ITAT restored the issue of disallowance to AO

1. Salora International Ltd manufactured CTVs etc.

2. Its case was selected for scrutiny assessment and u/s 143(3) (of Income Tax Act, 1961) its income was assessed at Rs 32.5 crores.

3. AO found that profit before tax came to Rs.33.5 crores, however, while computing the taxable income, assessee had reduced the said amount from the profit before tax and this resulted into claim of Rs. 43.47 lacs as diminution in investment.

4. AO made an addition of Rs 43 lakhs representing diminution in value of investment written back.

5. CIT (A) confirmed the addition

On appeal, the ITAT held as under:

6. We are in agreement with the claim made by the assessee, but the same should be allowed only if the assessee is able to establish to the satisfaction of the AO, that the amount written back in the instant year pertains to the diminution in value of investments in AY 2002-03.

7. We may add here, that both the authorities below had committed a fundamental fallacy in as much as a sum written back has been taxed without even coming to a conclusion that there was a transfer of the investment u/s 45 (of Income Tax Act, 1961).

8. It is claimed that appreciation/diminution in the value of investment are neither taxable nor deductible.

9. It is on account of this very principle that the diminution was not claimed according to the assessee in AY 2002-03 and, therefore, correspondingly such write-back of diminution in the instant year has claimed to be not taxable.

10. In the light of the above, the issue is restored to the file of AO to be decided in the light of the direction herein above.

Case Reference -  M/s. Salora International Ltd., vs. DCIT.

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH 'G' : NEW DELHI)

BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND

SHRI A.T. VARKEY, JUDICIAL MEMBER

ITA No.467/Del./2013

(ASSESSMENT YEAR : 2008-09)