TaxTMI 
TaxTMI 
2023 (4) TMI 983
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....vations wherever applicable shall apply to assessment years 2010-11, 2011-12 and 2013-14 as well. We shall first take up the Assessee's appeals for assessment year 2009- 10. ITA Number 17/Ahd/2017 for assessment year 2009-10 (Assessee's Appeal) Ground No. 1: CIT(A) erred on facts in dismissing the appellant's ground challenging action of the Assessing Officer in referring the case to transfer pricing officer for computation of arms length price in relation to alleged international transactions Soma Textile FZE 100% subsidiary of the assessee company. Ground No. 2: Ld. CIT(A) erred in confirming the addition of Rs. 4,87,46,666/- made by the Assessing Officer on account arms length price of loan interest 4. The brief facts relating to Grounds of appeal Number 1 and 2 of the assessee's appeal are that the assessee had advanced a certain sum of money to its subsidiary company Roma Textile FZE. The assessee company was of the view that such advance was in the nature of quasi capital and further the entire proceeds of the GDR issue have been invested in the aforesaid subsidiary and accordingly no addition was warranted u/s. 92CA(3). However, the Assessing Officer made adju....
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....ow, in principle, is to be confirmed." 6. In view of the above since ITAT has decided the issue against the assessee on identical facts in assessee's own case for assessment year 2008- 09, the ground nos. 1 & 2 of the assessee's appeal are dismissed accordingly. Ground No. 3: Ld. CIT(A) has erred in confirming the above addition made by the Assessing Officer by charging interest @ 7.14%. 7. With respect to this ground of appeal, the counsel for the assessee submitted that on identical facts, the issue has been decided in favour of the assessee by Hon'ble ITAT for assessment year 2008-09 in ITA No. 472/Ahd/2014 wherein ITAT held that Libor +2% arms length interest as an arm's length price. The counsel for the assessee submitted that the Department has not been able to bring forth any change in facts and circumstances as compared to that of assessment year 2008-09. In response, the ld. Departmental Representative placed reliance on the orders made by the Assessing Officer and ld. CIT(A). 8. We observe that the ITAT in the assessee's own case for assessment year 2008-09 has decided the issue by holding that the ALP adjustment is required to be made on the basis of Libor + ....
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....ed by the parents to subsidiary can indeed be taken as BB to D grade investments which refers to, as noted by the TPO himself at page 28 of the order, investments with serious risks of inadequate safety, investments of high risk, investments of substantial risk and investments of default. The approach adopted by the DRP cannot, therefore, meet our approval. 8. In this view of the matter, not only the fiction of assuming a corporate guarantee and then proceeding to benchmark the same, is unsustainable in law, even otherwise an adjustment due to assumption about lower credit rating of the subsidiary is not warranted. Perhaps the situation could have been materially different if the credit rating of the subsidiary was demonstrated to be lower but that is not the case before us. IN any case, in the immediately preceding assessment year, the TPO himself has adopted LIBOR plus 2% as an arm's length interest and there is no material change in the facts and circumstances of the case in this year. In view of these discussions, and bearing in mind entirely of the case, we uphold the grievance of the assessee to the limited extent that the ALP adjustment is required to be made on....
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....he assessment year 2007-08 (supra), wherein the coordinate bench has inter alia observed as follows: 15. So far as this grievance of the assessee is concerned, the relevant material facts are like this. During the course of the assessment proceedings, the Assessing Officer noted that the assessee has incurred expenses of Rs 75,12,960 on GDR issue and the treated the same as preliminary expenses eligible for amortization under section 35D of the Act However, the Assessing Officer declined the deduction of Rs 15,02,592, claimed by the assessee under section 35D, by observing that "it is settled law that whatever expense is incurred for issue of share capital is capital loss to the company and is neither revenue expenditure nor a capital expenditure for the purposes of business". Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. While rejecting the contention of the assessee, learned CIT(A) observed that, "the facts of the case are a/so squarely covered by the Supreme Court decision in the case of Brooks bond India Ltd Vs CIT (225 ITR 798)", that "these expenses are not in nature of preliminary expenses and are, therefore, not allowab....
