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2020 (3) TMI 1229 - AT - Income TaxBusiness loss or not - Payment of additional Custom Duty after the department of Customs found that goods were under-valued - the duty was paid in the names of other parties but the same related to the assessee only. - CIT(Appeals) not allowing to the appellant the deduction of custom duty being the business loss - HELD THAT:- Assessee has paid certain duty pursuant to action carried out by DRI. The matter of duty was finalized by Hon’ble Settlement Commission and the assessee made the payment as determined. The payment so made amounted to ₹ 197.60 Lacs out of which deduction to the extent of ₹ 104.47 Lacs has already been allowed to the assessee. The basis of disallowance is the fact that the payment is not in assessee’s account. However, as rightly pointed out by Ld. AR, the said payment was made by the assessee himself out of his own funds and substantial payment challans were in the name of assessee’s proprietorship concern namely M/s M.B.Sales Corporation. The other entities denied their liability and despite legal action, the stated amount could not be recovered from them and the amount eventually became irrecoverable for the assessee. Therefore, the said loss, in our considered opinion, was incurred in the course of business being carried out by the assessee and non-payment of the duty would have resulted into substantial losses for the assessee and damaged assessee’s reputation in the market. This being the case, the said loss would be allowable to the assessee as a business loss out of commercial expediency. The ratio laid down in the cited judicial pronouncements clearly support the case of the assessee. Therefore, we hold that the said expenditure would be an allowable expenditure.- Decided in favour of assessee. Disallowing the set-off of carried forward of losses pertaining to AY 2005-06 - HELD THAT:- The said issue would stand remitted back to the file of Ld. AO for re-adjudication in view of our decision for AY 2006-07. The Ld. AO is directed to verify assessee’s claim and allow the set-off of losses as per law. The ground stand allowed for statistical purposes. The appeal stands partly allowed.
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