Addition of trading loss on sale of tools and dies unsustainable

G-Tekt India Pvt. Ltd. Vs DCIT (ITAT Delhi)

ITAT Delhi held that addition on account of trading loss on sale of tools and dies unsustainable as the loss was incurred for sustainable and longer partnership and the same has given rise to generation of profits in subsequent years.

Facts- The assessee company is engaged in the business of manufacturing automotive parts and components. The case of the assessee was selected for scrutiny u/s. 143(3) of the Act. Accordingly, AO made an addition on account of trading loss on sale of tools and dies of Rs.22.99 crores.

CIT(A) sustained the addition. Being aggrieved, the present appeal is filed.

Conclusion- Held that Ld. CIT(A) has failed to appreciate the aforesaid and sustained the addition made by Ld. AO. It appears that the primary consideration in the mind of Ld. CIT(A) was that product was purchased from the sister concern of HCIL so that tainted the transaction of loss. However, as appreciated by the Bench 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.

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