TaxTMI 
TaxTMI 
2022 (6) TMI 1572
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.... sham transactions? 2. Whether on the facts and in the circumstances of the case and in law the Id. CIT(A) is correct in allowing assessee's claim of Brand Development expenses of Rs. 4,33,70,349/- without appreciating the fact that the same brings into existence benefit of enduring in nature and hence amounts to capital expenditure? 3. Whether on the facts and in the circumstances of the case and in law the Id. CIT(A) is correct in allowing assessee's claim of Brand Development expenses of Rs. 4,33,70,349/- without appreciating the fact that the expenditure incurred is not wholly and exclusively for the purpose of assessee's business but also relates to assessee's group companies? 4. Whether on the facts and in the circumstances of the case and in law the Id. CIT(A) is correct in allowing assessee's claim of interest expenditure of Rs.4,40,000/- without appreciating the fact that the assessee failed to prove nexus of interest free funds with interest free advances made? 5. Whether on the facts and in the circumstances of the case and in law the Id. CIT(A) is correct in allowing assessee's claim of expenses of Rs.50,48,041....
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....ly and exclusively for the purpose of assessee's business but, also relates to assessee group companies? 3. Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) is right in deleting addition of Rs. 1,51,54,918/- being gain/ loss on foreign exchange fluctuation holding it a capital receipt without appreciating the fact that assessee company itself credited the amount as revenue receipt treating the same as revenue receipt. Whether the assessee has shown fluctuation as a capital receipt in earlier year is not relevant. The Id. CIT(A) has relied on the decision in the case of Triveni Engineering Works Ltd. Vs CIT and Sutlej Cotton Mills Ltd Vs. CIT wherein it was decided that where profit or less arises to an assessee on account of appreciation or depreciation in the value of foreign exchange currency held by it, on conversion into another currency, such profit or less would ordinarily be trading profit or loss if the foreign exchange currency is held by the assessee on revenue account of a trading asset or as part of circulating capital in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed c....
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....10,73,94,634/- for which the assessee was asked to submit explanation for the transaction. The reply submitted by assessee is reproduced by the AO in his assessment order as under :- "The assessee company had entered into a Joint Venture Agreement with one Mr. Ashok Tiwari under the name and style as I-BILT Technologies Ltd. was incorporated under 50/50 ownership. I-BILT Technologies Ltd. was engaged in providing information technology (hereinafter referred to as "IT") related solutions to various companies including Ballarpur Industries Ltd. and its affiliates and subsidiaries (hereinafter referred to as "BILT"). Thus, these IT related services including Facility Management Service and Engineering Consultancy Services and Professional Services were rendered by the Company to BILT & its associate companies. However, the aforesaid Joint Venture business felt apart sometime in the year 2007. Consequently, an agreement was entered into between Mr. Ashok Tiwari (who was having 50% shares) and the assessee company (50% shares) to the extent as follows :- 1. The assessee company was required to sell all the shares (50%) held by the assessee company to Mr. Ashok Tiwari. ....
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....ital of other party. The AO thus observed that normally a prudent businessman would not indulge into such a deal. The AO thus disallowed the claim of capital loss on this account amounting to Rs.10,73,94,634/- as sham transaction and added the same to the income of the assessee company. 3.2 In first appeal, the ld. CIT(A) has deleted the disallowance made by the AO by observing at para 5.1 to 5.5 of his order as under :- "5. I have carefully considered the facts of the case and the written submissions of the appellant. I have also perused tripartite agreement entered into by the appellant with Shri Ashok Tiwari and M/s Newquest Outsourcing Pvt. Ltd. which is the 100% subsidiary company of the appellant. The appellant was holding 50% investment in share of IBILT at a cost of Rs. 9.26 crores. The said investment has been duly recorded and shown in the balance sheet of the appellant. The said tripartite agreement was required to be entered into by the appellant with Shri Ashok Tiwari in view of the certain differences in the management and also because of joint venture business was falling apart. In pursuance to the said agreement Shri Ashok Tiwari took over the entire act....
