PCIT Vs G-Tekt India Pvt Ltd (Delhi High Court)
Delhi High Court held that AO cannot supplant its view as to the commercial expediency of the transactions. Accordingly, disallowance of loss incurred on purchase and sale of tools and dies based on surmises and assumptions not sustainable.
Facts- The Assessee is engaged in the business of manufacturing and sale of automotive parts and components. The Assessee had filed its return in respect of AY 2014-15 declaring a loss of ₹28,09,72,605/-. AO had found that the loss as declared had arisen on account of transactions of purchase and sale of tools and dies, which were used for cars manufactured by Honda Car India Ltd. The Assessee had procured tools and dies for automotive parts from two entities – an Indian company, named, Honda Trading India Pvt. Ltd. and a company in Thailand named Tri Inter Thailand Company Ltd.
There is no cavil as to the transactions relating to the purchase of dies from the said two entities. However, the AO had doubted the transactions of sale of the said dies to HCIL at a price lower than the purchase consideration paid by the Assessee. Admittedly, the Assessee had sold the said dies to HCIL, which were thereafter handed over to the Assessee for manufacturing the automotive parts. According to the Assessee, bulk of the loss was related to the dies procured from TITC, which the Assessee quantified at ₹14.51 crores (out of a total loss of ₹22.99 crores). AO concluded that the said transaction was a sham transaction and the Assessee’s loss from the said transaction was, thus, an artificial loss.
