2017 (7) TMI 1009 - HC - Income Tax

High Court Upholds Tribunal Decision on Taxation of FEFG, Loan Utilization, and Revenue Expenditure

The High Court dismissed the appeal, upholding the Tribunal's decision on the taxation of FEFG under Section 43A, utilization of the loan for ship ... FEFG taxability in this year under Section 43A - Foreign Exchange Fluctuation Gains - Held that:- Tribunal has accepted that the Assessee has utilized the loan for the purpose of purchase of ship. It is also not disputed by the learned counsel for the Revenue that if the Assessee has utilized the loan for the purpose of purchase of ship, then the benefit given by the Tribunal cannot be disputed. However, contention of the learned counsel for the Revenue relying on the observations of the Commissioner (Appeals) in the Judgment is that the Assessee has not purchased the ship from the loan which has been advanced, does not appear to be proper. The Commissioner in its Judgment has accepted that the Assessee has acquired Vessel Bulk Prosperity. On perusing the agreement between the Assessee and the party advancing loan, the ship, as is subject matter of the said agreement, means 10500 deadweight tonne motor vessel bulk cargo transhipper known as “Bulk Prosperity”. The Commissioner accepts that the Assessee has acquired Bulk Prosperity. In view of this, the finding of the Tribunal that the Assessee has acquired the ship from the loan advanced is not perverse and the same is based on documentary evidence. We do not find any perversity in the same. Even finding of the Tribunal holding that the FEFG of ₹ 23.11 lakhs cannot be separately taxed as FEFG as the Assessee offered income under the TTS is concerned, the same is covered by the Order of this Court in [2010 (1) TMI 38 - BOMBAY HIGH COURT] Issues:Interpretation of Section 43A of the Act regarding taxation of FEFG, Utilization of loan for ship purchase, Revenue expenditure inclusion under TTS.Analysis:1. Interpretation of Section 43A of the Act regarding taxation of FEFG:The appellant contended that the Tribunal erred in holding FEFG of Rs. 7.53 crores as not taxable under Section 43A. The counsel argued that since the Assessee did not purchase the ship, the Tribunal's decision was unjustified. The Commissioner found no evidence of ship purchase and no addition to fixed assets schedule, supporting the appellant's claim. However, the Tribunal upheld that the loan was utilized for ship purchase, as per the respondent's submission.2. Utilization of loan for ship purchase:The senior advocate for the respondent argued that the loan was indeed used for acquiring 'Vessel Bulk Prosperity,' supported by the Commissioner's conclusion. The agreement between the Assessee and the loan provider confirmed the acquisition of the ship. The High Court found no fault in the Tribunal's decision, as documentary evidence proved the ship acquisition. The Commissioner's acceptance of the Assessee acquiring Bulk Prosperity validated the Tribunal's findings.3. Revenue expenditure inclusion under TTS:Regarding the revenue expenditure of Rs. 23.11 lakhs, the Tribunal's decision to treat it as income under TTS was challenged. The senior advocate cited a previous court order (Income Tax Appeal No.2394 of 2009) to support this treatment. The High Court agreed with the Tribunal's decision, stating that the revenue expenditure was appropriately covered under the Income Tax Act. The court found no basis to dispute the Tribunal's ruling on this matter.In conclusion, the High Court dismissed the appeal, stating that no substantial question arose from the issues presented. The decision was based on the Tribunal's findings regarding the utilization of the loan for ship purchase and the treatment of revenue expenditure under the Income Tax Act. The court upheld the Tribunal's decision, emphasizing the documentary evidence supporting the acquisition of the ship by the Assessee.