TaxTMI 
TaxTMI 
2026 (4) TMI 1185
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....justing brought forward losses of Rs. 2,39,51,488/- against the profit earned during the year. The assessee company revised computation showing loss of Rs. 58,49,38,385/- as the assessee has drawn amount of Rs. 60,88,89,873/- being amortization of Foreign Currency Monetary Item Translation as Difference Account. The assessee submitted from Form No.3CEB U/s 92E along with audit report. The case was selected for scrutiny. Notice u/s 143(2) dated 04.09.2014 was issued to the assessee. Notices u/s 142(1) and 143(2) along with questionnaire were issued on 24.09.2015. The assessee was asked for certain details vide Notice dated 17.10.2016. S/Shri Sanjeev Singh, Shri Ram Babu Keshari and Anuj Tomar, ARs of the assessee appeared and filed details, produced books of accounts, bills & vouchers etc. The assessee reported "Receipt of Interest" of Rs. 1,39,65,20,274/- on loan granted to its Wholly Owned Foreign Subsidiary Company M/s Aamby Valley Mauritius Limited (AVML). The loan of 480 million (mn) GBP i.e. Rs. 35,24,51,61,000/- was granted in the previous financial year i.e. 2010-11. Certain other specified domestic transactions were also reported by the assessee. Because of specified domest....
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....n the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 15,70,622/- made by the AO on account of Advertisement & Sales Promotion and Business Promotion Expenses. 4.On the facts and circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 14,49,735/- made by the AO on account of disallowance of consultancy charges. 5. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,90,73,715/- made by the AO on account of Diversion of Interest bearing fund. 6. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 395,49,10,222/-made by the AO on account of disallowance u/s 14.A. of the I.T. Act, 1961. 7. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 3,66,725/-made by the AO on account of prior period expenses. 8. On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 36,18,203/- made by the AO on account of bills not available. 9. On the facts and circumstances of....
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....f certificate in Form 26A of the Income Tax Rules, 1962. 7. That the learned CIT (A) has erred in law and on facts and circumstances of the case in confirming the disallowance of Rs. 7,02 800/-on account of Commission and Brokerage Expenses incurred for procurement of residential accommodation for employees 8. That the learned CIT(A) has erred in law and on facts and circumstances of the case in confirming the disallowance of Rs. 23,01,576/- out of outstanding debts written off during the year. 9. That the order passed by the learned CIT (A) is against the facts and circumstances as well as legal aspects of the case and, therefore, the additions confirmed by him deserve to be deleted. 10. That the appellant craves leaves to add, alter, amend, and withdraw any or all of the grounds of appeal on or before the date of hearing." 7. Ld. Departmental Representative submitted that ground of appeal No.1 of revenue is general. Regarding ground no.2 of appeal of Revenue, he submitted that Ld. CIT(A) erred in deleting additions of Rs. 8,94,02,760/- made by Ld. AO on account of advances from customers. Ld. CIT(A) noted that advances pertained to sale of c....
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....on of record in light of aforesaid rival contention, it is crystal clear that Ld. CIT(A) deleted addition of Rs. 8,94,02,760/- on account of advances received from booking from various parties Financial Statement of the assessee for AY 2013-14 is at page No.1 to 40 of the PB. The status of advances received against sale of chalets SAP screenshot and copy of ledger regarding advance from customers @ page no.300-312 of the paper book. In view of the above documents and agreement to sale entered or as per percentage of completion method the findings of Ld. CIT(A) being meritorious are upheld. Therefore, ground of appeal No.2 of Revenue is rejected. 10. Ld. Departmental Representative, submitted that Ld. CIT(A) erred in deleting the addition of Rs. 38,42,893/- made by the AO on account of Advertisement & Sales Promotion and Business Promotion Expenses. 10.1. The AO disallowed an amount of Rs. 38,42,839 out of the total expenditure, as compared hereunder: S. No. Vendor Amount claimed as expense Amount disallowed Reason for disallowance 1. Allied Media Networks P Ltd. Rs.67,28,685/- Ad-hoc disallowance of 50% i.e. Rs. 33,64,343 Vouchers submitted by Ap....
