ITAT – DCIT v. Railtel Corporation of India Ltd.

[2022] 140 taxmann.com 132 (Delhi – Trib.)

– The assessee purchased assets of Rs.275 Lakhs and revalued at Rs. 175.54 lakhs and the loss amounting to Rs. 99.46 lakh due to determination of the fair value of assets has been shown as ‘loss on revaluation of fixed assets in its financial statements.

– The capital loss would not be allowed under normal provisions of the act and as far as the MAT provisions are concerned as this is a capital loss it will not be allowed to be reduced from book profits.

– In this case, the revenue is trying to contend that as the loss is not allowed under normal provisions that is why it is also not allowed under MAT provisions but that is not correct the nature of such loss is disallowing itself.

– Revenue also contended that the loss is not just a diminution in the value but it is an actual loss as the company bought it at a higher rate from the seller, such capital loss is not a deductible loss in nature nevertheless.

– The expression ‘income defined under section 2(24) of the Act does not include such capital losses.

– The auditor gave qualification on the profits declared by the assessee and this would have not be the reason for the disallowance but the ITAT considered such qualification to be the reason for such disallowance

– The assessee is not entitled to reduce the book profit by the capital loss debited to the P&L account which is a subject matter of qualification by Auditors. A such capital loss is neither eligible for deduction under the normal provisions nor under the alternate provisions of taxation.