Case Law Details
Samtel Glass Ltd. Vs DCIT (ITAT Delhi)
ITAT Delhi held that loss claimed arising out of the sham transaction between two associated enterprises (AE) is disallowed.
Facts- In the course of the assessment proceedings, AO observed that the assessee company has inter alia claimed deduction of Rs.8,55,17,103/- on account of impairment loss as per note 26 of the balance sheet.
AO issued show cause notice for substantiation of aforesaid claim of deduction along with original agreement towards payment of security deposit to M/s. Samtel Avionics Ltd. (SAL) which is stated to be associate company of the assessee on appraisal of facts and attendant circumstances, AO alleged that the payment made towards security deposit to Samtel Avionics Ltd. is not a genuine transaction but a sham transaction with an aim to inflate losses and also to siphon of funds of the assessee-company. The impairment loss of Rs.8,55,17,103/- comprising of (i) forfeiture of security deposit placed by the assessee with Samtel Avionics at Rs.6,95,81,595/- and (ii) inventory of glass written off of Rs.1,59,36,508/- was found to be untenable and unsubstantiated. AO thus held that the loss claimed arises out of sham transactions between two Associated Enterprises (AE) in collusion with each other under guise of an agreement with a view squeeze the funds out of the assessee company and inflate the losses. The losses claimed by the assessee in the return of income was accordingly modified and reduced by the impairment loss of Rs.8,55,17,103/- claimed by the assessee.
CIT(A) denied relief. Being aggrieved, the present appeal is filed.
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