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2022 (8) TMI 1227 - AT - Income TaxAllowability of capital loss as well as the right of deferred tax assets - Disallowance of capital expenditure debited to the profit and loss account - whether CIT-A erred deleting disallowance of fixed assets without considering that since the assets are not part of the inventory which has been sold off in auction, they are a capital loss and thus cannot be written off as expenditure by the assessee? - DR submitted deferred tax write-off cannot be allowed as a deduction in any circumstances because of the reason that it is merely an entry for provision which does not impact the tax liability of the assessee at all - HELD THAT:- We find that the right off the loss on transfer of capital asset cannot be allowed to the assessee as a revenue loss. The learned CIT – A is incorrect in allowing such loss. Only a revenue loss which are incurred during the year are allowable as a deduction. Such loss debited by the assessee is not at all a revenue loss. Hence, we reverse the order of the learned CIT – A on account of allowing the deduction of write-off of the asset to the assessee as revenue expenditure. Similarly, the deferred tax asset is not an item which can be claimed as a deduction as revenue expenditure on its right for the simple reason that it is not at all an expenditure. Further such deferred tax assets are created on account of timing difference between profits and tax profits. At the time of creation, it is not allowable as an expenditure or not chargeable as income and further when it is written off, or written back, it is not charged to tax or granted as deduction. Therefore, write-off of the deferred tax assets is not an expenditure at all. Further, it is not also deductible loss as in fact it is merely a book entry. Therefore, the learned CIT – A has erred in allowing the deduction to the assessee on this account. All the decisions cited by the learned authorised representative clearly shows that only revenue loss which is incurred during the year arising out of the business being carried on by the assessee is allowable as deduction u/s 29 of the act. The loss claimed by the assessee is not at all a revenue loss. Thus the orders of the learned CIT – A is reversed on both the accounts in allowing the capital loss as well as the right of deferred tax assets. Both the grounds raised by the learned assessing officer are allowed.
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