Case Law Details
Ardom Towergen (P) Ltd. Vs DCIT (ITAT Delhi)
Introduction: The case of Ardom Towergen (P) Ltd. vs. DCIT, heard by the Income Tax Appellate Tribunal (ITAT) Delhi, addresses the deductibility of a loan advanced for the repayment of business operation liabilities under section 37(1) of the Income Tax Act. This article provides a detailed analysis of the case and its implications.
Detailed Analysis: Ardom Towergen (P) Ltd., formerly known as M/s. Quanta Towergen (P) Ltd., engaged in the business of owning and operating solar installations on telecom towers. The company entered agreements with M/s. Team Sustain Ltd. for executing solar installation projects and maintaining solar assets. Due to financial difficulties faced by M/s. Team Sustain Ltd., Ardom Towergen (P) Ltd. extended further funds to ensure the continuation of business operations.
The dispute arose concerning the deductibility of the amount advanced as a loan under section 37(1) of the Income Tax Act. The Assessing Officer disallowed the deduction, considering it as a capital expense. The Commissioner (Appeals) upheld the decision, stating that the deduction claimed was not in the nature of business expenditure.
In response, Ardom Towergen (P) Ltd. argued that the loan was advanced for the repayment of liabilities arising from business operations, making it a legitimate business expenditure.
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