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Unrecovered debt from a Subsidiary Company is allowable as Deduction

The Amritsar bench of Income Tax Appellate Tribunal has recently rule in Dy. CIT, Jalandhar vs M/s Sarup Tanneries Ltd. that a Holding Company is entitled to get deduction in respect of the debt unrecovered from its subsidiary company under the provisions of the Income Tax Act, 1961.

Coming to the facts of the case, the assessees, M/s Sarup Tanneries Ltd, is engaged in the business of manufacture and sale of leather goods, Shoe upper, soles etc. The Assessing Officer, while completing assessment for the relevant assessment year, has disallowed the claim made by the assessee in respect of loss written off due to its subsidiary company in US on ground that such losses claimed by assessee were not related to the business of assessee. On appeal, the Commissioner of Income Tax (Appeals) partly allowed the impugned order. The case was brought before the ITAT. The Revenue contended that reliance should be placed on the decision in Amalgamations Pvt. Ltd vs. CIT (1969) 226 ITR 188 (SC).

Article referred: http://www.taxscan.in/unrecovered-debt-subsidiary-company-allowable-deduction-itat-amritsar/2368/

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