Write-off of unutilised Cenvat credit was deductible when actually debited in the books as business expenditure.

Write-off of unutilised Cenvat credit relating to service tax was allowable as a business deduction in the year it was actually debited in the books, because the expenditure crystallised on that write-off and was not merely a premature claim. The Tribunal rejected the revenue's view that the benefit could be availed later, and treated the written-off amount as revenue expenditure deductible under section 37(1) of the Income-tax Act, 1961. The assessee therefore succeeded on the deduction claim for the year of accounting write-off.

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Issues: Whether the write-off of Cenvat credit relating to service tax, debited in the year under consideration, was allowable as a deduction.

Analysis: The assessee had earlier treated the service tax input as adjustable against service tax receivable, but later debited the amount when it concluded that the set-off would not be available. The authorities below disallowed the claim on the premise that the benefit of Cenvat credit could be availed later and the claim was premature. The Tribunal held that the assessee was entitled to claim the expenditure in the year in which it was actually written off in the books. The write-off represented a business expenditure allowable under section 37(1) of the Income-tax Act, 1961.

Conclusion: The write-off of Cenvat credit was allowable in the year it was debited to the accounts, and the claim succeeded in favour of the assessee.

Ratio Decidendi: A business claim for write-off of unutilised Cenvat credit is allowable as expenditure under section 37(1) of the Income-tax Act, 1961 in the year in which it is actually written off in the books.

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