TaxTMI 
TaxTMI 
TaxTMI 
2021 (10) TMI 115
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....icipated/expected losses has not been actually incurred but the assessee during the year. 2. On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law that the losses for future years cannot be allowed as deduction even if the same have been computed in conjunction with AS-7 notified by ICAI, as AS-7 has not been notified in the Act." ITA NO.5334/DEL/2017 (AY 2012-13) 1. On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs. 5,30,97,715/- made by the AO, as the anticipated/expected losses has not been actually incurred but the assessee during the year. 2. On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in law that the losses for future years cannot be allowed as deduction even if the same have been computed in conjunction with AS-7 notified by ICAI, as AS-7 has not been notified in the Act. 3. On the facts and under the circumstances of the case, the Ld. CIT (A) has erred in allowing to set off the b/f loss against the income from other sources to the tune of Rs. 2,56,36,785/-. As the business of the assessee is construction of power plants and not to....
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.... by the ld. CIT (A) and contended that this issue is no longer res integra as this issue is already decided in favour of the assessee since AY 2006-07 by the Tribunal vide order dated 05.02.2016 in erstwhile entity of the assessee company, namely, DCIT vs. M/s. LMZ Energy India Ltd. in ITA No.3834/Del/2009, ACIT vs. M/s. Power Machines India Ltd. in ITA Nos.53/Del/2011 & 17815/Del/2011 for AYs 2006-07, 2007- 08 & 2008-09 respectively which order has been confirmed by the Hon'ble Delhi High Court vide order dated 28.07.2016 in ITA 399/2016, ITA 400/2016 & ITA 426/2016. 10. Ld. CIT (A) decided the present issue in favour of the assessee by returning following findings :- "6.3. The third issue in appeal is regarding disallowance of provision for anticipated losses. (i) On this issue the assessee has strongly relied on various decisions of different High Court and ITAT in its favour and mainly on the case of jurisdictional High Court of Delhi in the case of Triveni Engg. and Industries Ltd. vide order dated 29.11.2010 for AY 2000-01 (336 ITR 374 Delhi). The relevant portion of the order are as under: "1. Though various questions of law were proposed in this appeal, the appeal ....
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....." (ii) The other case laws quoted by the assessee also have adjudicated in a similar manner in case of long term contracts following the method of accounting as per AS-7. It is felt that even if the contention of the AO is considered, the net result would be that the entire exercise will only disturb the year of allowability of expenditure which is revenue neutral. The true profit/loss, will emerge in the year of completion of contract when all the anticipated losses and gains would be adjusted. It is seen that even in ether years of the project being in progress, the revenue gain is also being recognised. Same has been done in this year also where the revenue gain is shown as Rs. 22 crore. (iii) It is not in dispute that the AO has accepted the method of accounting. The only ground of expenditure not being allowed was holding that the same was contingent in nature as no such actual expenditure was incurred in the said year and was only on the basis of estimates. However, it is observed that the assessee has been following, consistent and regular method of accounting which was uniform through the years and also being accepted by the department. The method can be rejected by ....
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....he set off of the brought forward losses against the income from other sources to the tune of Rs. 2,56,36,785. Ld.DR for the Revenue challenging the impugned disallowance contended that since the assessee is into the business of construction of power plants and not to earn the interest by investing in FDRs, ld. CIT(A) has erred in allowing the same. However, on the other hand, ld. AR for the assessee to repel the arguments addressed by the ld. DR for the Revenue relied upon the order passed by the ld. CIT (A). 15. Undisputedly, the assessee has earned interest income of Rs. 2,56,36,785/- from FDRs purchased during the course of business. It is the case of the assessee that for smooth running of its core business activities, funds are required on short notice and moreover all the fixed deposits have been purchased out of the business funds available with the assessee and has been utilized for actual business purpose. Ld. CIT (A) allowed the set off of brought forward losses returning the following findings :- "6.3 The assessee has classified in its Return of Income an amount of Rs. 2,56,36,785/- as "income from other sources". The AO has therefore not allowed set off against this....
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....s in banks or short term or long term deposits, the interest income derived from those sources would be 'income from other sources' but there have been cases in which such income has been treated as income from business notwithstanding the fact that it is interest income..................... The question to be seen in such a case is whether the interest income is derived also from what may be described as 'business activity'. If it is so derived, then the mere fact that it is taxed under a different section will make no difference. 8. .........The assessee claimed that it has funds which it derived from business and which are used only in business and for no other purpose. If they are spare funds, then they are deposited in banks and, hence, it is clear that this income is also business income ....... The company has not come from Italy to make bank deposits in India but has come to carry on business. If at any time it has spare funds it prefers not to keep the same idle but makes deposits in banks which give some income. This also is, therefore, business income, and for the purpose of set-off has not to be treated as separate from business income ....... 9....