2023 (11) TMI 39 - HC - Income Tax

Bad debts u/s 36(1) acquired from predecessor-in-interest - acquisition of commercial vehicle division in a scheme of demerger - HELD THAT - This very issue has been decided by us today in an appeal concerning the respondent/assessee in VE Commercial Vehicles Ltd. 2023 (10) TMI 1283 - DELHI HIGH COURT ruled issue in favour of the respondent/assessee as not disputed that the predecessor-in-interest had offered for imposition of tax the subject debts at a relevant point in time. See T. Veerabhadra Rao 1985 (7) TMI 2 - SUPREME COURT and Times Business Solution Ltd. 2013 (4) TMI 370 - DELHI HIGH COURT Nature of expenses - training expenses treated as a third kind of expense i.e. deferred revenue expenditure - Tribunal holds that u/s 37 the entire expenditure would have to be allowed - HELD THAT - According to us the view taken by the Tribunal is correct. Also see CIT(A) vs. Samsung India Electronic Limited 2013 (7) TMI 365 - DELHI HIGH COURT has taken the same view. Revenue appeal dismissed.

Summary

Issues:
The issues involved in this judgment are the deduction claimed by the respondent/assessee vis-à-vis bad debts and the deduction claimed towards training expenses.

Bad Debts Issue:
The primary issue in the bad debts matter was the disallowance of bad debts by the Assessing Officer due to the debts being acquired from the predecessor-in-interest, Eicher Motor Limited (EML), which was deemed impermissible under the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) ruled in favor of the respondent/assessee, a decision upheld by the Tribunal. The court referenced relevant legal principles and judgments to support the conclusion that no interference was necessary with the impugned order. Consequently, the disallowance concerning bad debts was correctly deleted, amounting to Rs. 5,96,20,438.

Training Expenses Issue:
Regarding the training expenses issue, the Assessing Officer treated the expenses as deferred revenue expenditure, allowing only a portion as deduction for the relevant Assessment Year (AY) 2011-12. The remaining amount was disallowed, with a direction for deduction in subsequent AYs. The Commissioner of Income Tax (Appeals) reversed this view, stating that the Act did not recognize deferred revenue expenditure, a decision upheld by the Tribunal. The court concurred with the Tribunal's interpretation under Section 37 of the Act, emphasizing that the entire expenditure should be allowed. A previous judgment by a coordinate bench of the Court supported this stance. Therefore, no substantial question of law arose for consideration on this issue.

Conclusion:
In conclusion, the court found no grounds for interference with the impugned order on either issue. The appeal was closed, and the parties were instructed to act based on the digitally signed copy of the order.