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2023 (6) TMI 884 - BOMBAY HIGH COURTExpenses of Group Companies - Can a deduction be allowed for the expenditure incurred by appellant to meet the liability of the another company and for the debts written off in the books? - Bad debts - Write off of advances given for purchase of Machinery - Computing the income under the head “Profits and gains of business or profession” - deductible expenditure u/s 28 - Deduction not claimed u/s Section 36(1)(vii) - HELD THAT:- Expenditure incurred were wholly incurred for the purpose of commercial expediency because MMC was a group company of appellant and appellant was, as could be seen from the orders passed by BIFR, keen in the preservation of MMC and to keep it as a going concern. The nexus between appellant and MMC is also not disputed. The Assessing Officer failed to appreciate the claim in the proper perspective. Appellant participated in the rehabilitation scheme of MMC and lent rehabilitation assistance by paying amounts to MMC as well as by converting its existing ICDs with MMC into rehabilitation assistance. Appellant also provided a guarantee of Rs. 200 lakhs to IDBI for the rehabilitation assistance disbursed by IDBI to MMC. If there was no commercial expediency, there was no reason for appellant to incur these amounts or participate in the rehabilitation scheme of MMC. Appellant was also the managing agents of MMC and MMC was also a Mahindra Group Company. It is certainly not necessary for the name of Mahindra and Mahindra to be used in the name of MMC to prove it was a group company. These expenditure/debts should be treated as having been incurred for the purpose of business and directly relatable to the business of the assessee and thus eligible for deduction as business expenditure/loss in assessee’s return of business income. The expenditure incurred by appellant or the debts that were recoverable from MMC, in our view, therefore, would certainly be deductible expenditure u/s 28 - ITAT was not right in not allowing the claims of assessee. Appeal is allowed and accordingly disposed.
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