Binding precedent and fresh factual objections barred interference with tax disallowances and foreign exchange loss treatment.

In a section 260A appeal, questions already covered by binding precedent on section 14A, the related CBDT circular, and licence fee expenditure were not treated as substantial questions of law, so no interference was warranted. The Court also upheld deletion of disallowance of unrealised foreign exchange loss on reinstatement of assets and liabilities, noting that the corresponding currency gain had been taxed earlier and that the revenue could not raise a fresh factual objection for the first time in appeal without having founded it before the lower authorities. The assessee's relief was therefore left undisturbed.

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Issues: (i) Whether the revenue's challenges on disallowance under section 14A of the Income-tax Act, 1961, the related CBDT circular, and the licence fee expenditure raised any substantial question of law in view of binding precedent; (ii) Whether the deletion of disallowance of unrealised foreign exchange loss arising on reinstatement of assets and liabilities required interference.

Issue (i): Whether the revenue's challenges on disallowance under section 14A of the Income-tax Act, 1961, the related CBDT circular, and the licence fee expenditure raised any substantial question of law in view of binding precedent.

Analysis: The questions concerning section 14A and the CBDT circular were covered by the earlier binding decision of the same High Court in Joint Investments, and the licence fee issue was covered by the decision in Bharti Hexacom. No independent foundation was laid to reopen those issues as substantial questions of law.

Conclusion: The questions were not entertained and no interference was called for; the ruling was in favour of the assessee.

Issue (ii): Whether the deletion of disallowance of unrealised foreign exchange loss arising on reinstatement of assets and liabilities required interference.

Analysis: The Court found that the assessee's gain on currency fluctuation in the earlier year had been offered to tax and that the revenue had not raised before the lower authorities the alleged non-fulfilment of the conditions relevant under Woodward Governor. In these circumstances, the revenue could not, for the first time in appeal under section 260A, contend that the foreign exchange loss was not allowable as business loss.

Conclusion: The deletion of the disallowance was upheld and the question was declined; the ruling was in favour of the assessee.

Final Conclusion: The appeal failed to disclose any substantial question of law and was dismissed in its entirety, leaving the assessee's relief undisturbed.

Ratio Decidendi: In an appeal under section 260A of the Income-tax Act, 1961, a question will not be admitted where it is already governed by binding precedent or where a new factual objection is raised for the first time without foundation in the lower proceedings; foreign exchange fluctuation loss is allowable when the relevant accounting treatment is consistent and the corresponding gain has been taxed.

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