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....e authorities below on this point and decline to interfere in the matter." 12. In view of the observations made by the ITAT, ground no. 4 of assessee's appeal is hereby dismissed. Ground No. 5: CIT(A) erred in confirming addition of Rs. 11,76,704/- on account disallowance of modified value added tax (MVAT). 13. The brief facts in relation to this ground of appeal are that when the assessee made purchases an amount of Rs. 11,27,327/- was separately shown as debit to the MVAT "receivable account" under the impression that the amount of MVAT will be available to the company for the purpose of set off against payment of VAT liability. Accordingly, the assessee submitted that to this extent Rs. 11,27,327/- purchases were shown less as only the net amount of purchases were shown as debit to purchases i.e. excluding VAT. Later on when it came to the knowledge of the assessee company that payment of MVAT will not be available to the company for the purpose of set off, the aforesaid debit to the MVAT receivable amount was reversed by crediting to the MVAT receivable account and such reversal has been considered as expenditure under the held "Miscellaneous Expenditure". The contenti....
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....course of assessment proceedings (the assessee had omitted to make the aforesaid claim in the return of income). The AO did not allow the aforesaid loss by relying on the Supreme Court order in the case of Goetze India Ltd. [2006] 157 Taxman 1 (SC) on the ground that the assessee is precluded from making a fresh claim during the course of assessment proceedings. In appeal, Ld. CIT(A) also dismissed the assessee's appeal by relying on the decision passed by his predecessor CIT for assessment year 2008-09, in which on identical issue, the ground of the assessee was dismissed by Ld. CIT(A) vide order dated 26-11-2013. 17. Before us, the counsel for the assessee submitted that the issue has now been decided in favour of the assessee by ITAT in assessee's own case for assessment year 2008-09 on identical set of facts, and accordingly the appeal is to be disposed of in light of the aforesaid order. We observe that the ITAT the assessee's own case for assessment year 2008-09 has allowed the assessee's appeal on this ground with the following observations: "15. During the course of scrutiny assessment proceedings, it was noticed that the assessee had claimed loss on derivative ....
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...."speculation business" shall be deemed to be distinct and separate from any other business", which implies it is only when speculative transactions are of such a nature as to constitute business on standalone basis, the income and losses from such transactions is required to be treated as distinct and separate from any other normal business. In other words, even speculative transactions, as long as such transactions are incidental to the main business of the assessee, cannot result in the profits or losses from such transactions being treated separately as that of a speculation business and thus making them ineligible for being set off against normal business profits and losses. Nothing really, therefore, turns on a transaction being settled, otherwise than through delivery, as long as such a transaction has standalone character isolated from the main activities of business. For this short reason alone, the action of the Assessing Officer must be held to be unsustainable in law. In any event, the assessee has filed detailed contracts notes before us which link the transactions to forward contracts entered into by the assessee. As a matter of fact, each of the confirmation so filed ....
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.... one is liability to be paid by employer and second is deemed income as per section 2(24)(x) which is held in trust by assesseeemployer, thus, said marked difference was to be borne while interpreting obligation of assessee-employer under section 43B. Therefore, the non obstante clause under section 43B could not apply in case of amounts which were held in trust as was case of employee's contribution which were deducted from their income and was not part assessee-employer's income, thus, said clause would not absolve assessee-employer from its liability to deposit employee's contribution on or before due date as a condition for deduction. Further, jurisdictional High Court decision in case of Gujarat State Road Transportation Corporation (2014) 41 taxman.com 100, wherein it was held that where assessee did not deposit employees' contribution to employees' account in relevant fund before due date prescribed in Explanation to section 36(1)(va), no deduction would be admissible even though he deposits same before due date under section 43B of the Act. Again the Gujarat High Court in the case of Pr. CIT v. Suzlon Energy Ltd. [2020] 115 taxmann.com 340 (Gujarat) held....
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....cordingly, as the borrowings were on revenue account, the assessee would be eligible for claiming loss of Rs.3,90,79,771/-. 24. Before us, Ld. Departmental Representative placed reliance on the observations made by the AO in the assessment order. We observe that even in the remand proceedings, when the Ld. CIT(A) referred the file back to the AO for his comments on this issue, the AO only relied upon the Supreme Court decision in the case of Goetze India Ltd supra and did not point out any factual or legal infirmity in the claim of loss by the assessee. Further, we find no infirmity in the order of Ld. CIT(A), who on appreciation of the facts of the case of the assessee allowed the assessee's appeal on the ground that the loss on foreign currency loan is on revenue account. Notably, in the case of PCIT v. Vedanta Ltd. [2023] 146 taxmann.com 34 (SC), the Hon'ble Supreme Court SLP dismissed against order of High Court that losses incurred by assessee-company due to foreign exchange fluctuation on export proceeds was to be allowed as business expenditure under section 37(1) of the Act. In the case of Global Wool Alliance (P.) Ltd. [2022] 145 taxmann.com 466 (Kolkata - Trib.), t....
