NEW DELHI: Failed industrialist Anil Ambani got a much-needed reprieve from the Income Tax Appellate Tribunal (ITAT) when it rejected a tax department plea that accused Anil Ambani of claiming a deduction on customs duty paid on a yacht used for personal purpose.
The tax department had raised the tax demand after it claimed that customs duty paid on the yacht could not be treated as business expenditure as the same was used for personal purposes of Anil Ambani and his family.
However, the Mumbai bench of the ITAT rejected the tax department's plea saying that the yacht was purchased by Anil Ambani's company Reliance Transport and Travels Pvt Ltd, and that the same is used for business purposes.
FROM OUR ARCHIVES | Anil Ambani resigns as director of Reliance Power, Reliance Infrastructure
The tribunal also noted that revenue from operations of the yacht was reported as business income and the same was accepted by the tax department in all the years. The appellate tribunal thus agreed that Anil Ambani's company in the course of its business hired the yacht for the use of its business and to provide services to other entities and companies.
The case pertains to assessment year 2013-14. Reliance Transport and Travels had debited Rs 32.12 crore as customs duty, out of which Rs 26.49 crore was claimed as business expenditure paid for the yacht.
Companies can deduct business expenditure from taxable revenue thus bringing down their tax liabilities. Often the tax department rejects business expenditures claims of companies, and this is one of the major reasons for a large number of tax litigation.
The tax department had also contended that the customs duty was paid in 2009 and not in the assessment year 2013-14. However, the appellate tribunal rejected the contention of the tax department saying that the said duty was only crystallised in AY2013-14 after determination by Customs and Excise Settlement Commission.