DEUTSCHE INVESTMENTS INDIA P.LTD, MUMBAI V. CIT 6, MUMBAI

ITA 3665/MUM/2014

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 3260 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 22-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Revision of order; Depreciation; Opportunity of being heard; Period of limitation; Revenue expenditure; Set aside
• Section: 143(3); 142(1); 143(2); 43; 13; 22; 263

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVAN KUMAR GADALE (JM) I.T.A. NO. 3665/MUM/2014 (ASSESSMENT YEAR 2008-09 ) DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED NIRLON KNOWLEDGE PARK 3 RD FLOOR, BLOC B-1, OFF WESTERN EXPRESS HIGHWAY GOREGAON EAST MUMBAI-400 009. PAN : AACCD1765E VS . CIT-6 AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI-400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI PERCY PARDIWALA DEPARTMENT BY SHRI K. MADHU SUDAN DATE OF HEARING 16.09.2020 DATE OF PRONOUNCEMENT 06.11.2020 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINS T ORDER OF LEARNED COMMISSIONER OF INCOME TAX [IN SHORT LEARNED CIT] D ATED 26.3.2014 AND PERTAINS TO ASSESSMENT YEAR 2008-09. 2. THE GROUNDS OF APPEAL READ AS UNDER :- 1. (A) THE COMMISSIONER OF INCOME TAX -6, MUMBAI (H EREINAFTER REFERRED TO AS CIT) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 263 OF THE INCOME TAX ACT, 1961 ('THE ACT') WERE APPLICABLE TO THE FACTS OF T HE APPELLANT'S CASE. THE ORDER DATED 26 MARCH, 2014 PASSED BY THE CIT IS BAD IN LAW, VOID, IN EXCESS OF AND/OR WANT OF JURISDICTION AND OTHERWISE ILLEGAL. (B) THE CIT ERRED IN SETTING ASIDE THE ASSESSMENT MADE VIDE ORDER UNDER SECTION 143(3) DATED 15 DECEMBER, 2011 AND HOLDING THAT IT WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE APPELLANTS PRAY THAT THE ORDER OF THE CIT PASSED UN DER SECTION 263 OF THE ACT BE QUASHED. 2. THE CIT ERRED IN DIRECTING AO TO FRAME FRESH AS SESSMENT ORDER (DE NOVO) AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE APPELLANTS. DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 2 3. THE CIT ERRED IN DIRECTING THE AO TO EXAMINE THE ISSUES RAISED VIDE ORDER UNDER SECTION 263 AND TAKE APPROPRIATE ACTION AS WARR ANTED BY THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE CIT ERRED IN SETTING ASIDE THE REGULAR ASSESS MENT ON THE ISSUE OF BROKEN PERIOD INTEREST AND HOLDING THAT BROKEN PERIOD INTEREST PAID ON PURCHASE OF SECURITIES WAS REQUIRED TO BE CONSIDERED AT THE TIME OF VALUING CLOSING STOCK AND THEN WORK OUT THE LOSS/PROFIT FROM TH E BUSINESS INCOME ACCORDINGLY. 5. THE CIT ERRED SETTING ASIDE THE REGULAR ASSESSME NT ON THE ISSUE OF CLAIM FOR DEBENTURE ISSUE EXPENSES. 6. THE CIT ERRED IN SETTING ASIDE THE REGULAR ASSESS MENT ON THE ISSUE OF CLAIM OF DEDUCTION FOR MARK TO MARKET LOSSES IN RELATI ON TO EQUITY LINKED NOTES. 3. BRIEF FACTS ARE THAT THE ASSESSING OFFICER IN TH IS CASE PASSED AN ORDER UNDER SECTION 143(3) OF THE I.T. ACT ON 15.11.2011. UPON THIS ASSESSMENT ORDER, THE LEARNED CIT INVOKED HIS JURISDICTION UND ER SECTION 263 OF THE I.T. ACT. IN THIS REGARD NOTICE UNDER SECTION 263 WAS IS SUED, AFTER CONSIDERING THE ASSESSEE REPLY LEARNED CIT PASSED THE FOLLOWING ORD ER UNDER SECTION 263 OF THE IT ACT :- 4. I HAVE PERUSED THE DETAILS SUBMITTED BY THE ASSES SES. I DO NOT AGREE WITH THE CONTENTION OF THE ASSESSEE THAT ASSESSMENT ORD ER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENU E. THE REASONS FOR COMING TO THIS CONCLUSION ARE AS UNDER : (I) AS REGARDS, THE CONTENTION IN THE SHOW CAUSE NOTI CE THAT RBI BEING REGULATOR OF NBFCS (FOR ASSESSEE ALSO RBI IS THE REGU LATOR, AS IT IS A NBFC) FOR THE ASSESSEE AND AO DID NOT VERIFY WHETHER THE ASSESSEE HAS COMPLIED