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....d and presently the company IBILT is under the control of Shri Ashok Tiwari and the shares Al lich were earlier held by the appellant are now no more the assets of the appellant out are the assets of Shri Ashok Tiwari. There is no basis to come to the conclusion,:hat the said transaction is sham, contrived or bogus. 5.3 As stated in the submission of the appellant, the word 'sham' has been defined as "being good in appearing but false infact", The Ld. AO has not sought to clarify as to what is the falsity invoked the transaction entered into by the appellant. None of the transaction entered ir.to by the appellant are illegal or done with intention of defrauding revenue. It .5 .: in such a context that it has been held in the case of AzadiBachaoAndolan, reported in 263 ITR 706 (SC), that the word 'sham' cannot be used as magic Mantras or catch all phrases to nullify the effect of a legal situation. The relevant portion of the order in case of Alok Ferro Alloys Ltd. (supra) wherein the above pronouncement of the honorable Apex Court is referred to is reproduced hereunder :- " .. If the transactions a-e not illegal or done with sole intensions of defr....
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....incur loss on shares. The transactions are through proper banking channel and genuineness of the same cannot be doubted. The decision of purchase and sale of shares has to be viewed from the point of view of businessman and not form the subjective standards of revenue. The various decisions relied upon by the counsel of assessee fully supports the case of assessee. 15. Considering the facts brought on record, we are of the view that it is difficult to hold, the only intention of the assessee was to purchase loss and thereby cause loss to exchequer. The assessee's adventure may be in bad taste and it ultimately resulted in a loss. But that is not sole test for allowing or not allowing a deduction." 5.5 The appellant is a juristic person and on account of loss in investment has lost entire sum of Rs.9.26 crores and hence it would be illogical to conclude that the appellant has entered into an transaction merely to save his tax. Considering the above totality of facts it is held that the disallowance of loss in the case of the appellant is unjustified and is therefore hereby deleted. These grounds are therefore allowed." 3.3 During the course of hearing, the l....
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....The ld. AR of the assessee thus submitted that the company is a juristic person and has lost entire investment of Rs.9.26 crores. The ld. AR of the assessee relied on the decision of ITAT Nagpur Bench decision in the case of Alok Ferro Alloys Pvt. Ltd. (ITA No. 30/Nag/1998 order dated 24-02-2006) and further submitted that ld. CIT(A) has rightly granted relief to the assessee by relying on the decision of ITAT, Nagpur Bench (supra). 3.6 We have heard both the parties and perused the materials available on record. It is noted by the AO during the course of assessment proceedings that the assessee had incurred long term capital loss of Rs.10,73,94,634/- in respect of shares of I-BILT Technologies for which the ld. AR of the assessee submitted that the assessee had entered into a joint venture with one Shri Ashok Tiwari in the name and style as I-BILT Technologies Ltd. which was incorporated under 50/50 ownership. The said I-BILT technology was engaged in providing information technology related solutions to various companies including Ballarpur Industries Ltd. and its affiliates & subsidiaries. The AO also noted in the assessment order that due to certain differences in the manage....
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....ealt with the facts and evidence on record extensively while granting relief in the case of appellant. Detailed order passed by the CIT(A) indicating reason for deleting the addition has been reproduced in the paragraphs hereinabove. We are in agreement with the findings and reasoning recorded by CIT(A) deleting the addition in the case of appellant. It is settled position of law that apparent is real in terms of judgment of Hon'ble Apex Court in the case of CIT vs Daulat Ram Rawatmull reported at 87 ITR 349(SC). Sale transaction of shares is in terms of legal agreement placed on record. Appellant has given sufficient reasons to explain the transaction of sale of shares for business consideration with unrelated party. It is equally settled by Hon'ble Jurisdictional High Court that transaction has to be considered from the point of view of businessman and not from subjective standard of Revenue. Transaction of sale of share is corroborated by legal documents which have not been faulted or found to be false or incorrect. On above undisputed factual position disallowance of long term capital loss on sale of shares is unjustified. Considering the totality of facts and circumsta....
