What did the High Court hold?

The Tribunal held that the tax authorities failed to appreciate the business prudence of incurring initial losses for long-term partnership, which led to profits in subsequent years. The Tribunal found no suspicious elements in the purchase documents to tag the transaction as sham.

The assessee company, incorporated in 2011, incurred losses on the purchase and sale of dies to maintain a business relationship with HCIL. The tax authorities disallowed these losses, considering the transactions to be sham, partly due to the purchase from a sister concern of HCIL.

What were the issues?

Whether losses incurred on the purchase and sale of dies, despite being from a related entity, were a result of genuine business expediency and not a sham transaction.

PCIT vs M/S G-Tekt India Pvt. Ltd | Delhi High Court 2024

$~132 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 463/2024 THE PR. COMMISSIONER OF INCOME TAX -4 NEW DELHI

.....Appellant Through: Mr. Shlok Chandra, SSC along with Ms. Madhavi Shukla, Ms. Priya Sarkar, JSCs, Mr. Madhav Gawri and Mr. Sushant Pandey, Advs.

versus

M/S G-TEKT INDIA PVT. LTD

.....Respondent

Through: Mr. Vishal Kalra, Adv.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE RAVINDER DUDEJA

O R D E R %

27.08.2024 CM APPL. 48879/2024 (6 Days Delay) & CM APPL. 48880/2024 (208 Days Delay in Refiling)

Bearing in the mind the disclosures made, the delay of 06 days in filing the appeal and the delay of 208 days in re-filing the appeal is condoned. Applications shall stand disposed of. ITA 463/2024

Having gone through the order dated 19 July 2023 rendered by the Income Tax Appellate Tribunal [„Tribunal‟] and on hearing Mr. Chandra, learned counsel appearing in support of the appeal, we note that insofar as the disallowance of trading losses is concerned, the Tribunal has observed as follows:- This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 13:32:38

“9. The Bench is of considered opinion that Ld. Tax Authorities below have not appreciated the fact that the company was incorporated on 23.11.2011 and its existence and sustenance primarily was dependent upon the contract to manufactures certain parts to be used in the cars manufactured by HCIL. The case of assessee is that as there were competitor who had quoted lower rates of the dies thus, it decided to purchase the dies and sell the same at loss. Ld. Tax Authorities have failed to appreciate the substantial business of assessee in terms of sales was outcome of the contract with HCIL. It failed to appreciate that except for the present assessment year 2014-15, the assessee company has in the year 2013-14 and thereafter from 205-16 onwards till 2022-23 has reported profit from the business it had transacted with HCIL. The Ld. Tax Authorities have tagged the transaction to be sham without pointing out anything suspicious in the purchase documents.

xxxx

11.

The Bench is of considered opinion that Ld. CIT(A) has failed to appreciate the aforesaid and sustained the addition made by Ld. AO. It appears that the primary consideration in the mind of Ld. CIT(A) was that product was purchased from the sister concern of HCIL so that tainted the transaction of loss. However, as appreciated by the Bench the Tax Authorities had failed to take into consideration the business prudence of the assessee for incurring certain losses in initial year for a sustainable and longer partnership with HCIL and which has given rise to generation of profits in subsequent years and which have been tendered for taxation.”

Since Mr. Kalra, learned counsel has entered appearance on behalf of the assessee and is yet to obtain a copy of the paper book, let the appeal be called again on 24.10.2024.

YASHWANT VARMA, J

RAVINDER DUDEJA, J AUGUST 27, 2024/RW This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2026 at 13:32:38

THE PR. COMMISSIONER OF INCOME TAX -4 NEW DELHI vs. M/S G-TEKT INDIA PVT. LTD

What did the High Court hold?

What were the facts?

What were the issues?

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