WITH THE GUIDELINES ISSUED BY RBI OR NOT. THE ISSUE IS NO T WHETHER VIOLATION OF GUIDELINES WAS OBSERVED BY THE UNDERSIGNED OR NOT BUT THE BASIC FACT REMAINS THAT A.O. DID NOT CALL FOR ANY DETAILS AS TO WHA T ARE THE GUIDELINES ISSUED BY RBI WHICH ARE APPLICABLE TO THE NBFC AND FA ILED TO VERIFY WHETHER ALL THE CONDITIONS STIPULATED THEREIN HAVE BEEN MADE. THE A.O. HAS NOT DONE THE ASSESSMENT IN A PROPER MANNER AND THAT WAS THE SHO RT POINT WHICH WAS BEING EMPHASIZED IN THE SHOW CAUSE NOTICE. I ACCEPT THE ARGUMENT OF THE ASSESSEE THAT INTEREST HAS BEEN SHOWN ON ACCRUAL BASIS EVEN AFTER THE DUE DATE OF COUPON PERIO D TILL 31.03.2008. THE ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INT EREST OF REVENUE ON THIS POINT. I ALSO ACCEPT THE ARGUMENT OF THE ASSESSEE THAT IT WAS GRANTED LICENSE/REGULATOR OF NBFC WITHOUT ANY PERMISSION TO INV ITE PUBLIC DEPOSITS. THE ASSESSEE COMPANY WAS THEREFORE NOT REQUIRED TO M AINTAIN CERTAIN DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 3 SECURITIES IN THE FORM OF SLR AND HAS THEREFORE CORRE CTLY CONSIDERED ALL THE INVESTMENTS AS 'CURRENT INVESTMENT' AND TREATED THEM AS STOCK IN TRADE. THE ASSESSEE'S CONTENTION IN THIS REGARD HAS ALSO BEEN F OUND CORRECT. (II) AS REGARDS BROKEN PERIOD INTEREST, THE CASE LAW S CITED BY THE ASSESSEE [CITIBANK N.A. (CIVIL APPEAL NO. 1549 OF 2006 DATED 12 TH AUGUST, 2008), AMERICAN EXPRESS INTERNATIONAL BANKING CORPORATION ( 258 ITR 601) (BOMBAY), DEUTSCHE BANK AG (INCOME TAX REFERENCE NO. 500 OF 1997) ] ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE P RESENT CASE, IT IS NOT THE CASE THAT BROKEN PERIOD INTEREST REALIZED ON SALES HAVE BEEN BROUGHT TO TAX AS INCOME, WHILE DEDUCTION ON ACCOUNT OF BROKEN PE RIOD INTEREST FOR PURCHASE IS BEING DISALLOWED IN ENTIRETY. IN THE FACTS OF THE PRESENT CASE, WHAT OUGHT TO HAVE BEEN CONSIDERED FOR DISALLOWANCE BY THE AO IS BROKEN PERIOD INTEREST ON SECURITIES LYING UNSOLD AND SHOWN IN THE CLOSING STOCK. SINCE, BROKEN PERIOD INTEREST IS PART OF THE PURCHASE PRICE. TO THE EXTENT IT PERTAINS TO SECURITY WHICH REMAINS UNSOLD ON 31 ST MARCH AND IS REFLECTED IN CLOSING STOCK, SUCH SECURITY HAS TO BE VALUED AFTER I NCLUDING THE BROKEN PERIOD INTEREST. BROKEN PERIOD INTEREST ON SUCH SECU RITY WILL BE ALLOWED AS A DEDUCTION ONLY AT THE TIME OF SATE OF THESE SECURITIES. THESE FACTS ARE TOTALLY AT VARIANCE WITH CASES CITED BY THE ASSESSEE. IN THE PRESENT CASE, ASSESSEE HAS PAID RS,9,41,67/- A S BROKEN PERIOD INTEREST FOR 11.3% GOI BONDS 2010. LIKEWISE, RS.1,58,01,984/ - HAS BEEN PAID AS BROKEN PERIOD INTEREST AT THE TIME OF PURCHASE OF BO NDS OF HOUSING DEV. FINANCE CORPN. BOTH THE ABOVE BONDS WERE LYING UNSOLD AS ON 31.03.2008. THEREFORE, THIS INTEREST BEING PART OF PURCHASE CONSID ERATION WAS REQUIRED TO BE CONSIDERED AT THE TIME OF VALUING CLOSING STOCK AND THEN WORK OUT THE LOSS/PROFIT FROM THE BUSINESS INCOME ACCORDINGLY. (III) AS REGARDS DISALLOWANCE ON ACCOUNT OF PROVISIO N FOR DEPRECIATION ON THE INVESTMENT IS CONCERNED, THIS ASPECT WAS REFERRED ONL Y TO POINT OUT THAT A.O. ACTED IN A MECHANICAL AND PERFUNCTORY MANNER. IF THE SECURITIES ARE HELD AS 'STOCK-IN-TRADE' WHICH IS THE PRESENT CASE, THERE IS NO DO UBT IN MY MIND THAT ASSESSEE IS ENTITLED FOR DEPRECIATION OF INVESTMENT WH ICH IS NOTHING BUT DIFFERENCE IN COST AND MARKET VALUE AT THE END OF FIN ANCIAL YEAR. THE ASSESSEE IS ENTITLED TO VALUE 'STOCK-IN-TRADE' AT COST OR MARKET PRI CE WHICHEVER IS LOWER. THERE IS NO DOUBT IN MY MIND REGARDING ALLOWA BILITY OF CLAIM ON DEPRECIATION OF INVESTMENT. THE CIT(A) HAS CORRECTLY ALLOWED THE APPEAL OF THE ASSESSEE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. I AGREE THE