Irrecoverable loss would be considered as Revenue Loss if its due to bad weather and technical snags
Income Tax Officer, Pune v. Roj Enterprises Pvt. Ltd.
[ITA No.1292/PUN/2018 decided on October 8, 2021]
Fact of Case
The Respondent (Roj Enterprises Pvt. Ltd) is an export house dealing in Mango Pulp. During 2004-05 it run Alliance Agro, Nagpur along with two more companies for processing Mango pulp and pumped in funds as Alliance Agro did not have any working capital finance. The Respondent had an agreement with Alliance Agro for obtaining the supply of the said processed Mango pulp. Certain expenses were incurred for the operations of Alliance Agro. Unfortunately, due to severe heat wave in Nagpur and technical snags, fruits got overripe and additionally, the plant of Alliance Agro could not start in time. The Respondent incurred a loss of Rs. 1,43,94,061/- and claimed deduction for the same.
Income Tax Officer in its assessment for 2004-05 disallowed the aforesaid deduction then The Respondent (Roj Enterprises Pvt. Ltd) filed appeal before Income Tax (Appeals), where Commissioner of IT (Appeals), Pune issued order in favor of Enterprises Pvt. Ltd.
Income Tax Officer (“the Appellant”) aggrieved by the order of Commissioner of Income Tax (Appeals), Pune filed appeal before Income Tax Appellant Tribunal (ITAT).
The Hon’ble ITAT, Pune accepted the submissions of the Respondent and observed that the Respondent’s loss was incurred for its business purpose whereby the loss is of a revenue nature. Hence, the Hon’ble ITAT Pune held that the said loss of Rs. 1,43,94,061/- shall be allowed as a deduction on account of it being a Revenue Loss to the Respondent.