Tribunal allows assessee's appeal on write-offs and investments, dismisses revenue's appeals for disallowances.

The tribunal condoned a minor delay in the assessee's appeal and proceeded with adjudication. For the AY 2011-12, the tribunal dismissed the revenue's appeal regarding the disallowance of expired goods written off. Regarding cross-appeals for AY 2012-13, the tribunal dismissed the revenue's appeals on inventories and bad debts written off, allowed the claim for investments written off in one subsidiary, and directed the AO to allow the deduction for advances written off. The revenue's appeals for AYs 2011-12 and 2012-13 were dismissed, while the assessee's appeal for AY 2012-13 was allowed.

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Issues Involved:
1. Delay in Assessee’s Appeal
2. Revenue’s Appeal for AY 2011-12: Disallowance of Expired-Goods Written-Off
3. Cross-Appeals for AY 2012-13:
- Inventories Written-Off
- Bad Debts Written-Off
- Investments Written-Off
- Advances Written-Off

Detailed Analysis:

1. Delay in Assessee’s Appeal:
The registry noted a minor delay of 3 days in the assessee’s appeal. The tribunal condoned the delay considering it minor and proceeded with the adjudication on merits.

2. Revenue’s Appeal for AY 2011-12: Disallowance of Expired-Goods Written-Off:
The assessee claimed the loss of expired goods written off as per FDA norms. The Assessing Officer (AO) denied deduction due to lack of requisite details during assessment. During appellate proceedings, the assessee provided complete details and documentary evidence, which were remanded to the AO. The Commissioner of Income Tax (Appeals) [CIT(A)] observed that the expired goods were identified and destroyed as per the report by M/s Grant Thornton. The waste disposal entity confirmed the collection and disposal of these goods. The tribunal found the claim substantiated and dismissed the revenue’s appeal.

3. Cross-Appeals for AY 2012-13:

Inventories Written-Off:
The AO denied the claim due to insufficient item-wise details. During appellate proceedings, the assessee provided additional evidence similar to AY 2011-12. The CIT(A) found no dispute regarding the expiry of the stock and justified the claim. The tribunal, finding the issue identical to AY 2011-12, dismissed the revenue’s appeal.

Bad Debts Written-Off:
The assessee wrote off bad debts and claimed deduction under Section 36(1)(vii). The AO denied the deduction due to inadequate details. The assessee provided additional evidence, including debtor details and sale invoices. The CIT(A) concurred that proving efforts to recover bad debts was unnecessary and allowed the claim. The tribunal upheld this decision, noting the conditions of Section 36(1)(vii) r.w.s. 36(2) were fulfilled.

Investments Written-Off:
The assessee wrote off investments in two overseas subsidiaries, claiming them as business losses. The AO treated these as capital investments and denied the deduction under Section 37(1). The CIT(A) allowed the write-off for investments in M/s Svizera Holdings B.V. Netherlands (SHBV), noting the business nexus, but disallowed it for M/s Lasa Industria Farmaceutica, Brazil (LASA), citing lack of direct business nexus. The tribunal found the investments were made out of commercial expediency and in furtherance of business objectives, thus allowable as business losses. The tribunal confirmed the CIT(A)’s decision for SHBV and reversed the disallowance for LASA.

Advances Written-Off:
The assessee wrote off advances to M/s Lilac Medicine Private Ltd. (LMPL) for technical know-how, which were disallowed by the AO. The CIT(A) confirmed the disallowance, treating the advances as non-trade. The tribunal found the advances were given in the normal course of business and were revenue in nature. Citing various judicial decisions, the tribunal directed the AO to allow the deduction.

Conclusion:
The revenue’s appeals for AYs 2011-12 and 2012-13 were dismissed. The assessee’s appeal for AY 2012-13 was allowed.

Order pronounced on 17th June, 2021.

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