ASSESSEE WAS ENTITLED FOR DEPRECIATION OF INVESTMENTS FULLY TO THE E XTENT OF CLAIM. I AGREE WITH THE ASSESSEE THAT NO ERROR IN THE ASSESSMENT ORDE R PREJUDICE TO THE REVENUE HAS BEEN CAUSED ON ACCOUNT OF THIS ISSUE. (IV) AS REGARDS DEBENTURE ISSUE EXPENSES, THE ISSUE IS NOT WHETHER THE DEDUCTION IS ALLOWABLE OR NOT. THE ISSUE IS WHETHER C LAIM OF THE ASSESSEE JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE TO THE EXTENT OF CLAIM OF DEDUCTION. THE A.O. DID NOT EXAMINE THIS ASPECT AT ALL I N THE COURSE OF SCRUTINY, AND FAILED TO CALL FOR RELEVANT DETAILS AND EXAMINE THEIR GENUINENESS. THE FACT THAT ASSESSEE HAS GIVEN THESE DETA IL DURING THE COURSE OF REVISION PROCEEDINGS ITSELF SHOWS THAT WHAT WAS BEI NG ALLEGED IN THE SHOW DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 4 CAUSE NOTICE IS CORRECT. THE AO HAS FAILED TO CALL FOR DETAILS OF DEBENTURE ISSUE EXPENSES BEFORE ALLOWING DEDUCTION. (V) LIKEWISE, IT IS NOTICED THAT NO INQUIRY WHATSOEVER HAS BEEN CAUSED BEFORE ALLOWING CLAIM OF DEDUCTION OF RS.1,42,44,981/-. HO W THIS LOSS AROSE WAS NECESSARY FOR A.O. TO EXAMINE BEFORE ALLOWING THE CLA IM? THE AO HAS FAILED TO VERIFY HOW THIS LOSS PERTAINING TO EQUITY LINKED NOT ES HAS BEEN ALLOWABLE AND HOW IT AROSE IN THE FIRST INSTANCE. FROM THE DETAILS FIF ED DURING REVISION PROCEEDINGS, IT IS APPARENT THAT NO DETAILS WERE CALLED FOR IN THE COURSE OF ASSESSMENT PROCEEDINGS. IT WAS ARGUED THAT ASSESSEE HAS RIGHTLY CLAIMED THE MARK TO MARKET LOSS, IN THE LIGHT OF DECISIONS OF BANK OF BAHRAIN AND KUWAIT, KOTAK MAHINDRA INVESTMENT LTD. PRIMA-FACIE, AO HAS FAILED TO CARRY OUT RELEVANT AND M EANINGFUL INQUIRIES BEFORE ALLOWING THIS LOSS ON THE BASIS OF MARK TO MAR KET TO THE NIFTY OPTION. WHETHER THIS LOSS CLAIMED IN THE COMPUTATION IS NOTIONA L EXPENDITURE OR NOT OUGHT TO HAVE BEEN EXAMINED BY A.O. IN LIGHT OF INSTR UCTION NO.3/2010 DATED 23.03.2010 ISSUED BY CBDT WHICH IS BINDING ON THE A. O. THE A.O. AS STATED ABOVE FAILED TO CALL FOR RELEVANT DETAILS. THIS LOSS BEING ARRIVED AT FOR OPEN DERIVATIVE POSITION NEED TO BE CONSIDERED AS PER INS TRUCTION NO. 3/2010 OF THE CBDT. THE A.O. FAILED TO FOLLOW INSTRUCTIONS OF T HE CBDT ON THIS REGARD. 5. IN THE LIGHT OF ABOVE DISCUSSIONS, I AM OF CONSIDE RED OPINION THAT ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF FAILURE OF THE AO TO CARRY OUT RELEVANT A ND MEANINGFUL INQUIRIES. THIS INFERENCE IS ALSO SUPPORTED BY RATIO OF VARIOUS DECISIONS OF MALABAR INDUSTRIAL CO. LTD. VS CIT 243 ITR 83 (SC), CIT VS MAX INDIA LTD. 295 ITR 282(SC) CIT VS MANGAL CASTINGS 303 ITR 23(P& H), CIT V. KOHINOOR TOBACCO PRODUCTS(P)LTD.[1998] 234 ITR 557, CIT V. M AHAVAR TRADERS[1996] 220 ITR 167(MP), DUGGAL & CO.V. CIT[1996] 220 ITR 4 56, CIT VS MEPCO INDUSTRIES LTD 294 ITR 121 (MAD.), MEERUT ROLLER FLOU R MILLS LTD VS C1T[2013] 3S TAXMAN.COM 183(AH.), BHARTI HEXACOM LTD V CIT [2013] 33 TAXMAN.COM.153(CAT.), M.I. OVERSEAS LTD V DIT (INT. TAX)[2012] 28 TAXMAN. COM.279(UTTARAKHAND), BHARAT OVERSEAS BANK LTD V CIT[2 012] 26 TAXMAN.COM 330(CHENNAI), CIT V HARSH J PUNJABI 345 ITR 451 (DEI.), CIT V INFOSYS TECHN. LTD 17 TAXMAN.COM 203 & SRIPAN LAND DEV.(P) LTD V CIT(2011) TAXMAN.COM 429(MUM ITAT). I AM SATISFIED T HAT IT IS A FIT CASE FOR REVISION U/S 263 OF THE ACT AS THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF FAILURE OF AO TO CARRY OUT RELEVANT AND MEANINGFUL INQUIRIES, I, THEREFORE, SET-ASIDE THE ASSESSMENT ORDER WITH THE FLOWING DIRECTIONS: THE AO IS DIRECTED TO FRAME FRESH ASSESSMENT ORDER (D E NOVO) IN ACCORDANCE WITH PROVISIONS OF (AW AFTER GIVING REASONABLE OPPO RTUNITY OF HEARING TO THE ASSESSES. THE AO IS DIRECTED TO EXAMINE ALL THE ISSU ES RAISED ABOVE AND TAKE APPROPRIATE ACTION AS WARRANTED BY THE FACTS AND CIR CUMSTANCES OF THE CASE IN ACCORDANCE WITH LAW, IN THE COURSE OF COMPLETING ASSESSMENT. 4. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BE FORE US. DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 5 5. WE HAVE HEARD BOTH THE COUNSEL PERUSED THE RECOR DS. LEARNED SENIOR COUNSEL OF THE ASSESSEE SHRI PERSI PARDIWALA SUBMIT TED THAT THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER AFTER DUE A ND PROPER ENQUIRY. HE SUBMITTED THAT ASSESSEE OFFICER HAS DULY ISSUED FOL LOWING NOTICES. NOTICE U/S. 142(1) DATED 12.1.2010 NOTICE U/S. 143(2) DATED 24.8.2011 5. THE LEARNED COUNSEL SUBMITTED THAT THE RETURN WA S ORIGINALLY FILED ELECTRONICALLY. HENCE, COMPUTATION OF INCOME WAS NO T ELECTRONICALLY FILED. SUBSEQUENTLY UPON ASSESSING OFFICERS ENQUIRY AND R EQUIREMENT THE COMPUTATION OF INCOME WAS DULY FILED IN THE COURSE OF ASSESSMENT. THAT IN THE COMPUTATION OF INCOME BOTH THE MATTERS I.E. BROKEN PERIOD INTEREST AND DEPRECIATION ON VALUE OF INVESTMENT, WHICH ARE SUBJ ECT MATTER OF THE CIT'S DELIBERATION UNDER SECTION 263 ORDER WHERE DETAILED IN THE NOTES. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT HONO URABLE BOMBAY HIGH COURT IN THE CASE OF STATE BANK OF INDIA VS. ACIT ( W.P NO. 271 OF 2018 VIDE ORDER DATED 18.6.2018) HAS HELD THAT IF THE ASSESSM ENT ORDER IS PASSED AFTER CONSIDERING THE COMPUTATION OF INCOME IN WHICH THE MATTERS ARE MENTIONED, IT CANNOT BE HELD THAT ASSESSMENT ORDER WAS PASSED WIT HOUT ANY APPLICATION OF MIND ON THE POINTS MENTIONED IN THE COMPUTATION OF INCOME. IN THIS REGARD LEARNED COUNSEL THE ASSESSEE SUBMITS THAT FOLLOWING NOTES WERE DULY MENTIONED IN THE COMPUTATION OF INCOME. 1) THE COMPANY WAS INCORPORATED ON 24TH MAY. 2005. THE PRINCIPAL BUSINESS OF THE COMPANY IS TO UNDERTAKE ACTIVITIES OF A LOAN/INVE STMENT COMPANY. THE COMPANY HAD APPLIED FOR REGISTRATION WITH RBI AS A NO N BANKING FINANCIAL COMPANY WHICH HAS BEEN RECEIVED ON 2ND AUGUST. 2007 . COMPANY HAS COMMENCED ITS BUSINESS ON JANUARY 2008. 2) IN ACCORDANCE WITH ITS OBJECTS, THE COMPANY HAS PL ACED DEPOSITS WITH BANK AND THE ENTIRE INTEREST INCOME HAS BEEN OFFERED TO TAX. 3) DEDUCTION HAS BEEN CLAIMED FOR BROKEN PERIOD INTE REST OF RS. 16,743,650 PAID ON PURCHASE OF SECURITIES LYING IN THE INVENTOR Y AS ON 31.03.08 RELYING ON THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF AMERICAN EXPRESS BANK REPORTED IN 258 ITR 601. DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 6 4) DURING THE YEAR THE COMPANY HAD ISSUED EQUITY LIN KED NOTES A LIABILITY PRODUCT OFFERED BY THE COMPANY. THE COMPANY MARKS TO MARKET THE OPEN POSITIONS AT THE YEAR END AND THE LIABILITY WITH RESPE CT TO MARK TO MARKET LOSS IS RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT IN ACCORDANC E WITH ACCOUNTING PRUDENCE NORMS. FOR THE CURRENT YEAR, THE COMPANY HA S RECOCGNISED AN AMOUNT OF INR 14,244,981 AS A MARK TO MARKET LIABILITY IN ITS PROFIT AND LOSS ACCOUNT TOWARDS THE SUBJECT PRODUCT. THE SAME HAS ACCO RDINGLY BEEN CLAIMED AS LAX ALLOWABLE IN THE RETURN IN THE RETURN OF INCOM E FOR THE CURRENT YEAR I.E. AY 2008-09. 