The Delhi bench of the Income Tax Appellate Tribunal ( ITAT) observed that loan advanced for repayment of business operation liabilities allowable as business expenditure under Section 37(1) of the Income Tax Act, 1961
The issue to be decided was whether the deduction claimed by the assessee is to be allowed as business expenditure or not.
The core issue arising for consideration in the appeal was whether an amount of 7, 67, 07,293/- was allowable as business expenditure under Section 37(1) of the Income-tax Act, 1961. The assessee is basically engaged in the business of owning and operating solar installations including batteries on telecom towers owned and operated by telecom companies.
The Assessing Officer examined the assessee’s claim of deduction qua write-off of Rs.8, 02, 05,204/- comprising loan waiver and compensation paid. After examining the assessee’s claim in the context of facts and materials on record, the Assessing Officer concluded that the amounts written off on account of loans and advances is not allowable as deduction in terms of Section 36(2)(i) of the Income Tax Act.
The counsel for the assessee Gautam Jain submitted that the loan advanced to M/s. Team Sustain Ltd is for payment of service tax and other liabilities sustained by M/s. Team Sustain Ltd and not for acquiring any capital asset. Thus, it was submitted that since the loan was advanced for repayment of liabilities arising out of business operations, they are allowable as business expenditure.
The two member bench comprising Pradip Kumar Kediya ( Accountant member ) and Saktijit Dey (Vice President) found, as per submissions of Departmental Representative, it was the case of the Revenue that various agreements, which are not produced at earlier stages need to be examined for arriving at a proper conclusion on assessee’s claim of business. Further, in the interest of justice, the issue arising for consideration needs to be restored back to the Assessing Officer for de novo adjudication
The Tribunal also directed the Assessing Officer to solicit any necessary documents from the assessee to determine the true character of the expenditure. Following this, the AO would reevaluate the issue, affording the assessee an opportunity to present their case. Consequently, the appeal was allowed.
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