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17. The next issue in ITA No.333/Ahd/2006 for assessment year 2002-03 of Revenue's appeal is against the order of CIT(A) in deleting the disallowance of long term capital loss on account of assignment of unsecured loan given to Torrent Gujarat Byotech Ltd. in favour of M/s. Focus Corporate Restructuring Pvt. Ltd. For this, Revenue has raised the following ground No.4:-

"4. The ld. CIT(A) has erred in law and on facts in deleting the disallowance of long term capital loss of Rs.17,30,67,016/- on account of assignment of unsecured loan given to Torrent Gujarat Byotech Ltd. in favour of M/s. Focus Corporate Restructuring Pvt. Ltd."

18. The brief facts leading to the above issue are that the Assessing Officer disallowed assessee's claim for long term capital loss by stating that assessee claimed long term capital loss on account of assignment of a loan of Torrent Gujarat Biotech Ltd. (TGBL for short) to Focus Corporate Restructuring Pvt. Ltd. The assessee had given a loan of Rs.12.84 crores to associated concern TGBI in the year 1996-97 and during that year under consideration the assessee had assigned/transferred the said loan to Focus Corporate Restructuring Pvt. Ltd. vide agreement dated 07-02-2005 for a sum of Rs.64 lakhs and the difference of Rs.12,21,28,000/- was claimed as long term capital loss. After claiming indexation benefits, the long term capital loss was calculated at Rs.17,30,67,016/- which was claimed and set off with long term capital gains from sale of trade mark. The AO stated that as per section 45(1) of the Act capital gain/loss is chargeable only on transfer of capital asset. Reference is also made to Section 2(14) and sated that capital assets mean property of any kind held by the assessee whether concerned with the business or not, the same cannot be considered to inclusive of advances given was in the nature of loans/investments. It is further stated that there is no reasons cited by the assessee for assignment of loan at its value of less than 5% of the original loan. The entire cash advance given to associated concern and its assignment to third party cannot be considered as capital loss u/s.45 of the Act. If at all there is a loss, it is on account of investment and not long term capital loss as ITA No.333 & 346/A/06 & 4343, 4356/A/07 A.Ys 02-03 & 04-05 Torent Pharmaceuticals P. Ltd. v ACIT/DCIT Cir-8 A'bd Page 18 alleged for set off against the capital gains. If it further sated by the AO that the assessee-company had earned long term capital gains during the year under consideration on profit on sale of shares belonging to group concerns and profit on sale of know how on sale of business of valprin. It, therefore, does not seem to be correct as per the provisions and the loan cannot be considered as capital asset and AO disallowed the entire capital loss of Rs.17,30,67,016/-. Aggrieved, the assessee preferred appeal before CIT(A).

d) However, TGBL could not successfully carry out restructuring and its business activities and incurred huge financial loss. They were not in a apposition to repay the loans borrowed by them from financial institute in as also from the group companies. It is declared as sick undertaking under the SICA Act. In the circumstances the appellant thought that the capital of TGBL was eroded and there was no likelihood of getting any recovery of the loan. In the meantime the appellant entered into an agreement with Focus Corporate Restructuring Pvt. Ltd. whereby the above loan was assigned to them for a sum of Rs.64 lakh. This amount of assignment is supported by the report of the Chartered Accountant Mr. Divyang P Mazumdar. As such the asignement was not for reducing taxable income but was in order to reduce loss of investment in TGBL.

The TGBL incurred huge losses as it could not carry out restructuring successfully and they were not in a position to repay the loans borrowed from IFCI and also the group company and accordingly it was declared as "sick undertaking". Accordingly, the assessee entered into an agreement with Focus Corporate Restructuring Pvt. Ltd. for assigning the above loan for a sum of Rs.64 lakh. Now the question arises that how this loan is an asset. The first requirement is that it should be a capital asset within the provisions of Section 2(14) of the Act as defined so as to "Capital asset" means property of any kind held by an assessee, whether or not connected with his business or profession, but does not include- (The items enumerated thereafter for exclusion are not relevant and hence need not be considered.) The main part of Section 2(14) talks of "property of any kind" and makes it irrelevant ITA No.333 & 346/A/06 & 4343, 4356/A/07 A.Ys 02-03 & 04-05 Torent Pharmaceuticals P. Ltd. v ACIT/DCIT Cir-8 A'bd Page 25 whether it is connected with the assessee's business or not but the term "property" has not been defined in the Act. We find that the property has been defined by various judicial pronouncements according to which the word "property" means "a bundle of rights which the owner can lawfully exercise to the exclusion of all others". It does not mean merely physical property but also means the right, title or interest in it. For example, mortgagor of an immovable property holds right subject to the rights of the mortgagee. The Supreme Court in the case of Ahmed G.H. Ariff v. CWT (1970) 76 ITR 471 (SC) has held that property means "highest right a man can have to anything" being that right which one has to lands or tenements, goods or chattels which does not depend on another's courtesy: it includes ownership, estates and interests in corporeal things, and also rights such as trade-marks, copy-rights, patents and even rights in personam capable of transfer or transmission, such as debts; and signifies a beneficial right to or a thing considered as having a money value, especially with reference to transfer or succession, and to their capacity of being injured." So on first principles it can be said that a creditor's right in a debt given is a property and hence can be treated as capital asset. We find that Hon'ble jurisdictional High Court in the case of CIT v. Minor Bababhai alias Lavkumar Kantilal 1981) 128 ITR 1 (Guj) held on the facts that the assessee had advanced a sum of Rs.25,000 to a company on a promissory note and could realize only Rs.13,323/- and a share of Rs.50 and hence claimed the balance of Rs.11,617/- as capital loss. The High Court naturally considered both the aspects viz. existence (i) of capital asset and (ii) of transfer of the same. On the fist aspect of the existence of capital asset, with the following sentence:-