7. FURTHER, LEARNED COUNSEL OF THE SUBMITTED THAT A S REGARDS THE ISSUE OF BROKEN PERIOD INTEREST IS CONCERNED, THE SAME IS DU LY COVERED IN FAVOUR OF THE ASSESSEE BY THE FOLLOWING DECISIONS FROM HONOURABLE BOMBAY HIGH COURT, HONOURABLE SUPREME COURT :- CIT VS. DEUTSCHE BANK A.G. (SLP NO. 345 OF 2004) (S C) CIT VS. DEUTSCHE BANK AG (INCOME TAX REF. NO. 500 O F 1997) (BOM HC) CITIBANK NA (CIVIL APPEAL NO. 1549 OF 2006 DT. 12.8 .2008)(SC) 8. LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT L EARNED CIT(A) TOTALLY ERRED THAT THESE DECISIONS ARE NOT APPLICABLE ON TH E FACTS OF THIS CASE. HE SUBMITTED THAT IN THE CASE OF CITIBANK NA (SUPRA) H ON'BLE APEX COURT HAS ANSWERED THE FOLLOWING QUESTION IN THE AFFIRMATIVE :- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE HIGH COURT WAS RIGHT IN LAW IN HOLDING THAT THE INTEREST PAID FOR BROKEN PERIOD SHOULD NOT BE CONSIDERED AS PART OF THE PURCHASE PRICE, BUT SH OULD BE ALLOWED AS REVENUE EXPENDITURE IN THE YEAR OF PURCHASE OF SECUR ITIES. HENCE, LEARNED COUNSEL SUBMITTED THAT WHEN THE ENTI RE INTEREST HAS TO BE ALLOWED AS REVENUE EXPENDITURE AND IS NOT TO BE A P ART OF PURCHASE PRICE THE LEARNED CIT(A) VIEW IS TOTALLY ERRONEOUS THAT INTER EST HAVE TO BE ALLOCATED TO UNSOLD INVESTMENT. 8. AS REGARDS THE MARKED TO MARKET LOSS IS CONCERNE D LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THIS WAS ALSO GIVEN IN DETAIL IN COMPUTATION OF INCOME. IN THIS REGARD, HE MENTIONED THAT FOLLOWING DETAIL WERE SUBMITTED BEFORE LEARNED CIT(A) WHICH COVERS THE ISSUE IN FAV OUR OF THE ASSESSEE. A) DURING THE YEAR UNDER CONSIDERATION, THE COMPANY HAS ISSUED EQUITY LINKED NOTES ('ELN'), A LIABILITY PRODUCT OFFERED BY THE COMPANY. THE DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 7 COMPANY MARKS TO MARKET THE OPEN POSITIONS AT THE END OF THE YEAR IN RESPECT OF ELN AND ANY LIABILITY WITH RESPECT OF MARK TO MARKET LOSS, IF ANY, IS RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT TOWARD THE SUB JECT PRODUCT, WHICH HAS BEEN CLAIMED AS DEDUCTION. B) THE COMPANY HAS RECOGNIZED AN AMOUNT OF RS. 14,2 44,981 AS A MARK TO MARKET LOSS IN ITS PROFIT AND LOSS ACCOUNT. THE DETAILS OF THE SAME ARE ENCLOSED AT PAGE 173 OF THE PAPER BOOK). C) IN THE CAPTIONED NOTICE, IT HAS BEEN STATED THAT T HE MARK TO MARKET LOSS ARISING OUT THE EQUITY LINKED NOTES, IS NOTIONAL IN NA TURE AND HENCE SHOULD NOT BE ALLOWED AS DEDUCTION IN VIEW OF THE CBDT INSTR UCTION NO. 3/2010 DATED 23 MARCH 2010 (COPY ENCLOSED AT PAGES 174 TO 1 75 OF THE PAPER BOOK). D) IN THIS CONNECTION, WE WISH TO RELY ON THE DECISI ON OF MUMBAI TRIBUNAL IN THE CASE OF THE DCIT VS. KOTAK MAHINDRA INVESTMENT LTD. (ITA NO. 1502/M/2012) DATED 3 MAY 2013 (COPY ENCLOSED AT PAGE S 176 TO 184 OF THE PAPER BOOK), WHEREIN THE TRIBUNAL HAS HELD THAT THE MA RK TO MARKET LOSSES IN RESPECT OF FUTURE CONTRACTS WAS ALLOWABLE AS DEDUCTION . E) AS REGARDS, TO THE CBDT INSTRUCTION, WE WISH TO SU BMIT THAT THE INSTRUCTION WAS WITH RESPECT TO THE LOSS ON FOREX DER IVATIVE TRANSACTION AND APPLICABILITY OF SECTION 43 OF THE INCOME TAX ACT. EQ UITY LINKED NOTES ARE NOT DERIVATIVES AND ARE IN THE NATURE OF BONDS AND HENCE THE CBDT INSTRUCTION RELATING TO THE DERIVATIVES IS NOT APPLICABLE IN THE IN STANT CASE. F) FURTHER RELIANCE IS PLACED ON THE DECISION OF SPECIAL BENCH OF MUMBAI ITAT IN THE CASE DCIT V. BANK OF BAHRAIN AND KUWAIT , ((2010) (41 SOT 290) (COPY ENCLOSED AT PAGES 185 TO 204 OF THE PAPER BOOK ) WHEREIN IT HAS BEEN HELD THAT MARK TO MARKET LOSSES IN RESPECT OF FORWARD FO REIGN EXCHANGE CONTRACTS DEBITED TO PROFIT AND LOSS ACCOUNT IS ALLOWAB LE AS DEDUCTION. THIS VIEW HAS ALSO BEEN UPHELD BY THE HON'BLE SUPREME COU RT IN THE CASE OF WOODWARD GOVERNOR INDIA (I) P. LTD, (2009) 312 ITR 254 (SUPREME COURT) (COPY ENCLOSED AT PAGES 203 TO 215 OF THE PAPER BOOK) . G) IN VIEW OF THE ABOVE, THE MARKED TO MARKET LOSS D EBITED TO PROFIT AND LOSS ACCOUNT OF THE COMPANY HAS BEEN RIGHTLY ALLOWED AS DEDUCTION. 