view of the above notices and their reply referred by the Ld. In view of the above notices and their reply referred by the Ld. counsel, he submitted that necessary inquiry which ought to have submitted that necessary inquiry which ought to have submitted that necessary inquiry which ought to have been made in the case of the assessee been made in the case of the assessee, had already been carried out had already been carried out by the Assessing Officer and a point by the Assessing Officer and a point-wise reply on all the three wise reply on all the three issues raised by the Ld. PCIT was already examined by the issues raised by the Ld. PCIT was already examined by the issues raised by the Ld. PCIT was already examined by the Assessing Officer. The Ld. counsel for the assessee accordingly ficer. The Ld. counsel for the assessee accordingly ficer. The Ld. counsel for the assessee accordingly submitted that the assessment order cannot be held as deemed to submitted that the assessment order cannot be held as deemed to submitted that the assessment order cannot be held as deemed to be erroneous in so far as prejudicial to the interest of the Revenue be erroneous in so far as prejudicial to the interest of the Revenue be erroneous in so far as prejudicial to the interest of the Revenue invoking Explanation 2 to Section 263 of the Act. In support thereof invoking Explanation 2 to Section 263 of the Act. In support thereof invoking Explanation 2 to Section 263 of the Act. In support thereof the Ld. counsel for the assessee relied on the decision of the Hon’ble e Ld. counsel for the assessee relied on the decision of the Hon’ble e Ld. counsel for the assessee relied on the decision of the Hon’ble Supreme Court in the case of PCIT v. V Supreme Court in the case of PCIT v. V-Con Integrated Solutions Con Integrated Solutions Pvt. Ltd. 476 ITR 526 (SC) wherein the Hon’ble Supreme Court held Pvt. Ltd. 476 ITR 526 (SC) wherein the Hon’ble Supreme Court held Pvt. Ltd. 476 ITR 526 (SC) wherein the Hon’ble Supreme Court held that the assessee does not control over the the assessee does not control over the pen of the As of the Assessing Officer and once the Assessing Officer carries out the investigation Officer and once the Assessing Officer carries out the investigation Officer and once the Assessing Officer carries out the investigation but does not make any addition, it can be taken that he accepts the but does not make any addition, it can be taken that he accepts the but does not make any addition, it can be taken that he accepts the plea and stand of the assessee plea and stand of the assessee. The Hon’ble Supreme Court further . The Hon’ble Supreme Court further held that there may be be cases where the Assessing Officer undertakes ing Officer undertakes a superficial and random investigation random investigation that may justify remit that may justify remit, albeit, the Commissioner of Income Commissioner of Income-tax must record abject failure and tax must record abject failure and lapse on the part of the Assessing Officer to establish both the error and the on the part of the Assessing Officer to establish both the error and the on the part of the Assessing Officer to establish both the error and the prejudice cause to the Revenue. The Ld. counsel for the assessee . The Ld. counsel for the assessee prejudice cause to th submitted that in the case submitted that in the case, the Assessing Officer has issued a series the Assessing Officer has issued a series of notices to inquire into the claim of the assessee and therefore, of notices to inquire into the claim of the assessee and therefore, of notices to inquire into the claim of the assessee and therefore, the case does not fall in the category the case does not fall in the category of no inquiry made. The Ld. no inquiry made. The Ld. counsel for the assessee relied on the decision of the Hon’ble counsel for the assessee relied on the decision of the Hon’ble counsel for the assessee relied on the decision of the Hon’ble Kolkata High Court in the case of PCIT v. Singhal Enterprises Pvt. Kolkata High Court in the case of PCIT v. Singhal Enterprises Pvt. Kolkata High Court in the case of PCIT v. Singhal Enterprises Pvt. Ltd. wherein Ltd. wherein it is held that in assessment or it is held that in assessment order passed after proper inquiry, passed after proper inquiry, proper application of the mind cannot be r application of the mind cannot be term as erroneous and prejudicial to the interest of the Revenue. term as erroneous and prejudicial to the interest of the Revenue term as erroneous and prejudicial to the interest of the Revenue 3.5 On the issue of the merit On the issue of the merit of the additions, the Ld. counsel for of the additions, the Ld. counsel for the assessee relied on the submissions made before the Ld. PCIT. the assessee relied on the submissions made before the Ld. PCIT. the assessee relied on the submissions made before the Ld. PCIT. He submitted that as He submitted that as far as issue on loss on capital reduction in far as issue on loss on capital reduction in share capital of ‘Kamani Kamani’ is concerned, the Assessing Officer has is concerned, the Assessing Officer has relied on the decision of the Hon’ble Supreme Court in the case of relied on the decision of the Hon’ble Supreme Court in the case of relied on the decision of the Hon’ble Supreme Court in the case of PCIT