Losses due to technical snags and bad weather shall be allowed as a deduction- ITAT Pune
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Case Details: |
ITO vs. Roj Enterprises Pvt. Ltd. |
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Appeal No.: |
ITA No. 1292/PUN/2018 |
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Order pronounced by: |
ITAT Pune |
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Date of Order: |
08-10-2021 |
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In favour of: |
Assessee |
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Assessment Year: |
2004-05 |
Source: www.itat.gov.in
Brief Facts:
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The assessee is an export house dealing in mango pulp etc. The assessee agreed to work with Alliance Agro (a sick company) for the conversion of mango pulp at their facility. It agreed to make payments on their behalf with an understanding that it will purchase mango pulp at basic cost plus Rs. 4500 PMT on the converted product. Since Alliance Agro was a sick company, it pumped funds into the company for the purchase of mango. |
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Unfortunately, due to severe heatwave in Nagpur, fruits were overripe and the plant could not start in time. This resulted in a loss of Rs. 1.43 crores which the assessee claimed as a part of its business. However, the A.O. disallowed the claim of the assessee and made an addition of Rs. 1.43 crores. The Ld. CIT (A) overturned the assessment order and deleted the addition. Aggrieved, the Revenue came up in appeal before the Tribunal. |
Observations of the Tribunal:
- It is an admitted position that the Alliance Agro is unrelated to the assessee and stands at arms’ length. The Government of Maharashtra was a stakeholder in this company which had turned sick.
- The agreement with Alliance Agro was made by the assessee to accelerate its business and thus pumped funds in Alliance Agro. Losses incurred by the assessee were due to weather conditions and other factors beyond the control of the assessee.
- The assessee has duly furnished the confirmation of one of the directors of the Alliance Agro along with a letter from the company confirming the agreement between the assessee and the company. A copy of the ledger account of Alliance Agro in the books of the assessee has been placed on record, which clearly depicts various payments over the period.
Ruling:
The fact that the business of Alliance Agro could not take off properly due to technical snags and the bad weather conditions reinforces the assessee’s claim of having genuinely incurred a loss of Rs. 1.43 crores for its business purpose which became an irrecoverable loss. As the loss is only in the revenue nature, we are satisfied that the Ld. CIT (A) took the correct view on this issue by allowing the deduction. Consequently, the appeal of the Revenue is dismissed.
Read complete order: ITO vs. Roj Enterprises Private Limited
Disclaimer: The above article is based upon the judgment of ITAT Pune and is meant for informative purposes only. Readers are requested to act diligently and under the consultation of a professional before applying the information contained in this article.
