Taxpayer entitles to Deduction for CENVAT Credit Written Off out of Assets acquired from GAPAIL through Slump Sale: ITAT [Read Order]

The assessee would be entitled for deduction of CENVAT credit written off out of assets acquired from GAPAIL through slump sale
ITAT - ITAT Delhi - CENVAT - CENVAT Credit - Central Value Added Tax - Tax news - Taxscan

The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) ruled that the taxpayer was entitled to a deduction for the Central Value Added Tax ( CENVAT ) credit written off from assets acquired through a slump sale from Global Auto Parts Alliance India Private Limited ( GAPAIL )

The assessee G-Tekt India Pvt. Ltd, was a company engaged in the business of manufacturing automobile parts and components. The return of income for the Asst Year 2013-14 was filed by the assessee company on 31.8.2013 declaring total income of Rs 3,27,47,550/-. During the year under consideration, the assessee purchased an undertaking namely GAPAIL through the process of Slump Sale. All the assets and liabilities of the undertaking were acquired by the assessee through a Business Transfer Agreement (BTA) with effect from 1.4.2012 in lieu of consideration.

It was pertinent to note that the assets transferred included ā€œshort term loans and advancesā€ amounting to Rs 20,64,70,506/- which admittedly included ā€œBalance with Excise and Custom authoritiesā€ in the sum of Rs 20,02,85,959/-, out of which, an amount of Rs. 89,55,542/- representing CENVAT Credit was written off by the assessee during the year under consideration.

Hence this goes to prove that the CENVAT Credit of Rs. 89,55,542/- was part of the total assets acquired by the assessee from GAPAIL under Slump Sale. Pursuant to the acquisition, the assessee noted that there were certain discrepancies in the documentation of CENVAT Credit acquired and accordingly could not claim the same as a credit and hence became ineligible for adjustment towards CENVAT Payable by the assessee.

Further the assessee had no other choice but to write off the same as irrecoverable from Custom and Excise authorities and wrote off the same by debiting to profit and loss account and crediting the ā€œBalance with Excise and Custom authoritiesā€ account. This write off in books was claimed as deduction by the assessee as a regular business loss.

Mr. Sandip Kumar Mishra, representing the revenue argued that the assessee had not offered any income with the Cenvat Credit written off in earlier years and hence the assessee is not entitled for deduction under Section 36(1) (vii) of the Income Tax Act.Ā  Hence it could be safely concluded that the claim of deduction was not made by the assessee under Section 36(1)(vii) of the Income Tax Act. Once there is no claim of deduction under Section 36(1)(vii) of the Income Tax Act, there was no requirement of compliance to conditions prescribed in section 36(2) of the Income Tax Act.

The bench found that there was absolutely no dispute that the said sum of Rs 89, 55,542/- represent CENVAT Credit written off by the assessee out of assets acquired from GAPAIL through slump sale. Under the slump sale, the assessee acquired all the assets and liabilities of GAPAIL on as was where basis and the same is were utilized by the assessee for the purpose of business of the assessee.

The two member bench of the tribunal comprising Yogesh Kumar US (Judicial member) and M. Balaganesh (Accountant member) held that the assessee would be entitled for deduction of CENVAT Credit written off in the sum of Rs 89, 55,542/- during the year under consideration. Accordingly, the grounds raised by the assessee were allowed.

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