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....s of CIT(A) and our submissions. 1. Service tax on reverse charge basis Service tax paid on consultancy charges for services taken from Dubai based consultant (PB Page no.136-139 13,49,735 CIT(A) correctly allowed the deduction as per section 43B of the Act, after verification of proof of payment 2. Sahara Global Mastercraft Ltd. Debit note received from Sahara Global Mastercraft Ltd for reimbursement of expense incurred by it on Macedonia Project (PB Page no.157-158) 1,00,000 CIT(A) correctly allowed deduction of the said amount on account of being professional fee paid to Sahara Global Mastercraft Ltd, which is incurring expenses on Macedonia Project and nothing being on record to question genuineness of this expense. 15. From perusal of findings of Ld. CIT(A), it is evident that, the addition of Rs. 26,80,635/- made by Ld. AO on account of disallowance of consultancy charges was deleted as Rs. 13,49,735/- service tax on reverse charges paid on consultancy charges for services taken from Dubai based consultancy were duly verified. Debit note of Rs. 1,00,000/- received from Sahara Global Mastercraft for reimbursement of expense incurred by it on Ma....
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....charging any interest and therefore, there stands no justification in imputing the interest income on alleged advances. Chart depicting details of business advances along with purpose of such advances, settlement of such advances and GL account of the parties is @ page no 369-390 of paper book. 18. From record, it is evident that Ld. AO had made addition of Rs. 3,90,73,715/- on account of diversion of interest bearing fund. The Ld. CIT(A) deleted by observing that only real income can be brought to tax. No hypothetical or notional income can be brought to tax under the I. T. Act. The Ld.AO ignored the chart depicting that aforesaid advances arise out of business transactions and same have been settled in later years. Refer chart @ page no 369-371 of the paper book. The assessee had reserves and surplus to the tune of Rs. 503,91,77,53,077/- as at 31.03.2013; amount of impugned advances is comparatively miniscule which, in any case, cannot be said to be out of interest-bearing funds. It is well settled principle of law that income tax cannot be levied on hypothetical income refers to judgment in Godhra Electricity Co. Ltd. vs CIT :225 ITR 746 (SC) (supra). Therefore, Ground of app....
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....dia Financial Corporation Ltd (supra) 21. From examination of record, in light of above rival contentions shows that, Ld. CIT(A) deleted disallowance of Rs. 395.49 crores made u/s 14A of the Act holding that no exempt income had been earned by assessee during the year under consideration. Relying on decision of Hon'ble High Court of Delhi in the case of CIT Vs. Holchin India Pvt. Ltd. (Supra). Similar disallowance was held in assessee's own case for AY 2012-13 vide order dated 19.07.2024 by this Tribunal. Therefore, ground of appeal No.6 of the revenue is rejected. 22. Ld. Departmental Representative regarding ground of appeal No.7 of revenue submitted that, Ld. CIT(A) has erred in deleting the addition of Rs. 3,66,725/- made by the AO on account of prior period expenses. The assessing officer disallowed expenses of Rs. 3,66,725 holding the same to be prior period expenses, not pertaining to the captioned assessment year. 23. Ld. Authorized Representative for respondent-assessee submitted that Ld. CIT(A) has rightly deleted the said disallowance considering that in each case, either the expenses have been crystallized or invoice has been received in the assessment year und....
