AO held that the liabilities of GPEL could not be treated as business expenditure of the assessee and disallowed the deduction. On appeal the CIT(A) allowed the relief mainly on the basis that it was a legitimate business decision. The joint venture entered into by the assessee-company was with the Government of Gujarat and it was not an arrangement to siphon off the money and the payments had been made in terms of the settlement approved by BIFR. Order of CIT(A) was up held by the Tribunal. On appeal the Tribunal held that the assessee, as part of implementation of a scheme accepted by the Board for Industrial and Financial Reconstruction had to clear the debt of GPEL as guarantor. The Revenue was not disputing the entries in the books of account and the circumstances considered either by the CIT(A) or the Tribunal. The deduction is held to be justified.( AY. 2001-02, 2002-03) (40 of 2011 dt. 10-4-2019)
CIT v. Apollo Tyres Ltd. (2019)419 ITR 100 /(2020) 274 Taxman 258 (Ker.)(HC)
S. 37(1) : Business expenditure-Joint Venture with State Industrial Corporation-Subsequent winding up of joint venture company — Amount paid as guarantor under the Scheme of BIFR is held to be allowable as deduction.