TaxTMI 
TaxTMI 
2019 (2) TMI 289
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....ards foreign fluctuation loss is not incurred wholly and exclusively for the purpose of business and not allowable as per provision of IT Act 1961. b. The assessee company has incurred the said loss while receiving back the money which was earlier advanced to its subsidiary company. However, the assessee is neither NBFC nor engaged in the business of lending money. Thus, the loss so claimed has not been incurred towards regular business activities and not allowable as per provision of I.T. Act 1961. c. Section 37 of the I.T. Act 1961, provides for deduction of all expenditure wholly and exclusively laid out or expanded for the purpose of the business of the assessee. One of the primary conditions for the claim of deduction u/s 37 is that the expenditure must be for the business which is carried on by the assessee during the previous year. d. The assessee company is neither a NBFC nor its primary business is lending money to other companies. Accordingly, loss incurred during the course of making transactions of advancing money is not a revenue loss and is capital in nature and required to be capitalized. e. The foreign fluctuation loss incurred wh....
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....12,85,278/-. On appeal, learned CIT(A), vide order dated 20th August, 2015 recorded the finding that the assessee had commenced the business on 23rd July, 2009. That the above order of learned CIT(A) was accepted by the Revenue and learned DR has filed the letter from the Assessing Officer accepting the fact that no appeal was filed for assessment year 2010-11 because the then Assessing Officer in the central scrutiny report has mentioned that the order of the CIT(A) is acceptable on merits. He stated that once the Revenue has accepted the order of the CIT(A) for assessment year 2010-11 holding that the assessee has commenced the business with effect from 23rd July, 2008, there would be no justification for holding in the year under consideration that no business was commenced. He has also relied upon the following decisions in support of his claim :- (i) CIT Vs. ESPN Software India P.Ltd. - [2008] 301 ITR 368 (Del). (ii) CIT Vs. Dhoomketu Builders and Development P.Ltd. - [2014] 368 ITR 680 (Del). 5. He further stated that the assessee company made investment in one subsidiary company known as M/s Galactic Ventures Limited (hereinafter referred to as 'GVL') of....
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..... (i) Hero Cycles P.Ltd. Vs. CIT - [2015] 379 ITR 347 (SC). (ii) CIT Vs. Modi Entertainment Ltd. - [2014] 89 CCH 0014 (Del). He, therefore, stated that the order of learned CIT(A) should be sustained and Revenue's appeal may be dismissed. 6. In the rejoinder, it is stated by the learned CIT-DR that the appeal for assessment year 2010-11 was not filed because of low tax effect and this is also mentioned by the Assessing Officer in the central scrutiny report sent by the Assessing Officer to higher authorities. Therefore, merely because no appeal was filed by the Revenue in assessment year 2010-11, it should not be concluded that the Revenue has accepted the order of the learned CIT(A) that business has been commenced by the assessee. She further stated that even otherwise, law of res judicata is not applicable to the assessment proceedings and each year should be decided on its own facts. 7. We have carefully considered the arguments of both the sides and perused the material placed before us. After going through the order of lower authorities as well as considering the submissions of both the sides, we are of the opinion that in this appeal, basically two....
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....bsidiary company in Mauritius for bidding up of power projects in foreign countries. The assessee had incorporated GVL in Mauritius, and through GVL, it submitted the bid for construction of power projects in foreign countries. When it was enquired from the learned DR whether the Revenue had accepted the above order or whether any appeal is filed. The ld. CIT-DR submitted the copy of letter received from the Assessing Officer. The information as submitted by the Assessing Officer vide letter dated 14th January, 2019 is reproduced below for ready reference :- "Required information on three questions is as under : 1. Whether Department has filed appeal on similar issues in earlier years? Ans : As per record and CSR for AY 2010-11, the assessing officer has not recommended filing of appeal for AY 2010- 11. 2. Whether Department did not file appeal on account of low tax effect? Ans : The AO in the CSR for AY 2010-11 has also not recommended filing of appeal for AY 2010-11. 3. Whether Department choose not to file appeal for AY 2010-11 &/or AY 2011-12? Ans : The Department has filed appeal before Hon'ble ITAT for AY 2011-12 ....
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....r finding that the assessee has commenced business through its subsidiary in Mauritius for bidding up of power projects in foreign countries. After these facts, in our opinion, in assessment year 2011-12, the Assessing Officer was not justified in holding that the assessee company did not start any business either during the year or prior to the year under consideration. 11. The following decisions of Hon'ble Jurisdictional High Court also support the case of the assessee :- (i) In the case of ESPN Software India P.Ltd. (supra), Hon'ble Jurisdictional High Court held as under :- "A business is nothing more than a continuous course of activities and for commencement of business all the activities which go to make up the business need not be started simultaneously. As soon as an activity which is the essential activity in the course of carrying on the business is started, the business must be said to have commenced." (ii) In the case of Dhoomketu Builders and Development P.Ltd. (supra), the facts were that the assessee was a company incorporated on August 22, 2005, and according to its memorandum of association, it was to carry on the business of....
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.... be permissible deductions. The question as to when a business can be said to have been set up is a question of fact to be ascertained on the facts and circumstances of each case and considering the nature and type of the particular business and no universal test or formula applicable to all types of businesses can be laid down. The commencement of real estate business would normally start with the acquisition of land or immovable property. When an assessee whose business is to develop real estate, is in a position to perform certain acts towards the acquisition of land, that would clearly show that it is ready to commence business and, as a corollary, that it has already been set up. The actual acquisition of land is the result of such efforts put in by the assessee; once the land is acquired the assessee may be said to have actually commenced its business which is that of development of real estate. The actual acquisition of land may be the first step in the commencement of the business but section 3 of the Act does not speak of commencement of the business, it speaks only of setting-up of the business." 13. That the ratio of the above decision of Hon'ble Jurisdictional Hi....
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....t the working capital for meeting any cash losses." 16. In the case of Modi Entertainment Ltd. (supra), Hon'ble Jurisdictional High Court held as under :- "The finding of the Tribunal was that the advancing of interest-free monies to the subsidiary companies was driven by business considerations since the subsidiaries were also engaged in the same business in which the assessee was engaged. The Tribunal accordingly held that it would be in the interest of business of the assessee and certainly would be commercially expedient for the assessee to advance interest-free monies to the subsidiaries as part of the corporate business strategy to expand its business operations through its subsidiaries. This finding of fact has not been disputed. Findings of Tribunal upheld." 17. That the above decisions of Hon'ble Apex Court as well as of Hon'ble Jurisdictional High Court would squarely support the case of the assessee. No contrary decision is brought to our knowledge by the Revenue. In the case of Modi Entertainment Ltd. (supra), Hon'ble Jurisdictional High Court has stated that the advancing of interest free money to subsidiaries as part of the corporate busines....
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....ese activities initiated by the appellant company constitute business activity. The appellant company has also given inter corporate deposits and from there it has earned interest income of Rs. 4,79,86,849/-. The business model of the company is such that it can carry business on its own or by forming joint ventures or subsidiaries. In order to capture the market and extend its arm globally, the appellant invested into a company which is in the same line of business as that of appellant in accordance with its main objects. For this purpose, the object clause of the appellant company has to be read and same is reproduced hereunder: "1. To promote, undertake, carry on either on its own or through any other entity or to enter into agreements, contracts, partnership, alliance or any other arrangement for technical, financial and operational assistance or sharing of profits / losses with any Person / Body / Bodies Corporate incorporated in India or abroad either under a Strategic Alliance or Joint Venture or any other arrangement, in India or any part of the world, the business of generating, developing, transmitting, distributing, trading and supplying all forms of electrical ....