ACIT 8(3)(1), MUMBAI, AAYAKAR BHAVAN, MUMBAI V. THIRUMALAI CHEMICALS LIMITED, MUMBAI

ITA 5032/MUM/2024

AI Insights

The case involves two appeals by the revenue against Thirumalai Chemicals Ltd., concerning the assessment years 2013-14 and 2014-15. The appeals challenged the CIT(A)'s decisions on various grounds related to the disallowance of interest expenses, treatment of foreign exchange fluctuation losses, and allowance of prior period expenses. The tribunal considered the precedents and findings of a coordinate bench in a similar case for AY 2012-13, which led to the dismissal of the appeals. The tribunal found that the CIT(A) had correctly applied the law and facts in allowing the expenses claimed by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398324 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Other Referred Cases: ITA Nos. 1273/Mum/2021 and 1683/Mum/2021 for AY 2012-13
• Laws Referred To: Section 36(1)(iii) of the Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: DEEPAK SHAH AW
• Keywords: Capital asset; Additional evidence; Revenue expenditure

Judgement Text

" |आयकर अपीलीय न्यायाधिकरण न्यायपीठ, म ुंबई| IN THE INCOME-TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, VICE PRESIDENT & SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER आयकर अपील सुं./ITA No. 5029/MUM/2024 (नििाारण वर्ा / Assessment Year :2013-14) आयकर अपील सुं./ITA No. 5032/MUM/2024 (नििाारण वर्ा / Assessment Year :2014-15) ACIT 8(3)(1), Mumbai Room No. 665A, 6 th Floor, Aayakar Bhavan, M.K. Road, Churchgate, Mumbai, Maharashtra- 400020 v/s. बिाम Thirumalai Chemicals Ltd. Thirumalai House, Road No. 29, Near Sion Hill Fort, Sion (E), Mumbai, Maharasthra-400022 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AAACT2015M Appellant/अपीलार्थी .. Respondent/प्रनिवादी निर्ााररती की ओर से /Assessee by: Shri Deepak Shah a/w Ms. Chetana Bohra राजस्व की ओर से /Revenue by: Shri Hemanshu Joshi, Sr. DR स िवाई की िारीख / Date of Hearing 04.06.2025 घोर्णा की िारीख/Date of Pronouncement 09.06.2025 आदेश / O R D E R PER NARENDRA KUMAR BILLAIYA [A.M.]:- ITA Nos. 5029/Mum/2024 & 5032/Mum/2024 are two separate appeals by the revenue preferred against to separate orders of NFAC, Delhi [hereinafter referred to as “CIT(A)”] dated 01.08.2024 for Assessment Years [AYs] 2013-14 P a g e | 2 ITA No. 5029 & 5032/Mum/2024 A.Y. 2013-14 & 2014-15 Thirumalai Chemicals Ltd. & 2014-15. Since the common grounds are involved in both these appeals, they were heard together and are disposed of by this common order for the sake of convenience and brevity, though the quantum may differ. 2. Representatives were heard at length on the facts of AY 2013-14 in ITA No. 5029/Mum/2024. The grievance of the revenue reads as under: “1 Ground No. 1 Whether the Ld. CIT(A) erred in deleting the disallowance of Rs. 1,06,76,766/- in interest expense without sufficient evidence from the assessee to prove that the investment in Taraderiv International was for business purposes as required by Section 36(1)(iii)? 2 Ground No. 2 Whether the Ld. CIT(A) erred in disallowing the interest only on current year overdraft amounting to Rs. 2,20,59,332/- and not on the cumulative overdraft amount of Rs. 7,57,03,928/- during F.Ys. 2010-11 to 2012-13 as part of disallowance u/s. 36(1)(iii) of the Act, as it related to the capital acquisition? 3 Ground No.3 Whether the Ld. CIT(A) erred in treating the foreign exchange fluctuation loss of Rs.94,12,972/- on the loan taken to acquire shares of the subsidiary as an allowable business expense, without considering that the loan was used for acquiring a capital asset and the loss is capital in nature? 4 Ground No. 4 Whether the Ld. CIT(A) erred in allowing the foreign exchange fluctuation loss of Rs. 94,12,972/- as an allowable business expense, despite the loss arising from a loan taken for acquiring shares of a subsidiary, which constitutes a capital transaction, thereby misapplying the provisions of the ICDS that pertain solely to revenue transactions?\" 5 Ground No. 5 Whether the Ld. CIT(A) erred in allowing the expenses of Rs. 53,82,230 for the current year, despite the fact that these expenses were related to a prior period and the assessee did not provide sufficient evidence to show that they were crystallized in the current year? 6 Ground No. 6 Whether the Ld. CIT(A) erred in allowing the expenses of Rs. 53,82,230/- by admitting the additional evidences without recording any reason for admitting the documents and without remanding the same to the Assessing Office under Rule 46A of Income Tax Rules to verify the additional evidences.” P a g e | 3 ITA No. 5029 & 5032/Mum/2024 A.Y. 2013-14 & 2014-15 Thirumalai Chemicals Ltd. 3. At the very outset, it has been brought to our notice that the issues raised in the captioned appeals were considered by the coordinate bench in ITA Nos. 1273/Mum/2021 and 1683/Mum/2021 for AY 2012-13. 4. We have carefully perused the order of the coordinate bench (supra) qua the grievance of the revenue. We find force in this contention and find that similar issues were considered by the coordinate bench in the assessee’s own case in AY 2012-13. 