The High Court dismissed the revenue's appeal challenging the ITAT's decision allowing a write-off of Rs.50.72 crores as revenue expenditure. The court held that investments made for business expansion qualify under Section 37 of the Income Tax Act, 1961.
Appeal dismissed; no relief granted to the appellant.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR
D.B. Income Tax Appeal No. 53/2021
The Principal Commissioner Of Income Tax (Central), Rajasthan 4Th Floor, Jeevan Nidhi - 2, Bhawani Singh Road, Ambedkar Circle, Jaipur.
----Appellant
Versus
M/s Vaibhav Global Limited, E-68, Epip, Sitapura Industrial Area, Jaipur-302022 (Raj.)
----Respondent For Appellant(s) : Mr. Siddharth Bapna Mr. Sourav Mehta For Respondent(s) :
HON'BLE THE CHIEF JUSTICE MR. AKIL KURESHI HON'BLE MR. JUSTICE UMA SHANKER VYAS
Order
15/12/2021
This appeal is filed by the revenue to challenge the judgment of the Income Tax Appellate Tribunal. Though as many as four questions are framed by the revenue in the appeal, the issues are only two which can be gathered from the following questions
framed by the department:-
(2 of 3)
[ITA-53/2021]
the amount was an investment that was never debited to the P&L account of the company.”
So far as the first question is concerned, learned counsel for
the revenue candidly brought to our notice an order dated 27/05/2019 passed by the division bench in Income Tax Appeal No. 281/2018 in the case of the present assessee. The appeal of
Under the situation, the first question is not entertained.
The second question pertains to the objection of the revenue to the claim of the assessee of a business loss of Rs.50.72 crores (rounded off) on account of permanent diminution in the value of the investment made in the equity shares in one of the subsidiaries of the assessee in USA. According to the assessing officer this loss was not allowable under Section 37 of the Income Tax Act, 1961 since the expenditure could not have been considered as a revenue expenditure. He also held that this was not a case of bad debt which could be allowed under Section 36 of the Act. The assessee carried the matter in appeal. The Income Tax Appellate Tribunal by the impugned judgment reversed the decision of the assessing officer on this point relying upon the earlier decision of the Tribunal in case of the assessee for the assessment year 2012-13. In such order the tribunal relying on the decisions of the Supreme Court and High Courts noted that under similar circumstances the expenditure incurred by the
(3 of 3)
[ITA-53/2021]
company were allowed. This was on the basis that the assessee company in order to expand its business world wide had setup subsidiaries in other countries. The investment made in such companies was seen as revenue expenditure since the purpose behind making the investment was only for expansion of the business. Applying this logic to the assessee in the present case, the Tribunal was of the opinion that such investment being in the nature of revenue expenditure was to be allowed under Section 37 of the Act.
Having perused the order passed by the assessing officer and by the tribunal and having heard learned counsel for the revenue, we find no error in the view expressed by the tribunal. As noted, the assessee had made investment in its subsidiary company in order to expand its business with a view to earn higher profit. The investment was thus driven by business expediency. The tribunal therefore committed no error. No question of law arises.
The appeal is dismissed.
(UMA SHANKER VYAS),J
(AKIL KURESHI),CJ
Anil Goyal/BM Gandhi/11
3 issues framed by the court
Whether ITAT was justified in allowing write off of loss on permanent diminution in value of investment without debiting to P&L under Section 37.
Whether loss of Rs.50.72 crores on diminution in value of equity shares constitutes deductible revenue expenditure.
Whether the earlier Division Bench order in Income Tax Appeal No. 281/2018 requires re-view of the first question framed by the revenue.
Colour shows how this judgement treated each authority
Income Tax Appeal No. 281/2018Distinguished
Income Tax Appeal No. 281/2018
2 provisions across 1 enactments
The Principal Commissioner Of Income Tax (Central), Rajasthan
M/s Vaibhav Global Limited
AKIL KURESHI
UMA SHANKER VYAS
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