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....e from the operating entities and will exercise transparency in its dealings. Several Corporate functions will now form part of the Avantha Holdings Ltd., include Group Finance, Corporate Affairs, Group Governance, Group Human Resource, Strategy and Business Development, Group Corporate Communication and CSR. As these functions consolidate as corporate functions, the details of their roles and activities shall be framed in due course. Accordingly, Avantha Holdings has already started now (year 2009-10) in entering into an agreement with various companies under its aegis as "right to use of Avantha Group Brand, Logo and other material." Further the agreement would also cover other aspects like (1) usage of Corporate Office of Avantha Group for companies such as Crompton Greaves Ltd. (2) providing of intellectual capital/ services from Avantha Group (3) usage of expertise areas of Avantha group like Risk Management, Finance, Secretarial, Legal etc. etc. Further from a detailed study of the investment schedules, you will find out that operation of the Avantha Group extended from paper to power and from Bangalore (India) to Europe/USA through its constituent member such as Cro....
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.... Fees of Professional Consultants. The AO considered the explanation of the assessee and noted that in Laymen's language the assessee has stated that Avantha Holdings has developed a logo/websites and related activities for propagation and brand building. For that purpose the above expenses were laid out. The AO noted the trade mark and logo expenses account forRs.63.51 lakhs and they cover varies facets of the work including design, registration of the logo and trade mark and other IPR related activities. The AO further noted that the business development expenditure connects to a grant of Rs.30 Lakhs to CII which will associate the brand at National and International level at CII Forum. Advertisement expenses are incurred on contributions of Rs.25 Lakhs to Women Golf Association of India and Professional Charges of Rs.1.98 crores are incurred on fees for professional consultants. The AO further observed that the assessee is creating capital asset like Brand, Logo, Trademark and goodwill etc. and the expenditure incurred towards it will be treated as a capital expenditure. The AO thus noted that the activity of the assessee is of `Brand Building which is capital assets and ....
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....and are in the nature of allowable business expenditure. Similarly the business development expenditure of Rs.30 lacs is on account of business development expenses. The aforesaid sum has been paid by assessee to Confederation of Indian Industries (CII) at national level of which assessee is one of the member. As the appellant is a member of the said association the said expenditure is revenue expenditure as no capital asset or benefit of enduring nature. In view of the above facts the expenditure incurred of Rs. 30 lacs is allowable business expenditure. The above conclusions are based on various judicial pronouncements on similar facts and are discussed in subsequent paragraphs. 7.2 In the case of Godrej Tea Ltd, Mumbai vs Department Of Income Tax the Mumbai bench of the honorable ITAT (ITA No. 6424/Mum/2007) the issue of expenses incurred on brand promotion has been decided in favour of the appellant. In the said case, the assessee company was engaged in the business of manufacturing and selling tea and other products. During the course of assessment it was interalia observed by the Assessing Officer that the assessee has incurred heavy expenditure on brand promotion am....
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....as a finding correctly reached by the Tribunal. The fact is now so much well established in the commercial world that a judicial notice can be taken thereof that all major tournaments world over are sponsored by one or the other business houses purely to further their business interest. This is an activity of business promotion through advertisement which the sponsoring of the tournaments carries with it. 8. If any precedent is needed, the decision rendered by the Delhi High Court in CIT v. Delhi Cloth & General Mills Co. Ltd. may be noticed wherein the assessee company was running a number of mills. The assessee company was also organising all India tournaments in hockey and football. The question arose whether the expenditure incurred by the assessee company in organising and sponsoring such sports tournaments could be allowed as business expenditure in terms of Section 10(2)(xv) of the Indian IT Act of 1922. Section 10(2)(xv) of the Act of 1922 is corresponding section of Section 37 of the IT Act, 1961. In the aforesaid decision, the Delhi High Court upheld the Tribunal's finding that by holding the tournament the assessee got publicity for its business and the repo....