v. Jupiter Capital Pvt. Ltd. wherein PCIT v. Jupiter Capital Pvt. Ltd. wherein the due to reduction in the due to reduction in share capital al al of of of the the the subsidiary subsidiary subsidiary company company company and and and subsequent subsequent subsequent proportionate reduction in the share holding of the assessee was held proportionate reduction in the share holding of the assessee was held proportionate reduction in the share holding of the assessee was held to be within the ambit of the expression sale, exchange or to be within the ambit of the expression sale, exchange or to be within the ambit of the expression sale, exchange or relinquishment if the asset used in section 2 (14) of the Act. The Ld. relinquishment if the asset used in section 2 (14) of the Act relinquishment if the asset used in section 2 (14) of the Act counsel submitted that the Ld. PCIT has on the contrary relied on itted that the Ld. PCIT has on the contrary relied on itted that the Ld. PCIT has on the contrary relied on the decision of the Hon’ble Supreme Court in the case of CIT vs. the decision of the Hon’ble Supreme Court in the case of CIT vs. the decision of the Hon’ble Supreme Court in the case of CIT vs. Grace Collies (supra) wherein Grace Collies (supra) wherein it is clarified that extinguishment in extinguishment in the rights in shares, without a conveyance, does not attract capital the rights in shares, without a conveyance, does not attract capital the rights in shares, without a conveyance, does not attract capital gain/loss. The Ld. counsel submitted that . The Ld. counsel submitted that out of two decisions of of two decisions of Hon’ble Supreme Court, the Assessing Officer has followed one Hon’ble Supreme Court, the Assessing Officer has followed one Hon’ble Supreme Court, the Assessing Officer has followed one decision and therefore, following of one of the opinion available out decision and therefore, following of one of the opinion available out decision and therefore, following of one of the opinion available out of two opinions, the assessment order cannot be held to b , the assessment order cannot be held to b , the assessment order cannot be held to be erroneous in so far as prejudicial to the interest of the Revenue, in erroneous in so far as prejudicial to the interest of the Revenue erroneous in so far as prejudicial to the interest of the Revenue view of the decision of the Hon’ble Supreme Court in the case of CIT view of the decision of the Hon’ble Supreme Court in the case of CIT view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Max India Ltd. 295 ITR 282 (SC). Similarly, regarding the claim vs. Max India Ltd. 295 ITR 282 (SC). Similarly, regarding the cla vs. Max India Ltd. 295 ITR 282 (SC). Similarly, regarding the cla of loss on account of waiver of of loss on account of waiver of right of receiving the loan is also ing the loan is also approved by the Hon’ble Bombay High Court in the case of CIT vs. approved by the Hon’ble Bombay High Court in the case of CIT vs. approved by the Hon’ble Bombay High Court in the case of CIT vs. Siemens Siemens Siemens Nixdorf Nixdorf Nixdorf Information Information Information System System System GmbH GmbH GmbH [2020] [2020] [2020] 114 114 114 Taxmann.com 531 (Bombay) and PCIT v. Reliance Natural Taxmann.com 531 (Bombay) and PCIT v. Reliance Natural Taxmann.com 531 (Bombay) and PCIT v. Reliance Natural Resources Ltd. [2019] 111 Taxmann.com 413 (Bombay), wherein Resources Ltd. [2019] 111 Taxmann.com 413 (Bombay) Resources Ltd. [2019] 111 Taxmann.com 413 (Bombay) the Hon’ble jurisdictional High Court held on’ble jurisdictional High Court held that loan given by the that loan given by the assessee to its subsidiary company would be covered by the assessee to its subsidiary company would be covered by the assessee to its subsidiary company would be covered by the meaning of ‘capital asset capital asset’ u/s 2(14) of the Act. It was contended that It was contended that the learned PCIT’s general proposition the learned PCIT’s general proposition — that loans or that loans or receivables are excluded from the definition of capital asset unless held as are excluded from the definition of capital asset unless held as are excluded from the definition of capital asset unless held as stock-in-trade by a money trade by a money-lending concern — proceeds from an proceeds from an incomplete appreciation of the factual matrix and is inconsistent incomplete appreciation of the factual matrix and is inconsistent incomplete appreciation of the factual matrix and is inconsistent with the precedents of the jurisdictional High Court relied upon by with the precedents of the jurisdictional High Court with the precedents of the jurisdictional High Court the assessee. Regarding the third issue of bad debt Regarding the third issue of bad debt written off of Regarding the third issue of bad debt interest, the Ld. counsel for the assessee submitted that when the interest, the Ld. counsel for the assessee submitted that when the interest, the Ld. counsel for the assessee submitted that when the said interest was already offered to tax by the said interest was already offered to tax by the assessee for tax, assessee for tax, then there is no reason to disallow there is no reason to disallow the bad debt written off as bad debt written off as expenditure in the hands of the assessee. in the hands of the assessee.

