CHANDIGARH BOTTLING CO. vs. C I T

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ITA/861/2008HC Punjab & HaryanaPHHC01080896200806 November 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE GURDEV SINGH3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that for a loss to be claimed as a deduction, the assessee must establish that the loss was factually suffered. The Court noted that all the authorities below had concurrently recorded a finding of fact that the loss in question was never suffered by the assessee. This finding was not shown to be perverse. Therefore, the submission of the assessee that the loss was incidental to business and allowable under Section 29 was not accepted. The Court concluded that no substantial question of law arose from the Tribunal's order. The appeal was dismissed.

What were the facts?

The assessee, Chandigarh Bottling Co., engaged in trading and distribution of soft drinks, claimed a deduction for loss on account of leakage and breakage of bottles for the assessment year 2002-03. The Assessing Officer rejected the claim due to lack of evidence and attributed the loss to the principal. The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal affirmed this decision. The Tribunal specifically noted the absence of evidence to substantiate the claim that the loss was borne by the assessee and not the principal, and also the lack of proof regarding how the stock became unserviceable. The disallowance was Rs. 4,81,151/-.

What were the issues?

1. Whether, on the true interpretation of Section 29 of the Income Tax Act, 1961, the loss on account of leakage, breakage, and unserviceable soft drink bottles is an allowable expense? (Question of law) Assessee's contention: The assessee argued that it was entitled to a deduction under Section 29 of the Act as the loss suffered was incidental to its business operations. Revenue's contention: The revenue contended that the assessee failed to substantiate the factual occurrence of the loss and that the loss, if any, was attributable to the principal. The authorities below had concurrently found that the loss was not factually suffered by the assessee.

Which sections of the Income-tax Act were involved?

Section 29,Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH.

Date of decision: 6.11.2009 Chandigarh Bottling Co.Chandigarh -----Appellants Vs. Commissioner of Income Tax, Chandigarh ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE GURDEV SINGH Present:- Mr. Pankaj Jain, Advocate for the appellant. Ms. Urvashi Dhugga, Advocate for the revenue. Adarsh Kumar Goel,J.

1.

This appeal has been preferred by the assessee under section 260A of the Income Tax Act, 1961 (in short, ‘the Act’) against the order of the Income Tax Appellate Tribunal, Chandigarh Bench ‘B’, Chandigarh in ITA No.341/Chandi/2006 dated 11.1.2008, for the assessment year 2002-03, proposing to raise following substantial question of law:- “Whether on the true interpretation of section 29 of the Act the soft drink bottles having leakage, breakage and of unserviceable nature is an allowable expense?

2.

The assessee is engaged in trading and distribution of soft drinks and made a claim towards loss on account of leakage/breakage of bottles. The said claim was rejected by the Assessing Officer in absence of evidence to substantiate the same. It was also observed that the assessee was only a distributor and loss claimed was attributable to the principal. This view has been affirmed by the CIT(A) as well as the Tribunal. The Tribunal observed:- “…It is a mere assertion by the assessee that the reasons leading upto the damage of the stock could not be attributed to the principal company and thus the loss was to be borne by the assessee. Leave alone the substantiation of such plea there is no evidence to show as to in what manner the stock in question had become bad or unservable. Therefore, in the absence of any evidence to support the claim, the assessee has to fail in this ground. Accordingly, we upheld the action of the Income Tax authorities in disallowing a sum of Rs.4,81,151/- claimed to be loss on account of leakage/breakage of stock of soft drinks. On this ground, the assessee fails.”

3.

We have heard learned counsel for the parties.

4.

Learned counsel for the appellant submits that the assessee was entitled to deduction under section 29 of the Act in respect of loss suffered as loss was incidental to business.

5.

We are unable to accept the submission. Even for claiming loss, the assessee has to establish that loss was factually suffered. All the authorities have concurrently recorded a finding of fact that loss in question was never suffered by the assessee. The said finding is not shown to be perverse.

6.

No substantial question of law arises.

7.

The appeal is dismissed. (Adarsh Kumar Goel) Judge (Gurdev Singh) November 6, 2009 Judge ‘gs’ 3

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