The Income Tax Appellate Tribunal (ITAT) Delhi bench deleted additions made on account of trading loss on sale of tools and dies for car manufacturing.
Assessee G-Tekt India Pvt. Ltd. is engaged in the business of manufacturing automotive parts and components.After filing the return of income assessee case was selected for scrutiny and apart from various additions the AO had made an addition on account of trading loss on sale of tools and dies of Rs.22.99 crores.
Aggrieved by the order, the assessee filed objections before the Commissioner of Income Tax (Appeal){ CIT(A)} . who uphold the addition. Thereafter the assesee filed a second appeal before the tribunal.
Before the bench counsel for the assessee submitted that major purchase of dies was from Tri Inter Thailand and not from Honda Trading Corporation India Pvt. Ltd.
Further only the transactions with Honda Trading Corporation India Pvt. Ltd. were examined and considered to sham and whole of the loss disbelieved.
Counsel for the revenue supported the decision of lower authorities and submitted that During the year, the company has entered into a contract with Honda Car India Limited (HCIL) for sale of tools and dies for its new car models.
HCIL had asserted that it had lower quotes for the subjected goods from” other vendors which forced the assessee to lower its quote and enter into a loss making transaction. The factum of the transaction being a loss making one was known to the assessee from the outset.Thus these transactions are sham transactions
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of N.K.Billaiya ,(Accountant Member ) and Anubhav Sharma,(Judicial Member) observed that 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.
Thus the bench determined that there is substance in the contention of Counsel that the major purchase of dies were from Tri Inter Thailand and not from Honda Trading Corporation India Pvt. Ltd.
Vishal Kalra, counsel appeared for assessee and Mohd. Gayasuddin Ansari, counsel appeared for the revenue.
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