5.1 As far as first reason for proceeding u/s 263 is concerned As far as first reason for proceeding u/s 263 is concerned As far as first reason for proceeding u/s 263 is concerned before us, the Ld. counsel before us, the Ld. counsel for the assessee has referred t referred to notices interalia, issued issued by the Assessing Officer on various dates issued by the Assessing Officer on various dates, interalia on 29.06.2021; 14.11.2021; 12.12.2021; 07.12.2022; 02.03.2022; on 29.06.2021; 14.11.2021; 12.12.2021; 07.12.2022; 02.03.2022; on 29.06.2021; 14.11.2021; 12.12.2021; 07.12.2022; 02.03.2022; he assessee has filed reply of all 15.03.2022; and 19.03.2022. T ; and 19.03.2022. The assessee has filed reply of all notices issued by the Assessing Office notices issued by the Assessing Officer. In those notices, the se notices, the Assessing Officer inquired about the claim of capital reduction of Assessing Officer inquired about the claim of capital reduction of Assessing Officer inquired about the claim of capital reduction of share capital of ‘Kamani Kamani’ , waiver of right to receiving to receiving of loan given to Kamani and reduction of bad debt receivable from Chinmaya. to Kamani and reduction of bad debt receivable from to Kamani and reduction of bad debt receivable from ned the reply of the assessee and The Assessing Officer has exami The Assessing Officer has examined the reply of the assessee and analyzed the decisions relied upon and thereafter isions relied upon and thereafter, chosen not to , chosen not to make any addition on tho e any addition on those grounds, particularly, , when the case was selected for scrutinizing was selected for scrutinizing on those issues. We notice that specific We notice that specific questions have been as been asked by the Assessing Officer on tho by the Assessing Officer on those issues and replied by the assessee with documentary evidences, which and replied by the assessee with documentary evidence and replied by the assessee with documentary evidence means that Assessing Officer after verification of the allowability of means that Assessing Officer after verification of the allowability of means that Assessing Officer after verification of the allowability of the claim considered not to make any additions the claim considered not to make any additions on all these all these issues. Therefore, in our opinion, it cannot be held that Assessing Officer in our opinion, it cannot be held that Assessing Officer in our opinion, it cannot be held that Assessing Officer had not carried out inquiry which ought to have been carried out. had not carried out inquiry which ought to have been carried out had not carried out inquiry which ought to have been carried out In n the the facts facts and and circumstances, circumstances accordingly accordingly, invoking of Explanation 2 to section 263 of the Act by the Ld. PCIT is Explanation 2 to section 263 of the Act by the Ld. PCIT is Explanation 2 to section 263 of the Act by the Ld. PCIT is unwarranted and hence, hence, rejected.