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....paper book volume-2 27. From perusal of record, in light of aforesaid rival contentions, shows that, Ld. CIT(A) deleted disallowance to the extent of Rs. 33,95,775/- and upheld disallowance of Rs. 2,22,786/-. The expenses were incurred by assessee on account of telephone charges, internet & broadband charges, air tickets and electricity charges, allowable under section 37(1) of the Act. Copy of bills for the expense of Rs. 33,95,775 is @page no 501-532 of the paper book. 27.1. In view of above material facts apparent on record, the deletion of Rs. 33,95,775/- is upheld. 27.2. Therefore, ground of appeal No.8 of the revenue is rejected. 28. Ld. Departmental Representative regarding ground of appeal No.9 of revenue submitted that, the Ld. CIT(A) has erred in deleting the addition of Rs. 35,82,247/- made by the AO on account of bills not in the name of company. The assessing officer disallowed expenses of Rs. 35,82,247 holding that the bills for such expenses were not in the name of the assessee but in the name of Sahara India Commercial Corporation Ltd. ("SICCL"). 29. Ld. Authorized Representative for respondent-assessee submitted that, the CIT(A) correctly deleted the....
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....reciation of record, in light of above said rival arguments reveals that Ld. CIT(A) deleted addition of Rs. 35,82,247/- made by ld. AO on account of bills not in name of Company. Ld. CIT(A) on consideration of invoices from Page No.412 to 438 found invoices to be in name of SICCL, assessee or in name of legal consultants of the assessee. The reason for deletion is cogent and sustainable in eyes of law. 30.1 Therefore, ground of appeal No.9 of revenue being devoid of merit is rejected. 31. Ld. Departmental Representative regarding ground of appeal No.10 of revenue submitted that, the Ld. CIT(A) has erred in deleting the addition of Rs. 7,64,083/- made by the AO on account of proper documentary evidence not available. The assessing officer disallowed expenses totaling to Rs. 7,64,083 observing that no proper documentary evidence was available for these expenses and therefore, the same may not have been incurred for the purpose of business. 32 Ld. Authorized Representative for respondent-assessee submitted that, Ld. CIT(A) deleted the said disallowance made by the AO after considering the invoices produced during 1 appellate proceedings. 32.1. The snapshot showing the natu....
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....on vehicle loan taken 3,88,854 3 Union Capital Services Ltd. Professional fee for valuation of properties 4,49,440 4 Kathan Mediatix India Ltd. Durga Puja Panda 3,35,000 5 Sahara Hospitality Ltd Food, drinks, lounge charges 4,12,528 6 Sahara Hospitality Ltd. Reimbursement of salary bills of Sh. Raquel Sanchez Total 69,12,872 37. Ld. Authorized Representative for respondent-assessee submitted that, while the CIT(A) upheld disallowance mentioned at S.No.1 to 3 & 6. 37.1. With regard to payments of Rs. 4,12,528 to Sahara Hospitality Ltd for Food, drinks lounge charges, CIT(A) deleted said disallowance on the ground that no TDS was required to be deducted on such payments. In absence of any provision in Chapter VII-B covering such payments, it is submitted that the CIT(A) has correctly deleted the disallowance. 38. From record, it is evident that, Ld. CIT(A) deleted addition of Rs. 4,12,528/- made by AO on account of non-deduction of TDS. Ld. CIT(A) deleted disallowance on the ground that no TDS was required to be deducted. In view of provisions in Chapter VII-B covering such payments, the disallowance i....
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....ing the amortization of foreign currency, monetary items translation difference amounting to Rs. 60,88,89,873/-. 43.1. It is submitted that the lower authorities have erred in not adjudicating the claim made by the Appellant by way of revised computation of income. 43.2. It is respectfully submitted that the decision of the Supreme Court in the case of Goetze (India) Ltd (supra) only deals with the power of the assessing officer to admit a claim, which was not raised in the return of income but does not impinge on the power of the appellate authority to entertain additional claims. This position has been upheld by the Supreme Court in the case of National Thermal Power Company Limited vs CIT: 229 ITR 383 (SC) and Jute Corporation of India Ltd vs CIT: 187 ITR 688 (SC). 43.3. Further reliance is placed on the decision of Calcutta High Court in the case of PCTT vs Ankit Metal & Power Ltd: [2019] 416 ITR 591 (Cal) wherein the assessee had filed original return of income treating the interest subsidy as revenue receipt and thereafter during the assessment proceedings, filed revised computation of income claiming interest subsidy as capital receipt. The assessing officer had den....
