TaxTMI 
TaxTMI 
2025 (9) TMI 584
X X X X Extracts X X X X
X X X X Extracts X X X X
....10-11 04.03.2016 Revenue 3. First we take up assessee's appeal for Assessment Year 2009-10 in ITA No. 3503/Del/2016. 4. Having perused the material on record. Assessee is a company and engaged in the business of engineering services. A search and seizure action was carried out at the business premises of M/s A2Z Group on 24.04.2012. Consequentially, the case of the assessee was centralized and notice u/s 153A was issued. In response to notice u/s 153A on 14.07.2014, the assessee declared income of Rs. 1,10,70,33,060/-, thereafter, the notices were issued and finally the income of the assessee was assessed accepted the returned income. It was the claim of the AR of the assessee that a sum of Rs. 1.56 Cr. was offered in the return of income filed for this year as additional income declared as a result of search which includes a sum of Rs. Rs. 1.14 crores pertaining to assessment year 2010-11 and, therefore, it was requested to the Assessing Officer to exclude this amount of Rs. 1.14 crores from total income of the assessee. The AO observed that Director of the assessee company Sh. Amit Mittal in his statement under recorded u/s 132(4) of the Act admitted additional income....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otice u/s 153A of the Act. It is settled principle of law that whatever income is declared by the assessee in its return of income cannot be reduced. Accordingly, in this year though we agree with the argument of the AR, however, if the additional income of Rs. 1.14 Cr is reduced, it will be resulted into the assessment at an income which is lower than return income. In view these facts, we uphold the assessed income at Rs. 1,10,70,33,060/- and direct the AO to reduce the amount of additional income Rs. 1.14 Cr inadvertently offered in AY 2009-10 from the total income assessed for Assessment Year 2010-11. With these directions, the assessee's appeal for Assessment Year 2009-10 is partly allowed. ITA Nos. 3504/Del/2016 & 3414/Del/2016 for AY 2010-11 7. Now come to cross appeals for Assessment Year 2010-11. In assessee's appeal, ground of appeal No.1 is with regard to confirmation of addition of Rs. 4,40,805/- by disallowing the loss on forward transactions in commodities. 8. Before us, the Ld. AR submits that during the year assessee was executing EPC contracts and for execution of the contracts products, raw material like Steel and aluminum were required on continuous basi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not apply to all 'speculative transactions', so to say the legislative fiction applies only when the speculative transactions carried on by an assessee are of such a nature as to constitute a business in itself. The hon'ble Madras High Court in the case of CIT vs. Sri Ramalinga Choodambigai Mills Ltd. reported in MANU/TN/0798/1998, while dealing with an identical issue held as under: "3. The contracts had been entered into, for securing supplies of cotton which is the raw material for the manufacture of the yarn the assessee's business being the manufacture of yarn. The assessee was not carrying on a separate and distinct business of speculating on trading in cotton. The decision of the assessee to cancel these contracts was not with a view to suffer a loss or make profit, but to minimise the loss that it was likely to suffer as the purchase of that variety cotton would not have been of utility to the assessee after the assessee had changed the plan of manufacture which required a different variety of cotton. 4. Learned counsel for the Revenue submitted that these transactions must be regarded as speculative transactions, in view of the definition of s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of Steel and Aluminum but entered into transactions to cover up the loss in price fluctuations in execution of the works contracts. Thus it does not constitute speculative business activity as provided in Explanation -2 of the Act. Accordingly, by respectfully following the judgement of hon'ble Madras high court as cited (supra) in our considered opinion once the assessee was not engaged in the speculative activity and hedging was done to save the business losses due to future price fluctuations, therefore, such transactions are wholly and exclusively for benefit of the business and accordingly the same is allowable as expenditure u/s 37(1) of the Act. In view of these facts, we allowed the loss of forwarding contracts at Rs. 4,40,805/-. The grounds of appeal No.3 and 4 of the assessee are allowed. 13. Ground Nos.1 and 2 are not pressed, thus, are dismissed. 14. Before us, vide letter dated 20.01.2020, the assessee has taken three additional grounds of appeal, out of which Ground Nos. 8 and 9 are not pressed. Thus, the remaining additional ground of appeal No.7 is admitted being legal ground and decided below. The Ground No.7 reproduced as under: "7. That in view o....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... assessee and the records it is related that in the books of account, the assessee itself had claimed loan processing for as capital expenditure as it has benefit spread across various years. Having shown it as capital expenditure, the assessee has amortized the expenses in various years. Having shown it as capital expenditure, the assessee has amortized the expenses in various years le. debited the expenses in parts. There is no provisions in Income Tax to claim capital expenses in parts. Amortization of expenses is not allowable except when claimed under specific provisions like section 35D, 35DD, 35DDA, 35E etc. Since loan processing fee is a capital expenditure, it is not allowable under section 37(1) of the Act. Hence, addition of Rs. 3,88,01,009/- is made to the returned income. The contention of the appellant with regard to the same is reproduced as under: "During the assessment year, the appellant had incurred an expenditure of Rs. 3,88,01,009/- towards loan processing fee details of the loan processing fee are given at page 1-6 of the paper book. It may be mentioned that the AO has not doubted the genuineness of the expenditure or regarding its quantum. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the assessee for raising the loan was expenditure incurred for the purpose of business and could not be treated as capital expenditure. It has been further held that if the business is started, interest on loan borrowed by the assessee is allowable, irrespective of the loan, even if the loan is borrowed for acquisition of asset. In view of the above discussion, it is held that the loan processing fees paid to the banks is a revenue expense and hence allowable in the case of appellant. Therefore, this ground of appeal is allowed." 19. Before us, the Ld. CIT-DR vehemently supports the order of the AO, however, had failed to controvert the findings of the Ld. CIT(A) by placing on record any contrary material in this regard. It is further seen that Ld. CIT(A) followed the judgment of Hon'ble Supreme Court in the case of Taparia Tools Ltd. vs. JCIT [2015] 55 Taxaman.com 361(SC) which has direct bearing on this issue. Further the hon'ble Madras High Court in the case of India Cements vs. reported in 60 ITR 52 also of the similar view. In view of these facts and by respectfully following the judgements of hon'ble Supreme court and of hon'ble high court as cited above, we fin....