5.2 As far as issue on merit is concerned, the first issue is of loss As far as issue on merit is concerned, the first issue is of loss As far as issue on merit is concerned, the first issue is of loss on capital reduction on share capital of on capital reduction on share capital of ‘Kamani’ pursuant to the pursuant to the order of NCLT. The company he company ‘Kamani’ reduced shares shares held by all share holders interalia alia the shares held by the assessee from the shares held by the assessee from 1,43,83,060 number of equity shares to 1,04,160 equity shares, 1,43,83,060 number of equity shares to 1,04,160 equity shares 1,43,83,060 number of equity shares to 1,04,160 equity shares whereby the ‘Kamani Kamani’ cancelled and extinguished 1,42,78,900 cancelled and extinguished 1,42,78,900 equity shares and in consideration equity shares and in consideration, paid Rs.050 per equity shares paid Rs.050 per equity shares aggregating to Rs.71,39,450/ aggregating to Rs.71,39,450/-. Thus, the shares have been the shares have been extinguished in favour of the assessee company. In such extinguished in favour of the assessee company. In such extinguished in favour of the assessee company. In such circumstances, the Ld. PCIT was of the opinion that shares have circumstances, the Ld. PCIT was of the opinion that shares have circumstances, the Ld. PCIT was of the opinion that shares have been extinguished without any conveyance and therefore, in view of been extinguished without any conveyance and therefore, in view of been extinguished without any conveyance and therefore, in view of decision of the Hon’ble Supreme Court in decision of the Hon’ble Supreme Court in CIT vs. Grace Collies CIT vs. Grace Collies (supra) the transaction does not attract capital/loss. Whereas, in (supra) the transaction does not attract capital/loss. Whereas (supra) the transaction does not attract capital/loss. Whereas our opinion, the Ld. PCIT has not examined the facts of the case our opinion, the Ld. PCIT has not examined the facts of the case our opinion, the Ld. PCIT has not examined the facts of the case properly. The case squarely falls within the ratio of the Hon’ble he case squarely falls within the ratio of the Hon’ble he case squarely falls within the ratio of the Hon’ble Supreme Court in the case of PCIT v Supreme Court in the case of PCIT vs. Jupiter Capital Pvt. Ltd. s. Jupiter Capital Pvt. Ltd. (supra), wherein the proportion in the share holding of the wherein the proportion in the share holding of the wherein the proportion in the share holding of the shareholder due to reduction of share capital of investee company shareholder due to reduction of share capital of investee company shareholder due to reduction of share capital of investee company held to be squarely covered within ambit of Explanation sale, or held to be squarely covered within ambit of Explanation sale held to be squarely covered within ambit of Explanation sale exchange, relinquishment of the relinquishment of the word ‘assets’ used in section 2(14) used in section 2(14) of the Act. Thus, even if it is considered that L even if it is considered that Ld. PCIT is correct d. PCIT is correct in holding that Assessing Officer should have followed the decision in holding that Assessing Officer should have followed the decision in holding that Assessing Officer should have followed the decision in the case of CIT v. Grace Collis (supra) the case of CIT v. Grace Collis (supra), the two opinion two opinions exists on the issue in dispute and the Assessing Officer has followed one of the issue in dispute and the Assessing Officer has followed one of the issue in dispute and the Assessing Officer has followed one of the opinion on law. The Assessing Officer cannot be held to be the opinion on law. The Assessing Officer cannot be held to be the opinion on law. The Assessing Officer cannot be held to be erroneous or prejudicial to the interest of the Revenue in view of erroneous or prejudicial to the interest of the Revenue in view of erroneous or prejudicial to the interest of the Revenue in view of decision of the Hon’ble Supreme Court in the cas decision of the Hon’ble Supreme Court in the case of CIT v. Max e of CIT v. Max India Ltd. (supra), wherein the Hon’ble Supreme Court held that wherein the Hon’ble Supreme Court held that wherein the Hon’ble Supreme Court held that every loss or revenue as a consequence of an order of the Assessing every loss or revenue as a consequence of an order of the Assessing every loss or revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interest of the Revenue, Officer cannot be treated as prejudicial to the interest of the Revenue, Officer cannot be treated as prejudicial to the interest of the Revenue, for example when the Income for example when the Income-tax Officer adopted one of the courses icer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where permissible in law and it has resulted in loss of revenue, or where permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income two views are possible and the Income-tax Officer has taken one tax Officer has taken one view with which the Commissioner does not agree it cannot be view with which the Commissioner does not agree it cannot be view with which the Commissioner does not agree it cannot be treated as erroneous or prejudi treated as erroneous or prejudicial to the interest of the Revenue, cial to the interest of the Revenue, unless the view taken by the Income unless the view taken by the Income-tax Officer is sustainable in law. tax Officer is sustainable in law.