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....In the case of Quality Engineering & Software Technologies (P.) Ltd. [2014] 52 taxmann.com 515 (Bangalore - Trib.) where assessee-company entered into forward contracts in order to protect its interest against fluctuations in foreign currency, in respect of consideration for export proceeds and there was an actual contract for sale of merchandise, said transaction would not qualify to be called as speculative transaction and therefore, provision for losses incurred on derivative contracts was an allowable expenditure. 30. In the result, in light of the above observations, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. 31. In the result, ground number 2 of the Department's appeal is dismissed. Ground No. 3 (ld. CIT(A) erred in deleting disallowance of loss of Rs. 39,03,002/- made by the Assessing Officer on account of retrenchment compensation paid to workers 32. The brief facts in relation to this ground of appeal are that during the course of assessment, the Assessing Officer made a disallowance of Rs. 39,03,002/- on account of deduction of retrenchment compensation paid to workers, on the ground that such compensation paid to worke....
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....at the assessee incurred expenditure of Rs. 54,50,000/- on account of loan processing fees in assessment year 2005-06. The assessee divided the aforesaid expenditure equally into five years i.e. claimed expenditure of Rs. 10,90,000/- beginning with assessment year 2005-06 till assessment year 2009-10. During the course of assessment, the Assessing Officer made an addition of Rs. 10,90,000/- being the disallowance 1/5th of the expenditure of ICICI loan processing fees by treating the aforesaid expenditure as prior period expenditure pertaining to assessment year 2005-06. 37. In appeal, before ld. CIT(A), the assessee submitted that in all the earlier years i.e. assessment years 2005-06 to 2008-09, the Assessing Officers have dully accepted the claim of 1/5th of the total expenditure being Rs. 10,90,000/- while passing the assessment order u/s. 143(3) of the Act. In the light of above facts, ld. CIT(A) allowed the assessee's appeal by holding that the assessee should be allowed deferred revenue expenses during the year under consideration amounting to Rs. 10,90,000/-. The Department is in appeal before us against the aforesaid deletion made by the ld. CIT(A). 38. We observe tha....
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....of the Act 46. We observe that this issue has been decided against the assessee while dealing with Grounds Number 4 of assessee's appeal for assessment year 2009-10 where the counsel for the assessee admitted that the issue has been decided against the assessee by Hon'ble ITAT for assessment year 2008-09 in ITA 472/Ahd/2014 and accordingly submitted that he shall not be pressing for ground no. 4 of his appeal. 47. Accordingly, Ground of Appeal Numbers 4 of the assessee's appeal is dismissed for assessment year 2010-11. Ground number 5: Ld. CIT(A) erred in confirming addition on account of late remittance of employee's contribution to PF and ESIC under section 36 (1) (va) of the Act. 48. We observe that this issue has been decided against the assessee while dealing with Grounds Number 7 of assessee's appeal for assessment year 2009-10. 49. Accordingly, Ground Number 5 of the assessee's appeal is dismissed for assessment year 2010-11. Ground number 6: Ld. CIT(A) erred in confirming addition on account of disallowance under section 40(a)(ia) of the Act. 50. The brief facts in relation to this ground of appeal are that that the AO made addition of Rs 3,92,791/- und....
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....account of interest charged @4.59% on addition of arm's length price of loan interest 56. We observe that this issue has been decided in favour of the assessee while dealing with Ground of Appeal No. 3 of the assessee's appeal for assessment year 2009-10, since the matter has been decided by the ITAT in favour of the assessee by Hon'ble ITAT in the assessee's own case for assessment year 2008-09 in ITA Number 472/A/2014. 57. Accordingly, Ground Numbers 3 of the assessee's appeal is allowed. Ground number 4: Ld. CIT(A) erred in confirming addition on account of late remittance of employee's contribution to PF and ESIC under section 36 (1) (va) of the Act. 58. We observe that this issue has been decided against the assessee while dealing with Ground Number 7 of assessee's appeal for assessment year 2009-10. 59. Accordingly, Ground Number 4 of the assessee's appeal is dismissed for assessment year 2011-12. 60. In the result, appeal of the assessee is partly allowed for assessment year 2011-12. Now we shall take up assessee's appeal for assessment year 2013-14 Ground No. 1: CIT(A) erred on facts in dismissing the appellant's ground challenging action of the ....