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....sum of Rs. 5,00,000 ought to have been allowed as an expenditure incurred in the interest of the business of the respondent company. The expenditure, incurred in connection with sponsoring of the Centenary celebrations of Cotton College, at Guwahati, by Anand Bazar Patrika Ltd. and the sponsoring the State Level National Children Congress in Assam, were also allowable, because the respondent company's banners, as sponsors of the events, were displayed at the said functions. Therefore, the said expenditure were held by the Tribunal to be wholly and exclusively incurred in connection with the business. While allowing the respondent company's claim, the learned Tribunal relied on a decision of the Calcutta High Court, in Assam Brook Ltd. case (supra), wherein a sum of Rs. 5,00,000 was paid by the assessee to a dub ..., 27. In view of the above propositions of law, we are of the considered view that it is for the assessee (respondent company in the present case) to decide where and in what manner publicity of its business is to be done and what benefit it will derive for its business by making such publicity. Consequently, we do not find any infirmity in the order of t....
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....ded by the ld. AO. On consideration, I find that the issue of deferred revenue expenditure on account of advertisement and brand building has come up before the Hon'ble IT AT, Delhi for the A Y 2003-04 in the assessee's own case. In the order dated 15.03.2011, the Hon'ble ITAT has allowed the claim of the appellant company with the following observations :- "6. We have carefully considered the rival submissions in the light of the material placed before us. The details of expenditure incurred by the assessee are filed at pages 14-28 of the paper book. As per para 5.2 of Schedule 21, the following note relevant to the impugned issue was filed by the assessee :- "5.2 During the year company has spent Rs.44,734,823/- on advertisement & brand building expenses to build its brand "GETIT" in the yellow pages segment of the business. Out of the above a sum of Rs.14,815,150/- is spent on brand building expenses, of which a sum of Rs. 3,703,787/- has been charged during the year and the balance of Rs.11,111,363/- has been carried as miscellaneous expenditure to be charged over a period of next three years." 7. As it can be seen from the above note, the....
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....party. The expenditure on advertisement and sales promotion constituted expenditure incurred on press advertisement, hoardings, neon signs, brochures, etc. The press advertisements could not be considered as capital asset acquired by the assessee. Similarly, putting hoardings and neon signs could not also be considered on capital field. The expenditures do not lead to create any capital asset to the assessee. Even there is no benefit of enduring nature so to treat the expenses as capital expenditure. Since by incurring expenditure on advertisement and sales promotion, the assessee has not acquired any fixed capital asset, but these expenditures were incurred for earning better profits, and for facilitating assessee's operation of providing cellular mobile services, there exist direct nexus between the advertisement and sales promotion expenses and the carrying out of the business activity of the assessee. We, therefore, do not find any justification in interfering with the order of the CIT(A) in deleting the disallowance of 10 percent of expenses towards advertisements and sales promotion incurred by the assessee for smooth functioning and carrying on assessee's business ef....
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....ere is nothing to suggest that the expenditure is of capital nature. In ACIT vs. AshimaSyntex Ltd., 310 ITRSP 1(SB, Ahmedabad) in identical circumstances, it was observed that the concept of deferred revenue expenditure is essentially an accounting concept and alien to the Act. The relevant provisions of the Act recognise only capital or revenue expenditure. Deferred revenue expenditure denotes expenditure for which a payment has been made or a liability incurred, which is essentially revenue in nature but which for various reasons like quantum and period of expected future benefit etc. is written off over a period of time e.g. expenditure on advertisement, sales promotion etc. Though the nature of such expenditure is revenue, keeping in view the fact that the benefits arising therefrom are expected to be derived over a period of time, stretching sometimes over several accounting years, the assessee have been amortising the same over the expected time period over which the benefits are likely to accrue therefrom. Accordingly, only a proportion of such expenditure is amortised in the Profit and Loss Account but an appropriate adjustment is made in the computation of income, claiming....