5.3 Identical view has been taken Identical view has been taken by the Hon’ble Bombay High the Hon’ble Bombay High Court in the case of CIT vs. Future Corporate Resources Ltd. [2021] Court in the case of CIT vs. Future Corporate Resources Ltd. [2021] Court in the case of CIT vs. Future Corporate Resources Ltd. [2021] 132 taxmann.com 173 132 taxmann.com 173 (Bombay) wherein it is held that para 6 of (Bombay) wherein it is held that para 6 of the decision:

“6. Mr. Tejveer Singh in fairness agreed that the law is very Mr. Tejveer Singh in fairness agreed that the law is very Mr. Tejveer Singh in fairness agreed that the law is very clear and inasmuch as if there are two possible views and the clear and inasmuch as if there are two possible views and the clear and inasmuch as if there are two possible views and the Assessing Officer has chosen one of the possible views then Assessing Officer has chosen one of the possible views then Assessing Officer has chosen one of the possible views then there is no re there is no reason to exercise power of revision and revisional ason to exercise power of revision and revisional powers cannot be exercised for directing a full inquiry to find powers cannot be exercised for directing a full inquiry to find powers cannot be exercised for directing a full inquiry to find out if that view taken after an inquiry is erroneous. Moreover, out if that view taken after an inquiry is erroneous. Moreover, out if that view taken after an inquiry is erroneous. Moreover, the power of revision can only be exercised where no inquiry the power of revision can only be exercised where no inquiry the power of revision can only be exercised where no inquiry as required under as required under the law is carried out and even in case of the law is carried out and even in case of inadequate inquiry by the Assessing Officer, the order of the inadequate inquiry by the Assessing Officer, the order of the inadequate inquiry by the Assessing Officer, the order of the Assessing Officer could not be reviewed.” Assessing Officer could not be reviewed. 5.4 As far as second issue of capital loss of right As far as second issue of capital loss of right As far as second issue of capital loss of right of waiver to receive the loan is concerned, the assessee receive the loan is concerned, the assessee signed a deed of signed a deed of settlement with ‘Kamani Kamani’ whereby he agreed to waive or settle his whereby he agreed to waive or settle his loan of Rs.30 cores for an amount of Rs. 9 lakhs loan of Rs.30 cores for an amount of Rs. 9 lakhs and and claimed a loss of Rs.29.5 crores as short term capital loss. 5 crores as short term capital loss. The ld The ld PCIT is of the view that such loan was not a view that such loan was not a capital asset in the hand of the capital asset in the hand of the assessee because accordingly capital asset has been defined in assessee because accordingly capital asset has been defin assessee because accordingly capital asset has been defin section 2(14) of the Act, a section 2(14) of the Act, according to which, the loan or receivables the loan or receivables are excluded from the definition of the capital asset unless held as are excluded from the definition of the capital asset unless held as are excluded from the definition of the capital asset unless held as stock in trade in a m stock in trade in a money lending business. For ready reference, oney lending business. For ready reference, section 2(14) of the Act is reproduced as under: section 2(14) of the Act is reproduced as under:

“(14) 53[“capital asset” 54 54 means- (a) property 54 54 of any kind held by an assessee, whether or not connected of any kind held by an assessee, whether or not connected with his business or profession; with his business or profession; (b) any securities held by a Foreign Institutional Investor which has any securities held by a Foreign Institutional Investor which has any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made invested in such securities in accordance with the regulations made invested in such securities in accordance with the regulations made under the Securities under the Securities and Exchange Board of India Act, 1992 (15 of and Exchange Board of India Act, 1992 (15 of 1992); Following sub Following sub-clause (b) shall be substituted for existing sub clause (b) shall be substituted for existing sub- clause (b) of clause (14) of section 2 by the Finance Act, 2025, clause (b) of clause (14) of section 2 by the Finance Act, 2025, clause (b) of clause (14) of section 2 by the Finance Act, 2025, w.e.f. 1-4- -2026: (b) any securities held by any securities held by- (i) a Foreign a Foreign Institutional Investor which has invested in such Institutional Investor which has invested in such securities in accordance with the regulations made under the securities in accordance with the regulations made under the securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992); Securities and Exchange Board of India Act, 1992 (15 of 1992); Securities and Exchange Board of India Act, 1992 (15 of 1992); or (ii) an investment fund specified in clause (a) of Explanation 1 to an investment fund specified in clause (a) of Explanation 1 to an investment fund specified in clause (a) of Explanation 1 to section 115UB which has invested such securities in section 115UB which has invested such securities in accordance with the provisions of the regulations made under accordance with the provisions of the regulations made under accordance with the provisions of