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....consistently held that there is no bar/ prohibition on the jurisdiction of an authority (other than the assessing officer) to consider fresh claim(s) made by the Appellant by way of revised computation: -CIT vs Jai Parabolic Springs Ltd.: 306 ITR 42 (Del) -CIT vs Sam Global Securities Ltd: 360 ITR 682 (Del), SLP dismissed by the Supreme Court vide order dated 04.04.2014 -DIT vs Ajay G Piramal Foundation: [2014] 52 taxmann.com 226 (Del) -Raghavan Nair vs ACIT: [2018] 402 ITR 400 (Kerela) -Rachna S Talreja vs DCIT: [2012] 25 taxmann.com 417 (Mum Trib). The CIT(A), was thus, duty bound to consider the claim made by the Appellant by way of revised computation of income and render findings on merits of the claim. 43.5. The Appellant advanced loan to its wholly owned foreign subsidiary, viz., Aamby Valley Mauritius Ltd ("AVML") during the preceding AY 2011-12 which was outstanding during the captioned AY. Copy of Loan agreement dated 13.12.2010 entered between the assessee and Aamby Valley Mauritius Ltd and addendum to the said loan agreement is @ page no 472-500 of the paper book volume 2. The said loan was shown as an Asset' under ....
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....ate to the acquisition of a depreciable capital asset, can be added to or deducted from the cost of the asset and shall be depreciated over the balance life of the asset, and in other cases, can be accumulated in a "Foreign Currency Monetary liem Translation Difference Account in the enterprise's financial statements and amortized over the balance period of such long-term asset/liability but not bevond 31st March, 202011, by recognition as income or expense in each of such periods, with the exception of exchange differences dealt with in accordance with paragraph 15. For the purposes of exercise of this option, an asset or liability shall be designated as a long term foreign currency monetary item, if the asset or liability is expressed in a foreign currency and has a term of 12 months or more at the date of origination of the asset or liability. Any difference pertaining to accounting periods which commenced on or after 7th December, 2006, previously recognized in the profit and loss account before the exercise of the option shall be reversed in so far as it relates to the acquisition of a depreciable capital asset by addition or deduction from the cost of the asset and in oth....
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.... under consideration. No dispute has been raised by the AO regarding the same. The FCMITD Account had an opening balance of Rs. 507,75,75,010. The Appellant has amortized Rs. 60,88,89,873 and transferred the same to P&L A/c so as to give effect to the provisions of AS-11. 43.9. The Appellant submits that the amount amortized and credited to P&L A/c will not be chargeable to tax for the reasons submitted hereunder. 43.10. In this regard, it is submitted that the Appellant had loaned funds to its wholly owned subsidiary, AVML with the primary intention of assisting its subsidiary in expansion of business activities. With such assistance, AVML will be in a position to earn more profits and since the Appellant is 100% holding company, it would have also benefited from the same. It is thus, submitted that the said loan given by the Appellant to its subsidiary is of capital nature. 43.11 Further, as per the loan agreement, it was agreed between the parties that the outstanding loan can be converted to preferential shares on mutually agreed terms and conditions, at any time before expiry of the loan period. 43.12. In view of the above, it is submitted that the loan given by th....
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....essee, therefore, rightly contended that with such assistance, subsidiary will be in a position to earn more profits and since the assessee is its 100% holding company, the assessee would be benefitted and can earn higher profits from its subsidiary as well It is, therefore, clear that the said loan advance is in the nature of investment by assessee in its subsidiary company and thus, it was of capital nature. The assessee further explained that as per the loan agreement, it was agreed between the parties that the outstanding loan may be converted into preferential shares on mutually agreed terms and conditions between the parties at any time or before expiry of the Loan terms. Thus, these facts clearly prove that the loan was of capital in nature and as such, it would not prove that loan advanced was connected with any revenue item. Therefore, the loan given to AVML is a capital asset which helps in earning incidental interest income, which is also offered for taxation. Since the loan advanced was its long term asset ie., on account of capital asset and not as part of circulating capital, therefore, foreign fluctuation gain on account of alteration in the rates of exchange would b....