9. PER CONTRA, LEARNED DEPARTMENTAL REPRESENTATIVE SHRI K. MAHU SUDAN SUBMITTED THAT THE ASSESSING OFFICER HAS NOT MADE N ECESSARY INQUIRY. HE SUBMITTED THAT LEARNED CITS DIRECTION IS VERY MUCH CORRECT AND IN ACCORDANCE EXPLANATION-2 INSERTED IN SECTION 263. HE SUBMITTED THAT THE SAID EXPLANATION SHOULD BE TREATED AS RETROSPECTIVE. FURTHERMORE, LE ARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FOLLOWING CASE LAWS FOR HIS PREPOSITION THAT NO PREJUDICE IS BEING CAUSED TO THE ASSESSEE AS A MATT ER IS BEING REMITTED ONLY FOR DE NOVO EXAMINATION. DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 8 SUPREME COURT DECISION IN RAJ MANDIR ESTATE VS. PR. CIT DELHI HIGH COURT DECISION IN GEE VEE ENTERPRISES ARVEE INTERNATIONAL VS. ADDL. CIT (ITAT, MUM)101 IT D 495 10. IN THE REJOINDER, LEARNED SENIOR COUNSEL OF THE ASSESSEE SUBMITTED THAT IN VARIOUS CASE LAWS IT HAS BEEN HELD THAT EXPLANATION (2) TO SECTION 263 IS PROSPECTIVE. MOREOVER, HE PLEADED THAT THE MATTER H AVING BEEN DEALT WITH IN COMPUTATION OF INCOME AND CASE LAWS ALSO MENTIONED THEREIN, IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND . HE FURTHER RELIED UPON HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF IT O VS. D.G. HOUSING PROJECTS (343 ITR 329). 11. UPON CAREFUL CONSIDERATION, WE MAY GAINFULLY RE FER TO PROVISIONS OF SECTION 263 OF THE IT ACT :- 263. (1) THE PRINCIPAL COMMISSIONER OR COMMISSIONER MAY CALL FOR AND EXAMINE THE RECORD OF ANY PROCEEDING UNDER THIS ACT, A ND IF HE CONSIDERS THAT ANY ORDER PASSED THEREIN BY THE ASSESSING OFFICER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE, HE MAY, AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD AND AFTER MAKING OR CA USING TO BE MADE SUCH INQUIRY AS HE DEEMS NECESSARY, PASS SUCH ORDER THERE ON AS THE CIRCUMSTANCES OF THE CASE JUSTIFY, INCLUDING AN ORDER ENHANCING OR MODIFYING THE ASSESSMENT, OR CANCELLING THE ASSESSMENT AND DIRE CTING A FRESH ASSESSMENT. EXPLANATION 1.FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT, FOR THE PURPOSES OF THIS SUB-SECTION, (A) AN ORDER PASSED ON OR BEFORE OR AFTER THE 1ST DA Y OF JUNE, 1988 BY THE ASSESSING OFFICER SHALL INCLUDE (I) AN ORDER OF ASSESSMENT MADE BY THE ASSISTANT COMM ISSIONER OR DEPUTY COMMISSIONER OR THE INCOME-TAX OFFICER ON THE BASIS O F THE DIRECTIONS ISSUED BY THE JOINT COMMISSIONER UNDER SECTION 144A; (II) AN ORDER MADE BY THE JOINT COMMISSIONER IN EXER CISE OF THE POWERS OR IN THE PERFORMANCE OF THE FUNCTIONS OF AN ASSESSING OFFI CER CONFERRED ON, OR ASSIGNED TO, HIM UNDER THE ORDERS OR DIRECTIONS ISSU ED BY THE BOARD OR BY THE PRINCIPAL CHIEF COMMISSIONER OR CHIEF COMMISS IONER OR PRINCIPAL DIRECTOR GENERAL OR DIRECTOR GENERAL OR PRINCIPAL COM MISSIONER OR COMMISSIONER AUTHORISED BY THE BOARD IN THIS BEHALF UN DER SECTION 120; (B) 'RECORD' SHALL INCLUDE AND SHALL BE DEEMED ALWA YS TO HAVE INCLUDED ALL RECORDS RELATING TO ANY PROCEEDING UNDER THIS ACT AVAI LABLE AT THE TIME OF EXAMINATION BY THE PRINCIPAL COMMISSIONER OR COMMISS IONER; (C) WHERE ANY ORDER REFERRED TO IN THIS SUB-SECTION AND PASSED BY THE ASSESSING OFFICER HAD BEEN THE SUBJECT MATTER OF ANY APPEAL FILED ON OR BEFORE OR AFTER THE 1ST DAY OF JUNE, 1988, THE POWERS OF THE PRINCIPAL COMMISSIONER DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 9 OR COMMISSIONER UNDER THIS SUB-SECTION SHALL EXTEND A ND SHALL BE DEEMED ALWAYS TO HAVE EXTENDED TO SUCH MATTERS AS HAD NOT BEE N CONSIDERED AND DECIDED IN SUCH APPEAL. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, IT IS HEREBY DECLARED THAT AN ORDER PASSED BY THE ASSESSING OFFICER SHALL BE DEEME D TO BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE , IF, IN THE OPINION OF THE PRINCIPAL COMMISSIONER OR COMMISSIONER, (A) THE ORDER IS PASSED WITHOUT MAKING INQUIRIES OR VERIFICATION WHICH SHOULD HAVE BEEN MADE; (B) THE ORDER IS PASSED ALLOWING ANY RELIEF WITHOUT INQUIRING INTO THE CLAIM; (C) THE ORDER HAS NOT BEEN MADE IN ACCORDANCE WITH A NY ORDER, DIRECTION OR INSTRUCTION ISSUED BY THE BOARD UNDER SECTION 119; O R (D) THE ORDER HAS NOT BEEN PASSED IN ACCORDANCE WI TH ANY DECISION WHICH IS PREJUDICIAL TO THE ASSESSEE, RENDERED BY THE JURISDI CTIONAL HIGH COURT OR SUPREME COURT IN THE CASE OF THE ASSESSEE OR ANY OTHER PERSON. (2) NO ORDER SHALL BE MADE UNDER SUB-SECTION (1) AFT ER THE EXPIRY OF TWO YEARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER SOUGHT TO BE REVISED WAS PASSED. (3) NOTWITHSTANDING ANYTHING CONTAINED IN SUB-SECTION (2), AN ORDER IN REVISION UNDER THIS SECTION MAY BE PASSED AT ANY TIME IN THE CA SE OF AN ORDER WHICH HAS BEEN PASSED IN CONSEQUENCE OF, OR TO GIVE EFFECT TO, ANY FINDING OR DIRECTION CONTAINED IN AN ORDER OF THE APPELLATE TRIBUNAL, NATI ONAL TAX TRIBUNAL, THE HIGH COURT OR THE SUPREME COURT. EXPLANATION.IN COMPUTING THE PERIOD OF LIMITATION FOR THE PURPOSES OF SUB- SECTION (2), THE TIME TAKEN IN GIVING AN OPPORTUNITY TO THE ASSESSEE TO BE REHEARD UNDER THE PROVISO TO SECTION 129 AND ANY PER IOD DURING WHICH ANY PROCEEDING UNDER THIS SECTION IS STAYED BY AN ORDER O R INJUNCTION OF ANY COURT SHALL BE EXCLUDED. 12. WE FIND THAT THE PROVISION OF SECTION 263 CAN B E INVOKED BY LEARNED CIT IF THE ORDER PASSED BY THE ASSESSING OFFICER IS ERR ONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. SO IT W AS INCUMBENT UPON LEARNED CIT TO GIVE A FINDING THAT THE ORDER OF THE ASSESSI NG OFFICER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. HENCE, LEARNED CIT(A)S DIRECTION TO MAKE FURTHER EXAMINATION WITHOUT POINTING OUT THAT ORDER IS BOTH ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE IS NOT S USTAINABLE. 13. WE NOTE HERE THAT LEARNED CITS FURTHER OBJECTI ON IS THAT THE ASSESSING OFFICER HAS NOT EXAMINED WHETHER RBI GUIDELINES IN THIS REGARD HAS BEEN FOLLOWED BY THE ASSESSEE OR NOT. HERE WE NOTE THAT THERE IS NO PRESUMPTION THAT NON-FOLLOWING OF RBI GUIDELINES IN AN ASSESSMENT WI LL RESULT IN AN ORDER WHICH DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 10 IS PREJUDICIAL TO THE INTEREST OF REVENUE. THE RBI GUIDELINES AND THE PRUDENTIAL NORMS ARE NOT DESIGNED TO PLUCK REVENUE LEAKAGE FRO M INCOME TAX POINT OF VIEW. THESE ARE MANDATE TO ENSURE THAT THE ASSESSE E FOLLOWS PROPER BANKING NORMS. HENCE, LEARNED CITS INFERENCE THAT NON EXAM INATION OF ADHERENCE TO RBI GUIDELINES BY THE ASSESSING OFFICER HAS RESULTE D IN A ORDER WHICH IS ERRONEOUS IN SO FAR AS IT IS PREJUDICE TO THE INTER EST OF REVENUE IS LIABLE TO BE SET ASIDE. MOREOVER AS WE HAVE ALREADY NOTED THE EXPLAN ATION (2) IN SECTION 263 HAS BEEN ADDED FROM 1.6.2015 AND THE SAME IS NOT OP ERATIVE IN THE PERIOD UNDER CONSIDERATION. 14. WE FURTHER NOTE THAT ON THE ISSUE OF BROKEN PER IOD INTEREST AND MARK TO MARKET LOSS, LEARNED COUNSEL OF THE ASSESSEE HAS SU BMITTED THAT THE NECESSARY DETAILS WERE GIVEN IN THE COMPUTATION OF INCOME AND ON THE TOUCHSTONE OF HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF S TATE BANK OF INDIA (SUPRA) IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NO T APPLIED HIS MIND ON THIS ISSUE. HE SUBMITS THAT THE ASSESSEE HAS DULY SUBMIT TED CASE LAWS IN FAVOUR OF THE ASSESSEE ON THESE CASES, WHICH THE ASSESSING OF FICER HAS DULY ACCEPTED. IN THIS REGARD WE NOTE THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF STATE BANK OF INDIA (SUPRA) HAS EXPOUNDED AS UNDER :- MOREOVER, THE ASSESSMENT ORDER IN REGULAR ASSESSMENT PROCEEDINGS IN TERMS DISALLOWED SOME OF THE CLAIMS MADE FOR DEDUCTION UND ER SECTION 143(3) OF THE ACT. THEREFORE, IN THE PRESENT FACTS, WE ARE PRIMA-FA CIE OF THE VIEW THAT, THE ASSESSING OFFICER HAS BY NECESSARY IMPLICATION