9911796707
|
Home
Issues involved: The judgment deals with the deduction claimed by an assessee for amounts forfeited on partial non-utilization of import licences, and whether such deduction is admissible in the computation of taxable business profits.
Summary: The assessee, a company engaged in manufacturing machinery, imported materials under a licensing scheme where it had to pay advance premiums to the Indian Cotton Mills Federation. If the imports were not fully utilized, the premiums would be forfeited. The assessee wrote off forfeited amounts as deductions in its taxable business profits for the assessment years 1968-69 and 1969-70. The Income Tax Officer (ITO) disallowed the claim, but the Tribunal allowed it, considering the loss as incidental to the business. The department challenged the Tribunal's decision on the question of law regarding the deductibility of the forfeited amounts. The High Court held that the loss was incurred in the course of the assessee's business and was a revenue loss, not an expenditure. The Tribunal correctly found the write-off to be incidental to the business, following the principle established in previous court decisions. The Tribunal determined that the write-off of forfeited amounts was directly related to the business operations of the assessee, as it was unable to fully utilize the import entitlement due to business exigencies. The deduction claimed by the assessee was deemed to be in the course of and incidental to its business activities, making it admissible for tax purposes. The High Court noted that the question referred by the Tribunal encompassed not only the strict business deduction aspect but also the consideration of the allowance of business loss as a proper revenue item. However, since the department did not argue that the written-off amounts were non-revenue items, the Court did not delve into this aspect. The reference was answered in favor of the assessee, who was awarded costs including counsel's fee.
|
