India: Taxpayer entitled to claim business losses from commercial transactions made in good faith (High Court decision)
Tax authority cannot question commercial decisions made in good faith in the absence of substantive evidence of malpractice
The Delhi High Court held that the taxpayer was entitled to claim business losses from the purchase and resale of tools and dies required for manufacturing automotive components.
The tax authority argued that the taxpayer’s loss transactions were shams, but the taxpayer asserted that the loss transactions were necessary to secure a critical business relationship.
The court held in the taxpayer’s favor based on the principle that that the tax authority cannot question commercial decisions made in good faith by the taxpayer in the absence of substantive evidence of malpractice.
The case is: PCIT v. G-Tekt India Pvt Ltd
Read a November 2024 report prepared by the KPMG member firm in India