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Tax Publishers
Writing off of advances and inventory arising out
of a contract with a related party (AE) - Allowability thereof
Facts:
Additions
were made to the tune of Rs. 6.95 and Rs. 1.59 crores which were claimed as
impairment losses in the books of the assessee company. It was explained by the
assessee that a security deposit was given to its related party AE entity for
manufacturing avionic glasses and since the said glasses were not manufactured
the said deposit and the related inventory purchases to the said contract
were written off by the assessee. This was allegedly to be a sham transaction
as no underlying contract and further evidences were produced by the assessee
to substantiate the write offs. On appeal CIT(A) upheld the disallowances.
On further appeal -
Held
against the assessee that since no evidences could be adduced for the
genuineness of the claim, the additions were sustained.
Ed. Note:
The modus operandi adopted is to be noted.
Case: Samtel Glass Ltd. v. DCIT 2023 TaxPub(DT) 2556 (Del-Trib)
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