DCIT, New Delhi V. M/s. Mosaic India Pvt. Ltd., New Delhi

ITA 2325/DEL/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6766 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 5 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 20-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 144C; 274

Judgement Text

1 ITA NO. 2325/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE MS SUCHITRA KAMBLE, JU DICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEM BER I.T.A. NO. 2325/DEL/2 015 (A.Y. 2009-10) DCIT CIRCLE 17(1), NEW DELHI (APPELLANT) VS . M/S. MOSAIC INDIA PVT. LTD. Y-65, GROUND FLOOR, HAUZ KHAS, NEW DELHI- 110016 PAN : AACCC4033C (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 30.01. 2015 PASSED BY CIT(A)- VI, NEW DELHI FOR ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL ARE AS UNDER : 1. WHETHER ON THE FACTS & CIRCUMSTANCES OF THE CASE & IN LAW, THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 13,11,26,585/- ON A CCOUNT OF LOSS INCURRED ON SALE OF BONDS HAVING SPAN OF 16 TO 23 YEARS RECEIVED IN LIEU OF CASH SUBSIDY AND REGARDED AS A CAPITAL LOSS BY T HE A.O. 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND I S NOT TENABLE ON FACTS AND IN LAW. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEN D OR FOREGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF A PPEAL. APPELLANT BY SH. MANONEET DALAL, MS. MANISHA JAIN, SH. VISHU GOEL, CAS RESPONDENT BY SH. AMIT KATOCH, SR.DR DATE OF HEARING 07.08.2019 DATE OF PRONOUNCEMENT 15.10.2019 2 ITA NO. 2325/DEL/2015 3. THE ASSESSEE IS A COMPANY INCORPORATED IN INDIA UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF IMPORT AND EXPORT OF FERTILIZERS, DOMESTIC TRADING AND DIS TRIBUTION OF FERTILIZERS AND INCIDENTAL ACTIVITIES SUCH AS STEVEDORING AND WAREH OUSING SERVICES. THE ASSESSEE COMPANY ELECTRONICALLY FILED ITS REVISED R ETURN OF INCOME FOR THE SUBJECT YEAR ON 15.10.2010, DECLARING LOSS OF RS. 2 82,673,846 AND CLAIMING A REFUND OF RS. 177,258,732. FURTHERMORE, A PAPER COP Y OF THE SAID RETURN WAS FILED WITH THE OFFICE OF THE DCIT, CIRCLE 5(1), NEW DELHI. THE RETURN WAS SELECTED FOR SCRUTINY UNDER SECTION 143(3), AND VIDE ORDER D ATED 11.03.2013 PASSED UNDER SECTION 143(3) READ WITH SECTION 144C OF THE ACT, THE ASSESSING OFFICER ASSESSED THE INCOME OF THE ASSESSEE COMPANY AT RS. 30,050,180 WHILE MAKING THE FOLLOWING ADDITIONS: S.NO. ADDITIONS MADE BY AO AMOUNT (RS.) 1 DISALLOWANCE OF NOTIONAL LOSS/EXPENDITURE INCURRED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION 181,597,443 2 DISALLOWANCE OF LOSS INCURRED ON SALE OF SPECIAL GOVERNMENT OF INDIA FERTILIZER BONDS (BONDS) RECEIVED IN LIEU OF SUBSIDY FROM GOVERNMENT OF INDIA (GOI) 131,126,585 TOTAL ADDITIONS 312,724,028 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) ERRED IN DE LETING THE ADDITION OF RS. 13,11,26,585/- ON ACCOUNT OF LOSS INCURRED ON SALE OF BONDS HAVING SPAN OF 16 TO 23 YEARS RECEIVED IN LIEU OF CASH SUBSIDY AND RE GARDED AS A CAPITAL LOSS BY THE ASSESSING OFFICER. 