TMI Blog2022 (11) TMI 782X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sisting promotional activities of industrial undertaking in the case of the assesse company and hence it is not a business expenditure attributable to the assessee company? (2) Whether on the facts and in the circumstances of the case, the learned ITAT is correct in law in directing to allow deduction for compensation made by the assesse company to its subsidiaries which is not in relation to its own business of the assessee company and also not incidental to the business of the assessee? 3. Whereas in ITA No.38 of 2017, the following question was framed by this Court on 18th December, 2019: Whether on the facts and in the circumstances of the case and when the assesse company has not been able to explain regarding the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... desired grade and specification were purchased from outside parties, which resulted in substantial financial loss to the subsidiaries. It was this loss which was sought to be compensated by the Assessee. 7. The Assessing Officer (AO) did not accept the above explanation and disallowed the claim of expenditure on the ground that it was not incurred wholly and exclusively for the purposes of the business of the Assessee. In arriving at this conclusion, the AO relied on the decision of the Supreme Court in Travancore Titanium Products Ltd. v. Commissioner of Income Tax, Kerala (1966) 60 ITR 277 where it was held as under: The position may therefore be summarised thus: the nature of the expenditure or outgoing must be adjudged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent against the orders of the ITAT in the appeals in ITA Nos.69 and 70/CTK of 1994 filed by the Assessee for AYs 1989-90 and 1990-91. 10. An affidavit has been filed by the Department today in which it sought to be contended that the aforementioned order of the ITAT for AYs 1989-90 and 1990-91 is distinguishable on facts. It is sought to be submitted that in the said order of the ITAT the issue concerned making of loans and advances by the Assessee to its subsidiaries, which were then subsequently written off whereas in the present cases what was paid to the subsidiaries was compensation for supposedly business losses of the subsidiaries. 11. Mr. Satapathy, learned Senior Standing Counsel for the Appellant draws attention of this Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted projects in the wake of the decisions mentioned herein above, is allowable as revenue expenditure. As far as the year of allowability is concerned, neither the assessing officer nor the first appellate authority disputed the bona fides of the assessee in writing off the amounts in the year under consideration. 13. In arriving at the above conclusion, the ITAT relied on the decisions of the Supreme Court in CIT v. Amalgamation Pvt. Ltd. [1997] 226 ITR 188 (SC) and Essen Pvt. Ltd. v. CIT [1967] 65 ITR 625 (SC) and of the Calcutta High Court in CIT v. Gillanders Arbuthnot Co. Ltd. [1982] 138 ITR 763 (Cal). 14. In the present case, while the nomenclature used for the expenditure incurred may have been different during AYs 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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