the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of the Securities and Exchange Board of India Act, 1992 (15 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) or under the International Financial Services Centres 1992) or under the International Financial Services Centres 1992) or under the International Financial Services Centres Authority Act, 2019 (50 of 2019); Authority Act, 2019 (50 of 201 55[(c) any unit linked insurance policy to which exemption under clause (10D) any unit linked insurance policy to which exemption under clause (10D) any unit linked insurance policy to which exemption under clause (10D) section 10 does not apply 55a[on account of the applicability of of section 10 on account of the applicability of the fourth and fifth provisos thereof fourth and fifth provisos thereof],] but does not include but does not include- (i) any stock- -in-trade [other than the securities referred to in sub trade [other than the securities referred to in sub-clause (b)]], consumable stores or raw materials held for the purposes of his (b)]], consumable stores or raw materials held for the purposes of his (b)]], consumable stores or raw materials held for the purposes of his business or profession ; business or profession ; 56[(ii) personal effects personal effects 57, that is to say, movable property (including wearing , that is to say, movable property (including wearing apparel and furniture) held apparel and furniture) held 57 for personal use 57 57 by the assessee or any member of his family dependent on him, but excludes any member of his family dependent on him, but excludes any member of his family dependent on him, but excludes- (a) jewellery; jewellery; (b) archaeological collections; archaeological collections; (c) drawings; drawings; (d) paintings; paintings; (e) sculptures; or sculptures; or (f) any work of art. any work of art. Explanation. Explanation.-For the purposes of this sub For the purposes of this sub-clause, “jewellery” includes- includes (a) ornaments made of gold, silver, platinum or any other precious ornaments made of gold, silver, platinum or any other precious ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metal or any alloy containing one or more of such precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi- metals, whether or not containing any precious metals, whether or not containing any precious precious stone, and whether or not worked or sewn into any precious stone, and whether or not worked or sewn into any precious stone, and whether or not worked or sewn into any wearing apparel; wearing apparel; (b) precious or semi precious or semi-precious stones, whether or not set in any precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any furniture, utensil or other article or worked or sewn into any furniture, utensil or other article or worked or sewn into any wearing apparel;] wearing apparel;] 58[(iii) agricultural land agricultural land 59 in India, not being land situate- (a) in any area which is comprised within the jurisdiction of a in any area which is comprised within the jurisdiction of a in any area which is comprised within the jurisdiction of a municipality 59 (whether known as a municipality, municipal municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, corporation, notified area committee, town area committee, corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board town committee, or by any other name) or a cantonment board town committee, or by any other name) or a cantonment board and which has a population 60 of not less than ten thousan and which has a population of not less than ten thousand 61[***] ; or [***] ; or 62[(b) in any area within the distance, measured aerially, in any area within the distance, measured aerially,- in any area within the distance, measured aerially, (I) not being more than two kilometres, from the local not being more than two kilometres, from the local limits of any municipality or cantonment board limits of any municipality or cantonment board referred to in item (a) and which has a population of more than to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in of any municipality or cantonment board referred to in item (a) and which has a population of more than one population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local not being more than eight kilometres, from the local limits of any municipality or cantonment board referred limits of any municipality or cantonment board referred to in item (a) and which has a population of more than to in item (a) and which has a population of more than ten lakh. Explanation. Explanation.-For the purposes of this sub- -clause, “population” means the population according to the last preceding census of means the population according to the last preceding census of means the population according to the last preceding census of which the relevant figures have been published before the first which the relevant figures have been published before the first which the relevant figures have been published before the first day of the previous year;]] day of the previous year;]] 63[(iv) 6½ per cent Gold Bonds, 1977, 6½ per cent Gold Bonds, 1977, 64[or 7 per cent Gold Bonds, 1980,] [or 7 per cent Gold Bonds, 1980,] 65[or National Defence Gold Bonds, 1980,] issued by the Central National Defence Gold Bonds, 1980,] issued by the Central National Defence Gold Bonds, 1980,] issued by the Central Government;] Government;] 66[(v) Special Bearer Bonds, 1991, issued by the Central Government ;] Special Bearer Bonds, 1991, issued by the Central Government ;] Special Bearer Bonds, 1991, issued by the Central Government ;] 67[(vi) Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 Gold Deposit Bonds issued under the Gold Deposit Scheme, 1999 68[or deposit certificates issued under deposit certificates issued under the Gold Monetisation Scheme, 2015] the Gold Monetisation Scheme, 2015] notified by the Central Government.] notified by the Central Government.] 