TaxTMI 
TaxTMI 
2021 (10) TMI 976
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....me Tax Act, 1961 challenging the order dated 21.08.2009 of the Income Tax Appellate Tribunal, "B" Bench, Bangalore ('Tribunal' for short) in ITA No.217/Bang/2009 relating to the assessment year 2005-06. 4. These appeals were admitted to consider the following substantial questions of law: In ITA No.548/2015: "Whether on the facts and in the circumstances of the case, the Tribunal is right in holding that the funds raised in FCNR were utilized for business purpose and exchange loss was to be allowed in spite of the fact that the same was not established to be linked to the working capital of the business of the assessee and even when the case relied upon by the Tribunal is not applicable to present case?" In ITA No.37/2010: "1. Whether the finding of the Tribunal that the assessee is entitled to write off bad debts and the same is eligible for deduction, is based on conjectures and surmises and not on material on record and therefore unsustainable? 2. Whether the finding of the Tribunal that the loss incurred due to foreign exchange loan is eligible for deduction without any material on record, is perverse and arbitrary? 3. Wh....
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....ng to assessment years 1996-97, 1997- 98, where the amount was claimed as revenue expenditure on renovation and repairs of an asset not owned by the assessee but categorized as the advances paid to Martin Burns Limited, which has been paid subject to deduction at source. Thus, considering trade of the credit as claimed by the assessee being revenue in nature allowed the claim. 9. Learned counsel for the revenue has placed reliance on the judgment of the Hon'ble Apex Court in the case of Vijaya Bank vs. Commissioner of Incometax reported in (2010) 323 ITR 166 (SC), wherein it has been explained that after the explanation vide Finance Act, 2001, in Section 36(1)(vii) with effect from 01.04.1989, the assesee (s) is now required not only to debit the profit and loss account but simultaneously also reduce loans and advances or the debtors from the asset side of the balance sheet to the extent of the corresponding amount so that, at the end of the year, the amount of loans and advances/debtors is shown as not of provisions for impugned bad debt. 10. There is some force in the said arguments advanced by the Revenue. None of the authorities have examined the issue in this angl....
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....United Commercial Bank, v.CIT." 13. In the case of Commissioner of Income Tax vs. Reliance Industries Ltd., reported in (2019) 102 taxmann.com 52 (SC), while considering the question "whether the High Court is correct in holding that interest amount being interest referable to funds given to subsidiaries is allowable as deduction under Section 36(1)(iii) of the Income Tax Act, 1961 (for short 'the Act') when the interest would not have been payable to banks, if funds were not provided to subsidiaries?," the Hon'ble Apex Court held that, the issue raises a pure question of fact. The High Court has noted the finding of the Tribunal that the interest free funds available to the assessee were sufficient to meet its investment. Hence, it could be presumed that the investments were made from the interest free funds available with the assessee. 14. In the case of Commissioner of Income-tax vs. Reliance Utilities and Power Ltd., reported in (2009) 178 Taxman 135 (Bombay), the Hon'ble High Court of Bombay has held thus:- "10. If there be interest-free funds available to an assessee sufficient to meet its investments and at the same time the assessee had raised a loan it can b....
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....business loss when primarily the assessee indicates that the loans were obtained in foreign exchange for working capital from its banks therefore indicated that a foreign exchange loss as noted by the bank was not to be borne by the banks but by the assessee. Therefore it is clear that the assessee has been able to establish its working capital requirements as was not related as otherwise noted by the Assessing Officer claimed as interest on forward contracts for investment in shares of companies which investment increased from Rs. 102 crores to Rs. 380 crores. Justifiably the learned counsel pointed out the issue in accordance with the provisions of section 43A distinguishing the capital/revenue nature imbibed therein to result in consideration thereof as were claimed by the assessee before the authorities below. The assessee himself rendered income on gain from exchange fluctuation on identical nature of revenue from loans remaining unpaid. The same is to be allowed on the facts and circumstances of the assessee. 16. The assessee has demonstrated before the Tribunal that increase in investments from Rs. 102.92 crores to Rs. 380.32 crores was on account of investment of Rs. 287....
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....expenditure were furnished before the CIT[A] which were primarily in the nature of employee related expenses with a breakup as under: "1. Salaries and wages Rs. 90.21 lakhs 2. Contribution of PF & other funds Rs. 9.64 lakhs 3. Staff welfare expenses Rs. 0.79 lakhs 4. Rent Rs. 6.28 lakhs 5. Rent & Taxes Rs. 0.01 lakh 6. Miscellaneous expenses Rs. 11.85 lakhs" 20. It was submitted that the assessee being in the business of manufacture and trading of IMFL, the act of blending for each brand is under an exclusive formula which requires to be tested at the technical centers. The assessee also explained that the manufacturing units of the assessee having technical laboratories where the quality control and development of the products manufactured are monitored, the research and development expenses are necessary which indeed are expended wholly and particularly for the business as per section 37[1] of the Act. The very same arguments are now advanced by the learned counsel appearing for the assessee in the present appeal proceedings. The CIT[A] upheld the disallowance. The Tribunal concluded that the said expenses are related to the bus....