5. The issues raised in ground No. 1 were considered by the coordinate bench in AY 2012-13 and decided as under: “On the other issue, the CIT(A) has granted relief in respect of interest expenses amounting to Rs. 33,72,105/-, the contentions of the Ld. DR that the claim has to be disallowed as no proper explanations and evidences were filed. We find the CIT(A) considered the source of barrowed funds and its utilization for the purpose of business and granted the relief. The Ld. DR could not controvert the findings of the CIT(A) with any new evidence or information on these two disputed issues to take a different view. Accordingly, we do not find any infirmity in the order of the CIT(A) on these disputed issues and uphold the same and the grounds of appeal of the revenue are dismissed.” On finding the parity of the facts, respectfully following the decision of the coordinate bench, ground No. 1 is dismissed. 6. The issues raised vide ground No. 2 were considered by the coordinate bench as under: 10. The The fourth disputed issue that, the lower authorities have confirmed the disallowance of interest paid to GIDC in respect of industrial land allotment. The CIT(A) has dealt at page 20 para 6.4 as under: 6.4 Ground No. 5 The Assessing Officer disallowed interest of 38,24,845. This interest was calculated at rate of 13% of an amount of Rs. 3,15,85,264/ paid to GIDC from Axis Bank cash credit account. The assessee claimed that this amount was paid out of internal accruals and therefore no disallowance should be made. P a g e | 4 ITA No. 5029 & 5032/Mum/2024 A.Y. 2013-14 & 2014-15 Thirumalai Chemicals Ltd. To verify the claim of assessee, the assessee was asked to produce a copy of bank account for the relevant period however, the assessee submitted summary of bank account for the relevant period. On the given date the opening balance was (-)15.53 Cr., there were credits of 5.36 Cr. and debit of Rs. 3.95 Cr.. From the above, it can be seen that the money received by assessee from business went to reduce the negative balance. The money given to GIDC resulted in increase in debit balance. This shows that the money was paid out of the borrowings from bank. In view of the above, the assessee should have capitalised this interest as per proviso to section 36(1)(iii). In view of the above, this disallowance of interest is upheld. This ground of appeal is dismissed The Ld.AR has made submissions on the claim. Since we took a reasonable view that interest on loan on land cannot be allowed as revenue expenditure till it commenced the production in the ground of appeal dealt at Para 9. Therefore we can not accept the Ld.AR contentions and up hold the action of the CIT(A) and dismiss this ground of appeal of the assessee.” 7. In line with the above findings of the coordinate bench, no disallowance has to be made on the cumulative overdraft amount during FY 2010-11 to 2012- 13, and only interest pertaining to the year under consideration has to be considered. Therefore, we decline to interfere with the findings of the CIT(A). Ground No. 2 is also dismissed. 8. The grievance raised vide ground Nos. 3 & 4 are consequential to the grievance raised vide ground No. 1. Since ground No. 1 is dismissed, ground No. 3 & 4 become infructuous. 9. Ground Nos. 5 & 6 relate to the allowance of the expenses of the prior period. After giving a thoughtful consideration to the assessment order, we are of the considered view that the AO has proceeded on the wrong assumption of fact. The AO was of the opinion that the impugned expenditure did not accrue during P a g e | 5 ITA No. 5029 & 5032/Mum/2024 A.Y. 2013-14 & 2014-15 Thirumalai Chemicals Ltd. the year under consideration, whereas the impugned expenditure was actually crystallised during the year. Since the liability was crystallised during the year, though the expenditure was of prior years, the same was claimed during the year of crystallisation of the liability. Therefore, we do not find any reason to interfere with the findings of the CIT(A). 10. Ground No. 5 is dismissed, and since there is no element of any additional evidence considered by the CIT(A), there is no violation of Rule 46A. Ground No. 6 is also dismissed. 11. Considering the facts in totality, ITA No. 5029/Mum/2024 is dismissed, and since the facts are identical in ITA No. 5032/Mum/2024, though the quantum may differ, the same is also dismissed. 12. In the result, both the appeals of the revenue are dismissed. Order pronounced in the open court on 09.06.2025. Sd/- Sd/- SAKTIJITT DEY NARENDRA KUMAR BILLAIYA (उपाध्यक्ष/VICE PRESIDENT) (लेखाकार सदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai दिन ुंक /Date 09.06.2025 अननक ेत स ुंह र जपूत/ स्टेनो आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT P a g e | 6 ITA No. 5029 & 5032/Mum/2024 A.Y. 2013-14 & 2014-15 Thirumalai Chemicals Ltd. 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यानित प्रनत //True Copy// आदेशािुसार/ BY ORDER, सहायक िंजीकार (Asstt. Registrar) आयकर अिीलीय अनर्करण/ ITAT, Bench, Mumbai. "