The Income Tax Appellate Tribunal ( ITAT ), Delhi bench, last day allowed deduction in respect of loss incurred on investment in Joint Venture Company which was written off by the assesse.
Assessee, as part of its main objects, entered into a Joint Venture by way of participating in a company in USA for distribution of petroleum and chemical products after obtaining approval from RBI. The Company was liquidated. The assessee has written off the investment and claimed deduction of the same while filing income tax returns for the year under consideration
Rejecting the claim, the Assessing Officer said that since the assessee has invested in shares of the joint venture company, the amount written off is nothing but a capital loss and cannot be allowed as a deduction. The Assessing Officer disallowed Rs. 2,92,31,861/-.
The assesse contended before the Tribunal that the investment in the joint venture company was a business investment for carrying on the business and it was not an investment simpliciter.
The bench noted that the assessee had invested 3 million US Dollars and on liquidation of the joint venture company, a sum of Rs. 24,82,746.3 US Dollars could only be recovered and the balance amount has been written off in the accounts of the year under consideration.
Relying on the Bombay High Court decision in CIT Vs. Colgate Palmolive [India] Ltd, the Tribunal held that “the claim of the assessee that the write off represents loss occurred against business investment cannot be brushed aside lightly. There is no dispute that the assessee made an investment in furtherance of its objects.”
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