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....t of view taken by the Hon'ble jurisdictionl High Court in their decision dated 8.9.2011 in the assessee's own case as also by the Special Bench in the aforesaid decision in Ashima Syntex Ltd.(supra), we do not find any merit in the ground raised by the Revenue. Therefore, ground No. 1 in the appeal of the Revenue is dismissed. 7.7 Similarly in the case of Pane Biscuits Pvt. Ltd, Mumbai vs Department Of Income Tax. The Mumbai ITAT Bench (I.T.A. No. 5320/Mum/2006, I.T.A. No. 5321/Mum/2006, I.T.A. No. 1412/Mum/2006 & I.T.A. No. 2802/Mum/2007), the Id. AO noted that the assessee has incurred an expenditure of Rs. 16.88 crores on publicity and brand advertising and fifty percent of this expenditure amounting to Rs. 8.44 crores has been debited in the books of accounts and the balance 50% was claimed in the computation of income. On said facts it was held as under :- "38. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute in as much as the assessee has incurred expenditure of Rs. 16.88 crores on publicity and brand advertising and out of it the assessee has debite....
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....s seen that the expenditure incurred by the assessee is not creating any enduring benefit of an asset but is rather helping the assessee in augmenting its sales and resultantly its profit. Even if it is presumed that the building of brand image of "Nirvana" is giving advantage of enduring benefit to the assessee, still it would be on revenue account as there is no creation of a tangible or intangible asset of enduring nature to the assessee. The hon'ble Supreme Court in the case of Empire Jute Co. Ltd. v. CIT [1980] 124 JTR 113 Taxman 69 (SC), has held that no tests for distinguishing between capital and revenue expenditure is paramount or conclusive. There is no all-embracing formula which can provide a ready solution to the problem, whether it is a capital expenditure or revenue expenditure. Their Lordships have held that even tests of enduring benefit at times gets failed as not each and every advantage of enduring nature can be of capital field. The most celebrated observations of their Lordships on this account are reproduced herein below (headnote) : "There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, none the....
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....professional services are so intricately related to carrying on or the conduct of the business that they have to be regarded as integral part of the profit-earning process and not for an acquisition of an asset or a right of permanent character and are in the nature revenue expenditure and hence held to be allowable. 7.10 With regard to the expenditure incurred in respect of rent at Rs.116.86 lacs. Sufficient evidence has been brought on record by the appellant to establish that the said property is being used for the purpose of its business. The said property situated in UK and is being used for marketing of products of the appellant in various areas of Europe and expenses incurred on rent are allowable business expenses and cannot be considered to be expenditure in capital nature. The various purposes for which the said property was put to use were submitted before the Id. AO during assessment proceedings. No evidence has been brought on record to establish that the said expense is bogus or inflated. The expenditure incurred on rent has to be allowed as business expenditure in terms of provisions of section 30 of I.T. Act 1961. The expenses incurred on rent for the premi....
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.... ITR 323 (Gau) 4. CIT vs Lake Palace Hotels & Motels (P)Ltd (2007) 293 ITR 281 (Raj) 5. Rajasthan Spinning & Weaving Mills Ltd.(2005) 274 ITR 463 (Raj) 6. CIT vs Delhi Cloth & General Mills Co. Ltd. (1978) 115 ITR 659 (Del) 7. CIT vs Modi Olivetti Ltd. (2013) 94 DTR 398 (All.) 8. Empire Jute Co. Ltd. vs CIT 124 ITR 001 (SC) 9. FineJewellery (India) Ltd. Vs ACIT (2012)19 ITR (Trib) 746 (Mumb) Thus, the ld. AR supported the order of the ld, CIT(A) and submitted that the ld. CIT(A) has rightly deleted the additions made by the AO. 4.5 We have heard both the parties and perused the materials available on record. From the available records, it is noted that the AO during the course of assessment proceedings made the addition of Rs.4,33,70,349/- under different heads mentioned hereinabove which has been deleted by the ld. CIT(A) during the course of hearing before him giving detailed findings in his order that the expenses incurred for advertisement, brand building and logo/trade mark and for professional services are related to carrying on the business and they have been regarded as integral part of the profit earning process a....