69[ 70[Explanation 1.] [Explanation 1.]-For the removal of doubts, it is hereby clarified that For the removal of doubts, it is hereby clarified that “property” includes and shall “property” includes and shall be deemed to have always included any rights in be deemed to have always included any rights in or in relation to an Indian company, including rights of management or control or in relation to an Indian company, including rights of management or control or in relation to an Indian company, including rights of management or control or any other rights whatsoever.] or any other rights whatsoever.] 71[Explanation 2.-For the purposes of this clause For the purposes of this clause- (a) the expression “Foreign Institutional Investor” shall have the meaning the expression “Foreign Institutional Investor” shall have the meaning the expression “Foreign Institutional Investor” shall have the meaning assigned to it in clause (a) of the Explanation to assigned to it in clause (a) of the Explanation to section 115AD section 115AD; (b) the expression “securities” shall have the meaning assigned to it in the expression “securities” shall have the meaning assigned to it in the expression “securities” shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) (42 of 1956) 72;]”

5.5 In view of plain language of section In view of plain language of section, it is clear that any kind of it is clear that any kind of property whether it is connected with the business or profession it property whether it is connected with the business or profession it property whether it is connected with the business or profession it is held to be capital asset. The properties o be capital asset. The properties which have have been excluded from the definition of from the definition of capital asset are as stock-in- -trade, personal effect etc. Thus the loans does not fall into the excluding definition. loans does not fall into the excluding definition. loans does not fall into the excluding definition. The assessee in support thereof relied on the decision of the Hon’ble The assessee in support thereof relied on the decision of the Hon’ble The assessee in support thereof relied on the decision of the Hon’ble Bombay High Court Nixdorf Information System GmbH (supra) and Bombay High Court Nixdorf Information System GmbH (supra) and Bombay High Court Nixdorf Information System GmbH (supra) and Reliance Natural Resources (supra) wherein it is squarely held that Reliance Natural Resources (supra) wherein it is squarely held that Reliance Natural Resources (supra) wherein it is squarely held that loan given by assessee to its subsidiary company would be covered given by assessee to its subsidiary company would be covered given by assessee to its subsidiary company would be covered by section 2(14) of the Act. Thus section 2(14) of the Act. Thus, the finding of the Ld. PCIT on the finding of the Ld. PCIT on merit is not in accordance with law. merit is not in accordance with law.

5.6 Further, as far as issue of the claim of bad debt as far as issue of the claim of bad debt written off for as far as issue of the claim of bad debt interest interest receivable receivable from from M/s M/s Chinmaya Chinmaya Associates Associates of of Rs.3,42,57,549/- is concerned, the Ld. PCIT has merely relied on is concerned, the Ld. PCIT has merely relied on is concerned, the Ld. PCIT has merely relied on presumption and assumption presumption and assumption. The contention of the PCIT is that he contention of the PCIT is that firm continue to exist and it could reviv inue to exist and it could revive as well and hence there e as well and hence there was no evidence that said that said debt had became fully ir irrecoverable. In this regard we may like to refer to the decision of the Hon’ble this regard we may like to refer to the decision of the Hon’ble this regard we may like to refer to the decision of the Hon’ble Supreme Court in the case of Supreme Court in the case of T.R.F. Ltd. v. CIT [2010] 90 Taxman [2010] 90 Taxman 391/323 ITR 397, wherein wherein it is held that bad debts debts need not be proven to be irrecoverable irrecoverable u/s 36(1)(vii) and it is sufficient sufficient if they are written off. In the case In the case, the assessee has discharge the assessee has discharged its burden of written off of debt in books of accounts and therefore, the finding of books of accounts and therefore, the finding of the Ld. CIT(A) is not in accordance with law. the Ld. CIT(A) is not in accordance with law.

5.7 In view of above discussion, the order of the Ld. PCIT is not In view of above discussion, the order of the Ld. PCIT is not In view of above discussion, the order of the Ld. PCIT is not sustainable in law both on sustainable in law both on Explanation-2 to section 263 2 to section 263 as well as on merit. Accordingly, we set aside the order of the Ld. PCIT and on merit. Accordingly, we set aside the order of the Ld. PCIT and on merit. Accordingly, we set aside the order of the Ld. PCIT and restore the order of the Assessing Officer. restore the order of the Assessing Officer.

Order pronounced in the open Court on ounced in the open Court on 26/09/2025. /09/2025.