ESCORTS LTD.,FARIDABAD vs. ADDL.CIT, SPECIAL RANGE-3, NEW DELHI

ITA 7394/DEL/2019Status: DisposedITAT Delhi13 March 2026AY 2016-1713 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the expenditure incurred on settling the corporate guarantee was not allowable as a business expenditure. The primary reason for giving the guarantee was to support a subsidiary, and the settlement was to resolve a dispute arising from that support, not for the direct business operations of the assessee.

What were the facts?

The assessee claimed a deduction for Rs. 47.64 crores incurred on settling a corporate guarantee given to a subsidiary's supplier. The guarantee was invoked due to the subsidiary's payment defaults, leading to arbitration and litigation. The assessee settled the dispute to avoid further losses and protect its business interests.

What were the issues?

Whether the expenditure incurred on settling a corporate guarantee given for a subsidiary's debt is an allowable business expenditure under Section 37(1) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 37(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘F NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA

For Respondent: Ms. Monika Singh, CIT(DR)
Hearing: 25.02.2026Pronounced: 13.03.2026

PER SATBEER SINGH GODARA, JM This assessee's appeal for assessment year 2016-17, arises against the Commissioner of Income Tax (Appeals)-34 [in short, the “CIT(A)”], New Delhi's order dated 28.06.2019 passed in case no. 172/18-19, involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act'). This assessee's appeal raises the following substantive grounds:

1.

That on the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the action of Assessing officer in disallowing a claim of expenditure of Rs.47,64,00,000/- incurred on settlement of a corporate guarantee invoked and awarded against the appellant.

2.

That on the

The order continues below.

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