INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Assessee engaged in housing and real estate development, claimed loss arising on valuation of inventory - Accumulated expenses of earlier years included as part of work-in progress, whether represented brought forward loss

Assessee was a private limited company and was engaged in housing and real estate development. It was aggrieved by decision of CIT(A) in confirming disallowance of claim of loss arising on valuation of inventory, which was accumulated expenses of earlier years included as part of work-in-progress. Held: Accumulated amount represented only revenue expenses and thus, assessee could have claimed the same as business loss in earlier years. In that case, the brought forward business loss would have been allowed as deduction. This submission of the assessee appeared to be attractive. However, the IT Act prescribes conditions for filing of loss returns and for carry forward of losses. None of those conditions were followed by the assessee and no loss was claimed or determined in any of the past years. Thus, it could not be presumed or deemed that the claim of the assessee represented brought forward loss. Accordingly, contention of the assessee was liable to be rejected.

REFERRED : CIT v. Tata Robins Fraser Limited (2012) 211 Taxman 257 (Jhar-HC) : (2012) 27 Taxmann.com 15 (Jhar-HC) : 2012 TaxPub(DT) 3014 (Jhar-HC)

FAVOUR : Against the assessee.

A.Y. : 2012-13

SUBSCRIBE FOR FULL CONTENT