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....e, now he taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it. on conversion into another currency, such profit or loss would ordinarily be trading profit or loss if the foreign currency is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature." 43.17. Kind attention is further drawn to the decision of Supreme Court in the case of CIT vs Woodward Governor India (P) Ltd: [2009] 312 ITR 254 (SC), wherein the issued involved was in respect of allowability of forex loss on revenue item. It was held by the apex Court that loss due to foreign exchange fluctuation, which is on revenue account, would be allowed as business expenditure under section 37(1) of the Act. 43.18. Therefore, in view of the above, it is submitted that the foreign fluctuation gain arising to the Appellant on the capital loan is in the nature of capital gain and therefore same will not be chargeabl....
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.... circumstances of the case in confirming the disallowance of Rs. 28,18,308/- out of Advertisement, Sales Promotion and Business Promotion Expenses. 46.1. During the year under consideration, the Appellant had incurred expenditure on account of advertisement sales promotion and business promotion expenses, qua which deduction was claimed in the return of income filed. The AO disallowed an amount of Rs. 38,42,839 out of the total expenditure, as computed hereunder:- S. No. Vendor Amount claimed as expense Amount disallowed Reason for disallowance 1. Allied Media Networks P Ltd Rs.67,28,685 Ad-hoc disallowance of 50%, i.e. Rs. 33,64,343 Vouchers submitted by Appellant are not properly supported and reason for incurring such huge expense not given. 2. International Property Media Ltd Rs.4,78,550 Rs.4,78,550 Voucher not properly supported and nexus between the business of Appellant and expense was not established. TOTAL 38,42,893 CIT(A) enhanced the aforesaid amount of disallowance from Rs. 38,42,893 to Rs. 44,69,510. The disallowance sustained/ made by the CIT(A), which form subject matter of appeal filed by the Appe....
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.... ITR 216 (SC) -Friends Clearing Agency Pvt Ltd vs CIT: 332 ITR 269 (Del) -Dwarka Prasad Agarwal vs. ITO: 52 ITD 239 (Cal Trib) -Mahendra Oil Cake Industries Pvt Ltd vs ACIT: 55 TTJ 711 (Ahd Trib), -Rattah Mechanical Works Ltd. v ITO: 87 Taxman 288 (Chd Trib) (Mag) 46.5. For the disallowance of Rs. 31,32,411, the allegation of the CIT(A) is that invoices pertain to AY 2014-15 and therefore, cannot be allowed in the captioned AY. In this regard, it is submitted that if the same cannot be allowed in the captioned AY, the Hon'ble Tribunal may kindly direct that the same be allowed as expenditure in AY 2014-15 itself. Copy of vouchers, invoices and other supporting documents are enclosed in merits paper book @ page number 60-135. 47. Ld. Departmental Representative submitted that, Ld. AO disallowed expenditure due to the extent of 50% as vouchers submitted by appellant were not properly supported. Ld. CIT(A) enhanced amount of disallowance from Rs. 38,42,893/- to Rs. 44,69,510/-. Vouchers regarding advertisement in newspaper bills etc. filed by the assessee were considered. Copy of vouchers, invoices and other supporting documents are enclos....
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....of the assessee submitted that, the learned CIT(A) is not justified in confirming the disallowance of Rs. 3,50,000 out of Advertisement Expenses by holding that the same has not been only and exclusively incurred for the business of the appellant. 51.1. Main project of the Appellant is development of Aambay Valley City which is situated in a valley about 20 kms away from Lokhandwala. The entire city is surrounded by forests and various types of permissions have to be taken from the Forest Department for carrying out day to day activities of development in the Lake City and for the purpose of sommoth running of the business of the Appellant. 51.2. In view of above, an expenditure incurred for birthday greetings of Forest Minister who is not a related party, cannot be said to be not incurred for the purpose of the business of the Appellant. Copy of invoice dated 07.01.2013 is @ page no 161 of the paper book. 52. Ld. Departmental Representative submitted that, Ld. AO disallowed Rs. 3,50,000/- out of advertisement expenses as there was no nexus between expenses incurred and the business of the appellant. 53. From the examination of record, in light of aforesaid rival conten....