6. THE LD. AR RELIED UPON THE DECISION OF THE CO-OR DINATE BENCH IN CASE OF 3 ITA NO. 2325/DEL/2015 DCM SHRIRAM CONSOLIDATED LTD. VS. ACIT (ITA NOS 274 & 1301/DEL/2013 ORDER DATED 14.10.2015). THE LD. AR ALSO RELIED UPON THE ORDER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED ALL T HE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE COMPANY HAS TO AC CEPT THE SPECIAL BONDS IN LIEU OF CASH/CHEQUE PAYMENT MADE BY THE GOVERNMENT OF INDIA PREVIOUSLY AGAINST THE AMOUNT OF FERTILIZER SUBSIDY RECEIVABLE BY THE COMPANIES. THESE BONDS HAVE BEEN ISSUED BY GOI ON FACE VALUE WITH MA TURITY OF 16 TO 23 YEARS. THESE BONDS ARE IN NATURE OF TRADING ASSETS OF THE COMPANY AND THE ASSESSEE COMPANY WAS NOT IN THE POSITION TO HOLD THESE BONDS AS INVESTMENT SINCE IT IS ISSUED BY THE GOVT. OF INDIA IN LIEU OF SUBSIDY REC OVERABLE IN CASH/CHEQUE AND DUE TO LACK OF FUNDS, THE ASSESSEE COMPANY WAS NOT ABLE TO HOLD THESE BONDS. THE DECISION OF THE TRIBUNAL IN CASE OF DCM SHRIRAM (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE. THE FACTS OF THE PR ESENT CASE IS ALSO IDENTICAL AND THEREFORE, THE CIT(A) WAS RIGHT IN HOLDING THAT THE SAME IS A REVENUE LOSS AND NOT THAT OF CAPITAL LOSS. THE CIT (A) HELD AS U NDER: 4.2.10 IT IS WELL SETTLED POSITION THAT MERE NOMEN CLATURE OR REFLECTION OR TREATMENT ADOPTED BY THE ASSESSEE FOR A PARTICULAR ITEM SUCH AS DISCLOSING THE SPECIAL BONDS ISSUED BY THE GOI UNDER THE HEAD INVESTMENT DOES NOT DETERMINE THE TAXABILITY OF SUCH ITEM. HONBLE SUPR EME COURT IN THE CASE OF KEDARNATH JUTE MFG. CO. LTD. [82 ITR 363] HELD THAT , WHETHER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEPE ND ON PROVISION OF LAW RELATING THERETO, AND NOT ON VIEW TAKEN BY THE ASSE SSEE NOR CAN BE EXISTENCE OR ABSENCE OF ENTRIES IN THE BOOKS OF ACCOUNTS BE D ECISIVE OR CONCLUSIVE IN THE MATTER IN THE CASE OF NATIONAL CEMENT MINES INDUST RIES LTD. VS. CIT [42 ITR 69], APEX COURT HELD THAT, THE CHARACTER OF THE RE CEIPT EITHER AS CAPITAL OR AS INCOME SHOULD NOT BE BASED ON THE NAME GIVEN TO THE AMOUNT RECEIVED BY THE ASSESSEE IN HIS RECORDS, BECAUSE IN LAW THE REAL NA TURE AND CHARACTER OF THE TRANSACTION MUST BE DETERMINED IN LIGHT OF THE TERM S OF THE CONTRACT AND RIGHT AND OBLIGATION OF THE PARTIES FLOWING THEREFROM UNG UIDED BY THE NOMENCLATURE OF THE TRANSACTION. IN VIEW OF THE ABOVE FACTUAL A ND LEGAL POSITION THE LOSS ON 4 ITA NO. 2325/DEL/2015 THE SALE OF BONDS IS A REVENUE LOSS AND, THEREFORE, THE AO IS NOT JUSTIFIED IN DISALLOWING THE SAME AS CAPITAL LOSS. THE APPEAL IS ALLOWED IN THIS GROUND. THE ADDITION THEREFORE, WAS CORRECTLY DELETED BY TH E CIT(A). THE REASONING GIVEN BY THE CIT(A) WAS CORRECT AND THERE IS NO NEED TO I NTERFERE WITH THE FINDINGS OF THE SAME. THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2019 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 15/10/2019 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI