THE PR.COMMISSIONER OF INCOME TAX-3 vs. EMBRYONIC PROPERTIES LTD.

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ITA/1067/2017HC DelhiDLHC01343269201728 November 2017Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE SANJEEV SACHDEVA2 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal affirmed the decision to treat the amount as a business loss, relying on previous judgments. The court emphasized that the true nature of the amount, not just its book treatment, determines its classification.

What were the facts?

The assessee, a real estate developer, sought to write off an outstanding amount of Rs. 4,32,42,500/- recoverable from Mr. Kishore. The AO disallowed this write-off, considering it stock-in-trade expenditure. The CIT(A) and ITAT treated it as a business loss.

What were the issues?

Whether an unrecoverable debt arising from stock-in-trade can be treated as a business loss. The nature of expenditure and its allowability as a business loss.

Which sections of the Income-tax Act were involved?

Section 28,Section 37

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ITA No.1067/2017 Page 1

$~31 * IN THE HIGH COURT OF DELHI AT NEW DELHI

+ ITA 1067/2017

THE PR.COMMISSIONER OF INCOME TAX-3 ..... Appellant Through: Mr. Ruchir Bhatia with Mr. Puneet Rai & Mr. Gaurav Khetarpal, Advs.

versus

EMBRYONIC PROPERTIES LTD. ..... Respondent

Through: None.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SANJEEV SACHDEVA

O R D E R %

28.11.2017

1.

The Revenue is aggrieved by the ITAT’s decision with respect to the deletion of `4,32,42,500/-, for A.Y. 2009-10. 2. The assessee, which is engaged in business of accommodation, construction, development and sale of integrated townships, had claimed that `4,32,42,500/- – shown as an outstanding amount and recoverable from one Mr. Kishore, needed to be written off. The AO held that the write off was impermissible because the amount was not in respect of its asset but on account of the stock-in-trade expenditure. The

ITA No.1067/2017 Page 2

amount was therefore disallowed. The CIT(A) granted relief by treating the amount as a business loss. The ITAT affirmed this finding. In doing so, the ITAT relied upon the judgment of this Court in Mohan Meakin Ltd. v. Commissioner of Income Tax 348 ITR 109 (Del.). 3. As is evident, the facts disclose that there are concurrent findings. Besides, treatment of particular amounts is not to be based only on the manner of the assessee’s reporting or its treatment in the books but as to its true nature as ruled in Kedarnath Jute Manufacturing Co. Ltd. v. Commissioner of Income Tax (1971) 82 ITR 363; furthermore this kind of treatment (i.e. writing off of business related debts), as a business loss, was upheld in Mohan Meakin Ltd. (supra). No question of law therefore arises.

The appeal is consequently dismissed.

S. RAVINDRA BHAT, J

SANJEEV SACHDEVA, J NOVEMBER 28, 2017 kks

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