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.... CIT[2016] 236 Taxman 447 [2015] 63 taxmann.com 308/379 ITR 0347 wherein it was held that once it was established that there was nexus between expenditure and purpose of business, Revenue could not justifiably claim to put itself in the arm-chair of a businessman or in the position of Board of Directors and decide how much was reasonable expenditure. 17. Thus, in the light of the above legal position, it is not for the Assessing Officer to decide what would be good for the assessee in promoting its business and therefore, decision cannot be arrived at by the Assessing Officer based on his own personal perceptions and it should be left to the decision of the assessee, who is the best person, who knows that what would be best for his business activity. 22. Further, the CIT(A) rightly took note of the decision in Delhi Cloth & General Mills Co. Ltd. (supra) by observing that the power of the Revenue is confined only to examine the purpose of genuineness of the expenditure and not the expediency or the quantum. Expenditure incurred on development of brand in respect to existing activity of business is clearly allowable business expenditure and cannot be considered ....
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....ld. AR submitted that the ld. CIT(A) has rightly deleted the addition. 5.5 After hearing both the parties and perusing the materials available on record, we find that the assessee had share capital and reserve surplus to the tune of Rs.127.60 crores which is sufficient for the assessee to explain loan/advance of Rs.37 lacs to M/s. Thapar Polytechnic, Patiala as interest free advance. It is also noted that the AO has not brought on record any adverse evidence on the issue in question. Respectfully following judicial precedent relied upon by the learned CIT(A), we hold that addition made by the AO was unjustified. In this view of the matter, we find no reason to interfere with the order of the ld. CIT(A). Thus Ground No.4 of the Revenue is dismissed. 6.1 Apropos Ground No. 5 of the Revenue, brief facts of the case are that the AO during the course of assessment proceedings observed that the assessee had short deducted TDS as per the Schedule XIV submitted alongwith the audit report. The AO thus noted that the proportionate disallowance of expenditure representing short fall is worked out at Rs.50,48,041/- u/s 40(a)(ia) of the Act which the AO added to the income of the assessee....
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....f shares were held for a very short period of time while in the year under consideration, the appellant has entered into a limited number of transactions and has held the shares for years. 5.1 The Hon'ble ITAT also relied on the case of GopalPurohitvs JCIT 20 DTR 99 (supra) wherein it has been held that the appellant's claim for short term and long term capital gain from the transaction in shares have been allowed on identical facts in earlier assessment years and that therefore the same could not be disallowed in the year under consideration only because the transaction conferred certain benefits of the appellant. It is further stated in the said judgement that modus operandi of appellant is the same and therefore, the appellant's claim deserves to be accepted by the following rule of consistency. Following the said decision of GopalPurohitvs JCIT (supra), the Nagpur Bench of ITAT has given relief to the appellant in AY 2004-05. 5.2 Even during the year under consideration, it is evident that shares which have been sold by the appellant have been consistently shown as investment in its books of accounts over the years. This fact has not been refuted b....
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....it is also a fact that most of these shares have been held by the assessee for the last several years. To this effect, the ld. CIT(A) has relied on the decision in the case of GopalPurohitvs JCIT 20 DTR 99 and further observed that ITAT Nagpur Bench has given the relief to the assessee in view of decision of GopalPurohitvs JCIT (supra). It is also pertinent to mention that in the immediately preceding year, similar transaction had been treated by the AO to be assessable under the head capital gains. In this view of the matter, we concur with the findings of the ld. CIT(A) on the issue in question. Thus, Ground Nos. 1 and 2 of the Department are dismissed. 10.1 Apropos Ground 2 and 3 of the Department wherein the ld. CIT(A) had allowed the assessee's claim of Brand Development Expenses of Rs.6.96.73.647/-. 10.2 After hearing both the parties and perusing the materials available on record, the Bench finds that this issue has been decided by this Bench in the case of the assessee for the assessment year 2008-09. Thus the decision taken by this Bench in the case of the assessee for the assessment year 2008-09 shall apply mutatis mutandis in the case of the assessee for the as....
