ITAT Dismisses Appeal as NCLT Granted Moratorium Against Corporate Debtor under Section 14 of IBC

DCIT Vs Rapid Buildwell Ltd. (ITAT Delhi)

Introduction: The recent decision by the Income Tax Appellate Tribunal (ITAT) Delhi in the case of DCIT vs. Rapid Buildwell Ltd. has significant implications. The appeal, directed against the Commissioner of Income Tax (Appeals), relates to the Assessment Year 2010-11. The primary grounds of contention include the allowance of expenses and depreciation claimed by the assessee. Let’s delve into the details of the case.

Detailed Analysis: The assessee, engaged in property rental and maintenance, filed its return for AY 2010-11, declaring a substantial loss. However, the Assessing Officer (AO) later observed that unabsorbed depreciation had been incorrectly allowed. The AO reopened the case and, in 2016, reduced the loss to nil, disallowing both depreciation and business loss.

On appeal, the Commissioner of Income Tax (Appeals) overturned these disallowances, prompting the Revenue to approach the ITAT. The grounds of appeal mainly question the legitimacy of claimed expenses and depreciation, raising concerns about the commencement of the assessee’s business.

During the hearing, it came to light that the assessee had been admitted to Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code 2016. The ITAT took cognizance of the National Company Law Tribunal’s order granting moratorium against proceedings concerning the corporate debtor.

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