2022 (11) TMI 782 - HC - Income Tax
Allowable business expenditure/commercial expediency - Disallowance of claim of expenditure on the ground that it was not incurred “wholly and exclusively for the purposes of the business” - expenditure incurred by the Assessee in the form of loans and advances to its subsidiaries which were subsequently written off - HELD THAT:- In the present case, while the nomenclature used for the expenditure incurred may have been different during AYs 1989-90 and 1990-91 where it was ‘loans and advances’ which were subsequently written off, the fact remains that it was an irrecoverable expenditure as far as the Assessee was concerned. In the present AYs as well, what was paid as ‘compensation’ by the Assessee to the very same subsidiaries was to recoup the business losses of the subsidiaries, and was again irrecoverable as far as the Assessee is concerned.
Considering that the expenditure was in the nature of moneys advanced to the subsidiaries, it cannot be said that there is no intimate connection between the Assessee and the two subsidiaries as far as the business activities are concerned.
In that sense the decision of the ITAT to allow the expenditure cannot be said to be inconsistent with the dictum of the Supreme Court in Travancore Titanium Products Ltd. [1966 (1) TMI 21 - SUPREME COURT] It must therefore be concluded that the expenditure incurred by the Assessee in the present cases is not only incidental to the business of the Assessee but also necessitated or justified by commercial expediency.
Consequently, the Court is not persuaded that the ITAT has in the present cases committed any legal error in answering the questions framed in favour of the Assessee and against the Department.