IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No. 7394/Del/2019 (A.Y. 2016-17)

Escorts Ltd. Vs. Addl. CIT Corporate Centre, 15/5, Special Range-3, Mathura Road, C. R. Building, I. P. Estate, Faridabad, Haryana New Delhi PAN: AAACE0074B Appellant Respondent Assessee by Sh. R. N. Mehta, CA Revenue by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 30/01/2025 Date of Pronouncement 19/03/2025 ORDER PER YOGESH KUMAR, U.S. JM:

The present appeal is filed by the Assessee against the order of the Commissioner of Income Tax (Appeals)-34, New Delhi [‘Ld. CIT(A))’ for short] dated 28/06/2019 for the Assessment Year 2016-17.

2. The Grounds of Appeal are as under:-

“1. That on the facts and circumstances of the case and in law, the learned CIT(A) erred in upholding the action of Assessing officer in disallowing a claim of expenditure of Rs.47,64,00,000/- incurred on settlement of a corporate guarantee invoked and awarded against the appellant.

2. That on the facts and circumstances of the case and in law, the learned CIT(A) erred in not appreciating that the said guarantee was given to a third party to ensure interrupted supply of material to a subsidiary of appellant in USA engaged in the business of tractors.

3. That on the facts and circumstances of the case and in law, the learned CIT (A) erred in not appreciating that the settlement was arrived at to end litigation, to avoid loss of business and to protect assets of the appellant.

4. That the appellant reserves to itself, the right to add, alter, amend, substitute and/or withdraw any Ground(s) of Appeal on or before the date of hearing.”

3. Brief facts of the case are that, the Assessee filed income tax return on 28/11/2016 for Assessment Year 2016-17 declaring total income at Rs. 27,86,92,900/- under the normal provision of Income Tax Act, 1961, (‘Act’ for short) and book profit at Rs. 72,55,82,742/- u/s 115JB of the Act. Subsequently, revised return has been filed on 27/03/2018 wherein the Assessee made fresh claim of expenditure of Rs.47,64,00,000/- which has been claim to have been incurred consequent to the settlement made with M/s L. S. Cables, Korea, consequent to an Arbitration award pronounced by International Court of Arbitration Vienna, Austria against the Assessee and its subsidiary in North America and thereby declared loss at Rs. 19,87,50,360/- under the normal provisions of Act and book profit at Rs. 72,55,82,742/- under 115JB of the Act. The case of the Assessee was selected for scrutiny and the assessment proceedings have been initiated. An assessment order came to be passed on 18/12/2018 by disallowing the expenditure of Rs. 47,64,00,000/- claimed by the Assessee. Aggrieved by the assessment order dated 18/12/2018, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 28/06/2019, dismissed the Appeal filed by the Assessee.As against the order of the Ld. CIT(A), the Assessee preferred the present Appeal on the grounds mentioned above.

4. The Ld. Counsel for the Assessee submitted that the Ld. CIT(A) erred in upholding the disallowance of expenditure incurred on account of settlement of corporate guarantee invoked and the award passed against the Assessee. Further submitted that the Lower Authorities haveignored the fact that the corporate guaranteed has been given to a third party to ensure uninterrupted supply of material to a subsidiary of the Assessee in USA engaged in the business of manufacture of sale of tractors. The Ld. Counsel further submitted that the Ld. CIT(A) has erred in not appreciating that the settlement arrived to end the litigation to avoid the loss of business and to protect assets of the Assessee.

5. The Ld. Counsel further contended that the Ld. CIT(A) committed error in not considering the fact that the Assessee has incurred the expenditure with an intention to buy peace rather than prolonging th