The Income Tax Appellate Tribunal (ITAT), Pune Bench while setting a precedent that If your overseas investment is integral to your business strategy (not just for dividends or capital gains), losses can be claimed as business expenditure and has allowed the appeals of Brahm Precision Materials Pvt. Ltd. for Assessment Years 2018–19 and 2020–21, holding that the company’s write-off of foreign investment in its U.S.-based wholly owned subsidiary constituted a business loss and not a capital loss.
The Bench comprising Vinay Bhamore (Judicial Member) and Dr. Manish Borad (Accountant Member) also condoned a 445-day delay in filing one of the appeals after the company explained that it had mistakenly believed that a single appeal covered both assessment years.
The appellant, Brahm Precision Materials, an Aurangabad-based auto component manufacturer, had invested in its wholly owned U.S. subsidiary — Brahm Corporation, Indiana (WOS-BC, USA) — which in turn acquired 80% of Littler Diecast Corporation (LDC, USA). The investment aimed to expand the company’s business into the U.S. and European markets for high-precision aluminum casting and aerospace components.
However, the U.S. entities ran into severe financial difficulties, defaulted on bank loans, and faced civil litigation from Regions Bank, Alabama. A resolution for liquidation was passed in 2018, leading Brahm Precision to write off ₹97.61 lakh as a business loss in AY 2018–19, and later ₹9.56 crore in AY 2020–21.
The Assessing Officer (AO) and Commissioner (Appeals) had rejected the claim, treating the write-off as capital loss, and further added ₹99.23 lakh as unexplained cash credit under Section 68 of the Income Tax Act, 1961, allegedly received from foreign sources.
After detailed submissions, the ITAT observed that the investment was made for business expansion and commercial expediency, not to earn dividends or capital appreciation. The Tribunal emphasized that Brahm Precision had started receiving revenue in the form of service charges and export sales from the U.S. subsidiaries as early as FY 2016–17, proving a direct nexus between the investment and the company’s business operations.
The Bench noted that, “the purpose of the investment in Brahm Corporation, USA was not to earn dividend or appreciation in capital value but to expand the assessee’s business of manufacturing high-precision components for aerospace and defence industries in the U.S. The resulting loss is therefore revenue in nature.”
Relying on precedents such as CIT v. Colgate Palmolive (India) Ltd. (2015) and Ace Designers Ltd. v. ACIT (2020), the Tribunal ruled that where investment in a subsidiary is made for business purposes, any loss on such investment qualifies as business loss.
Accordingly, the disallowance of ₹97.61 lakh for AY 2018–19 and ₹9.56 crore for AY 2020–21 was deleted.
On the ₹99.23 lakh addition under Section 68, the ITAT found that the amount represented advance against sales received from Littler Diecast Corporation (LDC, USA), not unexplained cash credit. The company’s bank records and ledger entries substantiated the claim, leading the Tribunal to delete the addition.
Citing the Supreme Court’s decisions in Collector, Land Acquisition v. Mst. Katiji (1987) and Inder Singh v. State of M.P.(2025 INSC 382), the Bench condoned the 445-day delay in filing the appeal, observing that the delay was unintentional and caused by a bona fide misunderstanding.
Case Details
Case Title: Brahm Precision Materials Pvt. Ltd. v. CIT(A)/NFAC, Delhi
Case No.: ITA No.425/PUN/2025
Date: 13.10.2025
Counsel For Appellant: Hari Krishan
Counsel For Respondent: Amol Khairnar
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, Pune Bench while setting a precedent that If your overseas investment is integral to your business strategy (not just for dividends or capital gains), losses can be claimed as business expenditure and has allowed the appeals of Brahm Precision Materials Pvt. Ltd. for Assessment Years 2018–19 and 2020–21, holding that the company’s write-off of foreign investment in its U.S.-based wholly owned subsidiary constituted a business loss and not a capital loss.){kind=link}