2014 (5) TMI 467 - AT - Income Tax

Tribunal allows business expenditure, not capital, under Income Tax Act

DCIT Cir. 3(1), New Delhi Versus M/s. Brawn Pharmaceuticals Ltd.

DCIT Cir. 3(1), New Delhi Versus M/s. Brawn Pharmaceuticals Ltd. - TMI Issues:Revenue's appeal against deletion of addition made on account of disallowance of assets written off.Analysis:The case involved an appeal by the revenue against the deletion of an addition made on account of disallowance of assets written off. The appellant, a public limited company listed on the Bombay Stock Exchange, had filed a return declaring a loss for the assessment year in question. The assessing officer disallowed an amount of Rs. 71,12,659/- claimed by the appellant on the grounds that it was of capital nature. The appellant contended that the assets were not capable of sale and had no realizable value, leading to the write-off in the books of accounts and the debiting to the Profit and Loss account.The assessing officer's disallowance was based on the categorization of the amount under 'assets written off' by the appellant's auditor, indicating a capital nature. However, the Commissioner of Income Tax (Appeals) found merit in the appellant's explanation. The CIT(A) held that the amount written off was allowable under Section 37 of the Income Tax Act, as it was not of capital nature and was a business expenditure. The CIT(A) also noted that the assets in question were depreciable assets on which depreciation had been claimed and allowed in the past.The CIT(A) referred to relevant provisions of the Act and case law to support the decision to delete the addition. The appellant argued that the assessing officer had not disputed the fact that the assets were part of the block of assets and that the loss was incurred due to circumstances beyond the appellant's control. The appellant relied on specific provisions of Section 32(1)(iii) to support the claim for the write-off. The Tribunal upheld the CIT(A)'s order, noting that the claim fell within the scope of Section 32(1)(iii) and that the assessing officer had not raised doubts on the genuineness of the claim. The Tribunal dismissed the revenue's appeal, affirming the deletion of the addition made by the assessing officer.In conclusion, the Tribunal upheld the decision of the CIT(A) to delete the addition of Rs. 71,12,659/-, finding that the claim of the appellant was allowable under the provisions of the Income Tax Act and was not of capital nature. The Tribunal dismissed the revenue's appeal, pronouncing the order in open court on 25-04-2014.