2024 (1) TMI 352 - AT - Income Tax

Allowability of business expenses and business loss - as submitted business of the assessee was not set up during FY 2009-10 and that the assets were not used by the assessee for the purpose of its business during AY 2010-11 - AR submitted that the assessee company has been admitted to Corporate Insolvency Resolution Process ( CIRP ) under the Insolvency and Bankruptcy Code HELD THAT - On perusal of records, we find that the NCLT in the matter of M/s. Rapid Buildwell Ltd. 2022 (11) TMI 1437 - NATIONAL COMPANY LAW TRIBUNAL NEW DELHI BENCH has granted moratorium against the institution of proceedings against the corporate debtor by issuing direction as a consequence of the application being admitted, moratorium as envisaged under the provisions of Section 14(1), shall follow in relation to the corporate debtor, prohibiting as per proviso (a) to (d) of the Code However, during the pendency of the moratorium period, terms of Section 14(2) to 14(4) of the Code shall come in force. Pursuant to the aforementioned directions of the NCLT, we dismiss the appeal of the Revenue without going into the merits of the case. Revenue shall be free to institute the appeal after the completion of the CIRP proceedings, if so advised, as per the relevant provisions of the Act, for which the Ld. Sr. DR had no objection.

Summary

Issues involved:
The appeal involves the allowance of other expenses and depreciation claimed by the assessee for Assessment Year 2010-11, the commencement of the business of the assessee, and the disallowance of expenses and depreciation by the Assessing Officer.

Issue 1: Allowance of Other Expenses and Depreciation
The Revenue challenged the allowance of other expenses and depreciation claimed by the assessee, arguing that the business had not commenced during the relevant year, making the claimed expenses unjust and against the Income Tax Act. The Revenue contended that the expenses were part of a colorable device to evade taxes. The Assessing Officer disallowed the depreciation and business loss claimed by the assessee, leading to a reduction of the loss to nil. However, the Commissioner of Income Tax (Appeals) reversed these disallowances, resulting in the deletion of the adjustments made by the Assessing Officer.

Issue 2: Commencement of Business
The Assessing Officer held that the business of the assessee was not set up during the fiscal year 2009-10, and therefore, the claimed expenses were disallowed. The Assessing Officer asserted that since the business was not established, the expenses incurred were not allowable. However, the Commissioner of Income Tax (Appeals) disagreed and allowed the expenses, leading to the restoration of the claimed loss by the assessee.

Judgment Summary:
The Appellate Tribunal, ITAT Delhi, heard the appeal filed by the Revenue against the Commissioner of Income Tax (Appeals)'s order for Assessment Year 2010-11. The Tribunal noted that the assessee's company was admitted to Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016. Due to the moratorium granted by the National Company Law Tribunal, which prohibited proceedings against the corporate debtor, the Tribunal dismissed the Revenue's appeal without delving into the case's merits. The Tribunal allowed the Revenue to reinstitute the appeal after the completion of the CIRP proceedings. The dismissal of the appeal was based on the moratorium granted by the NCLT, and the Tribunal did not address the substantive issues raised by the Revenue.