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....foreign exchange fluctuation is a capital receipt which is not acceptable and thus the claim of the assessee company was denied by the AO and the AO made an addition of Rs.1,51,54,918/-. 14.2 In first appeal, the ld,.CIT(A) has allowed the addition of Rs.151.54 lacs made by the AO by observing at para 7 to 8 of his order as under :- "7. I have carefully considered the facts of the case and the submission of the appellant. In the given set of facts, it is evident that the gain/loss on foreign exchange fluctuation is a capital receipt. It is also a fact that loss on account of foreign exchange fluctuation in the immediately8 preceding year was not claimed by the appellant in the return of income itself. Thus, the AO having not allowed the foreign exchange fluctuation loss in the immediately preceding year ought not to have assessed foreign exchange fluctuation gain as revenue income at the hands of assessee in previous year under consideration. 7.1 In any case, it has been held in the case of Triveni Engineering Works Ltd. vs. CIT (supra) as under :- The law has been declared by the Supreme Court in Stitlef Cotton Mills Ltd. Vs. CIT 1978 CTR (SC) 155: (1....
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.... decisions. 1. Gati Limited Vs ACIT (ITA No. 1467/Hyd/2017 dated 20- 06-2018 - ITAT Hyderabad) 2. Triveni Engineering Works Ltd. vs CIT (1985) 156 ITR 202 (Delhi) 3. Padamjeep Pulp & Paper Mills Ltd. vs CIT, 210 ITR 97 (Bom.) Thus the ld. AR of the assessee prayed that the ld. CIT(A) has rightly deleted the addition made by the AO. 14.5 We have heard both the parties and perused the materials available on record. It is noted that the AO made an addition of Rs.1,51,54,919/- on account of foreign exchange fluctuation gain. The ld. CIT(A) taking into consideration the factual position as well as the decision of Hon'ble Delhi High Court in the case of TriveniEngineerng Works vs CIT(A) (supra) deleted the addition made by the AO by observing as under :- 8. Considering the above facts and clear legal position, the addition made of Rs. 151.54 lacs, being net foreign exchange fluctuation gain, is directed to be deleted. This ground is therefore allowed. It is also noted that the ld. AR of assessee during the course of hearing prayed that the matter in respect of loss arising on foreign exchange fluctuation in immediately preceding year is pe....
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.... 13.25% annually. As per assessee, premium of Rs.3,63,01,37 0/- was accrued on bonds as computed at the close of the year. According to the AO, the claim of the assessee company is not acceptable as the expenditure laid out is interest/ premium on debenture which will be due for redemptions on 12-09-2012. Thus according to the AO, the expenditure is allowed as deduction when such expenditure becomes payable or paid and this expenditure will actually become due on redemption of debentures on 12-09-2012 and it cannot be assumed to be expenditure for the years. According to the AO, the premium is payable in the nature of interest. Section 40(a)(ia) of the I.T. Act has its own role to play for the purpose of allowance under the Act. The AO thus rejected the claim of the assessee amounting to Rs.3,63,01,370/- as the assessee company has not deducted the tax in this year. The AO thus relied on the decision of Hon'ble Supreme Court in the case of Goetze (India) Ltd. vs CIT (2006) 157 Taxman 1(SC) and the AO further held that the amount cannot be allowed for the fact that the same was not claimed by the assessee in the return of income. Hence, the AO made an addition of Rs.3,63,01,370/....
