TaxTMI 
TaxTMI 
TaxTMI 
2025 (10) TMI 647
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....d in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 4,72,87,054/- made by the Assessing Officer being foreign exchange gain on capital loan and in not appreciating that the Assessee Company failed to follow Income Computation and Disclosure Standard IV relating to effects of changes in foreign exchange rates. 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 4,72,87,054/- made by the Assessing Officer by relying upon certain case-laws and in not taking into cognizance the CBDT's Circular 10/2017 dated 23rd March, 2017 which were notified in the light of certain judicial pronouncements and it specifically mentioned that the provision of ICDS shall be applicable to the transactional issues dealt therein in relation to assessment year 2017-18 and subsequent assessment years. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 2,08,99,216/- made by the Assessing Officer being expenses for USFDA approval observing that the expenses incurred for US FDA approval are certainly bus....
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....ain on capital loan advanced by the assessee to its foreign subsidiary company and has not offered it for taxation. The treatment is not in line with the ICDS provisions notified u/s 145(2) of the Act. He issued show cause to the assessee, requiring it to furnish justification as to why the foreign exchange gain on capital loan should not be added to the total income. He held that as per the ICDS provisions, there is no segregation of exchange gain/loss between revenue and capital nature. Except the exchange gain or loss covered u/s 43A of the Act, all other exchange gain would be taxed under the Act. He, therefore, added foreign exchange gain on the capital loan and initiated penalty proceedings u/s 270A of the Act. 5.1 The CIT(A) has reproduced relevant portions of the order of AO and submission of the appellant before him. The appellant had relied on the decision of the Hon'ble Delhi High Court in case of Chamber of Tax Consultants & Anr vs. UOI & Ors., (2018) 400 ITR 178 (Del). The CIT(A) observed that the ICDS IV itself states that if there is conflict between the Income-tax Act and ICDS, provisions of the Act will prevail. He observed that the actual income has been offere....
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....exchange difference on conversion of the capital loans into Indian Rupee on the balance sheet date. The profit on such conversion of foreign currency loan into Indian currency is notional in nature and is on the capital field. Relying upon the ICDS VI, the AO has added the amount as income of the assessee. However, the Hon'ble Delhi High Court in case of Chamber of Tax Consultants (supra) has clearly held that the Income Computation and Disclosure Standards (ICDS) in exercise of power u/s 145(2) of the Act cannot override binding judicial precent or provisions of the Act or Rules made thereunder. It also held that the losses/gains arising by valuation of monetary assets or liabilities of foreign operations as at the end of the year cannot be treated as real income. It is only in the nature of notional or hypothetical income, which cannot be even otherwise subject to tax. While deciding the issue, the Hon'ble High Court referred to the decision of the Hon'ble Supreme Court in case of Godhra Electrics Supply Company Ltd. vs. CIT, [1997] 225 ITR 746 (SC) and Sutlej Cotton Mills Ltd. (supra). The Hon'ble Supreme Court in case of Sutlej Cotton Mills Ltd. (supra) has held as under: ....
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....xpenses are genuine business expenses. Hence, the CIT(A) directed the AO to delete the addition. 6.1 Aggrieved by the order of CIT(A), the revenue has filed the appeal. The ld. CIT-DR relied on the order of AO and submitted that the assessee failed to submit details and evidences to support the claim of expenditure. 6.2 On the other hand, ld. AR submitted that the expenses incurred was for extending the territory of business to enter the US market of the existing product. The expenditure was not for any new business. To join the US market, certain clinical trial was to be conducted in US and on successful completion of the trial, it is possible to do business in US. Both bare stents and drug eluting stents are required for the clinical test. The same are required as per the guidelines issued by USFDA. The clinical test is to be conducted on an animal in order to evaluate the effectiveness and suitability of the stents. Hence, expenses for both bare and drug coated stents are the primary requirement for entering in the US market. Therefore, the expenditure was wholly and exclusively for the purpose of business and cannot be separated to partially disallow the expenditure. 6....
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....ed perversely that where statutory time limit of 7 days was not granted in second 148A(B) noticed dated 23/03/2022 on second piece of information, notice u/s 148 of the Act is violated despite noting in his appeal order that the Assessee furnished his reply on 29 March, 2022 and order u/s 148A(d) of the Act was not passed before 31/03/2022. 3. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in relying upon the order of Meghalaya High Court in a Writ Petition in the case of Jasmine Sangma V/s UOI without appreciating that said Hon'ble Bench gave a specific relief to the Assessee by setting aside 148 notice with a direction to department to consider the matter afresh with the Assessee's reply whereas the facts of the Assessee's case were completely different. 4. On the facts and in the circumstances of the case and in law and without prejudice to the above grounds, the Ld. CIT(A) has erred in admitting the additional ground challenging the validity of notice u/s 148 of the Act ignoring the applicability of provisions of section 292BB which clearly deemed the notice as valid as the Assessee has raised no such objectio....
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....otice u/s 148 of the Act can be issued only by a Faceless Assessing Officer." 11. The facts of the case are that assessee filed return of income on 31.10.2018, declaring income of Rs. 48,41,49,900/-. The case was re-opened on the basis of information flagged on the insight portal in accordance with risk management strategy of the CBDT. The notice u/s 148 was issued on 31.03.2022 after obtaining approval from the competent authority. The AO completed assessment u/s 143(3) r.w.s. 147 by making various disallowances and additions and determining total income at Rs. 55,02,24,640/-. 12. Aggrieved by the order of AO, assessee filed appeal before the CIT(A), wherein an additional ground was raised regarding validity of notice and issuance of order u/s 148A(d) on 31.03.2022 without considering reply of the appellant. The CIT(A) admitted the additional legal ground by relying upon the decision of Hon'ble Supreme Court in case of NTPC vs. CIT, (1998) 229 ITR 383 (SC). The CIT(A) observed that as per the procedure w.e.f. 01.04.2021, before issuing notice u/s 148, the AO has to conduct enquiry with prior approval, issued show cause notice and allow not less than 7 days to file reply and ....
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....e ld. AR submitted that the time of 6 days only granted to file reply was violation of section 148A(b) of the Act and is not a mere procedural lapse. He relied on the decision in case of Thulladeedas Srinath (supra) where the petition of the assessee is allowed because non-affording of time period of 7 days has resulted in prejudice and violation of principles of natural justice. He also submitted that the AO has accepted in a remand report that assessee had filed reply on 29.03.2022, which was not considered in the order passed u/s 148A(d) of the Act. Hence, there is contravention of section 148A(c) and 148A(d) of the Act. The ld. AR submitted that the decision relied by revenue in case of Manish Kumar (supra) is distinguishable on facts and is not applicable to the case of the appellant. 15. We have heard both the parties and perused the materials available on record. We have also deliberated upon the decisions relied on by both sides. There is no dispute that an opportunity was given vide notice u/s 148A(b) on 23.03.2022 giving time to furnish the reply on or before 29.03.2022. Therefore, only 6 days' time was granted by AO, which is clearly in violation of the express provis....