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....ing any finding or observation, which is not correct in law and deserves to be deleted. Further, there is no liability in the hands of the Appellant to deduct TDS on payment made to ICICI Bank towards interest on loan. In this regard, section 194A contains provisions for liability to deduct tax in case of interest other than 'interest on securities. Clause (iii) of sub-section (3) of section 194A clearly specifies that 'where any such income is credited or paid to any banking institution to which the Banking Regulation Act, 1948 applies, no tax has to be deducted'. The Relevant extracts of Section 194A of the Act is reproduced hereunder: Interest other than "Interest on securities". 1944. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paving to a resident any income by way of interest other than income by way of interest on securities, shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force: ....................... ....
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....ahara Hospitality Ltd without any element of income embedded therein. 55. Ld. Departmental Representative submitted that, Ld. AO had disallowed amount of Rs. 69,12,872/- on account of non-deduction of tax at source. Ld. CIT(A) confirmed disallowance of Rs. 46,39,828/-. The matter is restored to be sent to the file of Ld. AO for verification. 56. From examination of record, in light of aforesaid rival contention, it is crystal clear that, Ld. CIT(A) confirmed disallowance of Rs. 46,39,828/- Rs. 4,49,440/- Rs. 6,87,222/- and deleted other additions. The matter is required to be verified by AO. Therefore, the matter is restored to the file of Ld. AO. Ground of Appeal No.6 of the assessee is allowed for statistical purposes. 57. Ld. Authorized Representative for appellant-assessee qua of ground of appeal No.7 submitted that, the learned CIT(A) has erred in law and on facts and circumstances of the case in confirming the disallowance of Rs. 7,02,800/- on account of Commission and Brokerage Expenses incurred for procurement of residential accommodation for employee. 57.1. That during the assessment proceedings, the Appellant had duly submitted the complete details of the pers....
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....ion. 17. In view of the above, we hold that the expenditure incurred by the assessee is revenue expenditure. The question is answered accordingly in favour of the assessee and against the revenue." (emphasis supplied) 57.5. Therefore, in view of the above, the expenditure incurred by the Appellant on account of brokerage commission charges is in the nature of staff welfare expenditure incurred wholly and exclusively for the purpose of Appellant business, allowable under section 37(1) of the Act. 57.6. Details of payment made for commission and brokerage expenses alongwith copy of leave and license agreement is page no 268-288 of the paper book. 58. Ld. Departmental Representative submitted that, Ld. CIT(A) considered the rent agreement submitted by the Appellant and observed that these are entered between employees and the owner of the residential properties and the Appellant only pays HRA to its employees. Therefore, CIT(A) confirmed the disallowance made by AO holding that the same cannot be allowed under section 37(1) of the Act. 59. From record, it is amply clear that Ld. AO made addition of Rs. 7,02,800/- on account of commission and brokerage expenses ....
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.... loss on the basis of the evidence produced by the assessee. The Tribunal proceeded on a premise that once a claim is made for deduction as bad debts, then the deduction can be granted only if the provision of Section 36 of the Act are satisfied and it is not open to an assessee to claim a deduction in the alternative under any other provision of the Act. In view of the above. we are not making any observation with regard to whether the claim of the assessee on merits is allowable as a business loss. We are only examining the issue posed for us vis, that when the claim made for bad debts is not satisfied, could it be considered as a allowable business loss, 10. Section 28 of the Act imposes a charge on the profits or gains of business or profession. The expression "Profits and gains of business or profession" is to be understood in its ordinary commercial meaning and the same does not mean total receipts. What has to brought to tax is the net amount earned by carrying on a profession or a business which necessarily requires deducting expenses and losses incurred in carrying on business or profession. The Supreme Court in the matter of Badridas Daga v. CIT [1958] 34 ITR 10,....