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....S is to be made cannot be ascertained. The above contention of the appellant gets supports from the findings given in the case of Industrial Development Bank of India Vs. ITO (supra) wherein it has been held that when the tax deductor cannot ascertain the beneficiary of credits, the tax deduction mechanism cannot be put into service. The relevant portion of the findings of the Hon'ble Mumbai ITAT is reproduced as under :- "We agree with the merits of the stand so taken by the CDBT. The deduction of tax at source can only be effected when payee is known. As far as the situation before us is concerned, the regular return bonds being transferable on simple endorsement and delivery and the relevant registration date being a date subsequent to the closure of books of account, the assessee could not have ascertained the payees at the point of time when 'the provision for interest accrued but not due was made. Accordingly, no tax was required to be deducted at source in respect of the provision for interest payable made by the assessee which reflected provision for 'interest accrued but not due' in a situation where the ultimate recipient of such 'interest acc....
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....cision of ITAT Hyderabad Bench in the case of Gati Limited (ITA No. 1467/Hyd/17 dated 20-06-2018). The ld. AR further submitted that the convertible debentures were transferrable before the date of maturity and the entire premium was to be paid on 12-09-2012. The bounds could be transferred by delivery and therefore, the ultimate payee of premium could not be identified as bonds may undergo transfer in between the date of previous year ending and the date of maturity. Payee of the premium was not identifiable and hence it was not possible to deduct TDS in respect to premium accrued upto the end of accounting year. The assessee has deduced and paid TDS at the time of payment of Bonds on12-09-2012 and no disallowance is made u/s 40(a)(ia) of the Act. To this effect, the ld. AR of the assessee relied on following decisions. 1. Industrial Development Bank of India vs ITO (ITAT, Mumbai "H" Bench in ITA No.6439/Mum/1997 dated 31st July 2006 wherein the Bench concluded that tax can be deducted at source only when payee is known and identifiable; regular return bonds issued by the assessee being transferable by simple endorsement and delivery and the relevant registration date bei....
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....e Hon'ble Jurisdictional High Court has rendered the judgment after duly considering the judgment of Hon'ble Apex Court in the case of M/s. Goetze (India) Ltd. relied upon by A.O. In view of above considering the claim of assessee and allowing deduction in the appellate proceedings by CIT(A) cannot be faulted. On merits allowability of deduction is covered in favour of ACIT, CIRCLE-7, NAGPUR VS M/s. Newquest Corporation Ltd. (Now known as Avantha Holdings Ltd) assessee in terms of judgment of Hon'ble Apex Court in the case of M/s Madras Industrial Investment Corporation Ltd. reported at 225 ITR 802(SC). The learned departmental representative has not contravened the submission of appellant in the course of hearing before Tribunal. The direction of Hon'ble CIT(A) to allow accrued premium as deduction for computing the income from business on issue of nonconvertible debenture cannot be faulted. The nonconvertible debentures are transferable by delivery and thus payee of debenture remains not identifiable till the date of redemption on 12/09/2012. In the absence of payee being identifiable it is not possible to deduct tax at source under the provisions of Income Tax Ac....
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....hus further observed that the facts of the case in A.Y. 2010-11 are the same as in A.Y. 2009-10. Following the order of the AO for the A.Y. 2009-10, loss on sale of share was treated as business loss for this year also. 16.2 In first appeal, the ld. CIT(A), accepted the long term capital loss as claimed by the assessee amounting to Rs. 1,78,70,639/- by observing at para 13 to 14 of his order as under :- "13. It is seen that the said issue already stands covered in favour of the appellant in view of the judgment of the Hon'ble ITAT, Nagpur Bench in appellant's own case for AY 2004-05 and the relevant extract of the judgment has already been reproduced in Para D above in the appellant's submission. The Hon'ble ITAT has held that appellant has been showing the said shares as investment in its books of account and not as stock in trade and that the surplus arising on sale of share was a long term capital gain which had been so accepted by the revenue authority in earlier years and that therefore there was no justification for not accepting the explanation for short term capital gain. It is important to note that the above judgment was given by the Hon'bl....