ALLOW ED THE CLAIM. MOREOVER, THE BASIC DOCUMENT FOR COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT IS THE COMPUTATION OF INCOME. THEREFORE, TO THE EXTENT THE CLAIMS MADE FOR DEDUCTION IN THE COMPUTATION OF COME, WERE DI SALLOWED BY THE ASSESSING OFFICER, DISCUSSION ON THE SAME IS FOUND I N THE ASSESSMENT ORDER. IT IS AN ACCEPTED POSITION THAT THE ASSESSMENT ORDERS WOULD NECESSARILY DEAL ONLY WITH THE CLAIMS BEING DISALLOWED AND NOT WITH THE CLAIMS BEING ALLOWED. THIS IS FOR THE REASON AS OBSERVED BY THE GUJARAT HI GH COURT IN CIT VS. NIRMA CHEMICALS LTD 309 ITR 67, THAT IF THE ASSESSIN G OFFICER WAS TO DEAL WITH ALL THE CLAIMS WHICH WERE TO BE ALLOWED IN THE AS SESSMENT ORDER, THE RESULT WOULD BE AN EPICTOME. THIS IS SO, AS IT WOULD C AST AN IMPOSSIBLE BURDEN UPON THE ASSESSING OFFICER CONSIDERING HIS WO RKLOAD AND THE PERIOD OF LIMITATION. THERE WAS ALSO NO REASON IN THE PRESEN T FACTS FOR THE ASSESSING OFFICER TO ASK ANY QUERIES IN RESPECT OF THIS CLAIM OF THE PETITIONER, AS THE BASIC DOCUMENT VIZ. COMPUTATION OF INCOME AT NOTE 21 (A SSESSMENT YEAR 2013-14) AND NOTE 22 (ASSESSMENT YEAR 2014-15) THEREO F EXPLAINED THE BASIS DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 11 OF THE CLAIM BEING MADE TO THE SATISFACTION OF THE ASSES SING OFFICER. THUS, IT MUST NECESSARILY BE INFERRED THAT THE ASSESSING OFFICE R HAS APPLIED HIS MIND AT THE TIME OF PASSING AN ASSESSMENT ORDER TO THIS PARTIC ULAR CLAIM MADE IN THE BASIC DOCUMENT VIZ. COMPUTATION OF THE INCOME BY NOT DISALLOWING IT IN PROCEEDINGS UNDER SECTION 143(3) OF THE ACT AS HE WAS SATISFIED WITH THE BASIS OF THE CLAIM AS INDICATED IN THAT VERY DOCUMENT . THEREFORE, WHERE HE ACCEPTS THE CLAIM MADE, THE OCCASION TO ASK QUESTIONS ON IT WILL NOT ARISE NOR DOES IT HAVE TO BE INDICATED IN THE ORDER PASSED IN THE REGULAR ASSESSMENT PROCEEDINGS. 15. THUS ON THE TOUCHSTONE OF ABOVE HON'BLE BOMBAY HIGH COURT DECISION WHEN THE ISSUES WERE GIVEN IN NOTE IN THE COMPUTATI ON OF INCOME AND CASE LAWS WERE REFERRED, IT CANNOT BE SAID THAT ASSESSIN G OFFICER HAS NOT EXAMINED THE ISSUES AND APPLIED HIS MIND. 16. AS REGARDS THE BROKEN PERIOD INTEREST IS CONCER NED WE NOTE THAT THE SAME WAS DULY GIVEN IN NOTE OF COMPUTATION OF INCOM E AS UNDER :- DEDUCTION HAS BEEN CLAIMED FOR BROKEN PERIOD INTERE ST OF RS. 16,743,650 PAID ON PURCHASE OF SECURITIES LYING IN THE INVENTOR Y AS ON 31.03.08 RELYING ON THE JUDGEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS BANK REPORTED IN 258 ITR 601. 17. HENCE, THE ASSESSEE HAS DULY EXPLAINED THE QUAN TUM OF BROKEN PERIOD INTEREST BEING CLAIMED AND THE BASIS FOR THE SAME H AS BEEN EXPLAINED TO BE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF AM ERICAN EXPRESS BANK (SUPRA). WE NOTE THE LEARNED CITS VIEW IS THAT ASS ESSING OFFICER HAS NOT ENQUIRED AND APPLIED HIS MIND IN AS MUCH AS THE SAM E IS NOT DEALT WITH IN THE ASSESSMENT ORDER. ON THE TOUCHSTONE OF HON'BLE BOM BAY HIGH COURT DECISION IN THE CASE OF STATE BANK OF INDIA VS. ACIT (SUPRA) IT CANNOT BE SAID THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND ON THIS ISSUE. ONCE IT IS HELD THAT THE ASSESSING OFFICER HAS AFTER APPLICATION OF MIND TAKEN A VIEW, LEARNED CIT CANNOT EXERCISE HIS JURISDICTION U/S. 263 OF THE AC T UNLESS THE VIEW IS EX FACIE NOT TENABLE. AS HELD BY HON'BLE APEX COURT IN THE CASE OF M/S. MALABAR INDUSTRIAL COMPANY LTD. VS. CIT (243 ITR 83), IF TW O VIEWS ARE POSSIBLE AND ONE VIEW IS ADOPTED BY THE ASSESSING OFFICER WITH W HICH LEARNED CIT(A) DOES DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 12 NOT AGREE WITH, THE ASSESSMENT CANNOT BE HELD TO BE PREJUDICIAL AND ERRONEOUS TO THE INTEREST OF THE REVENUE. 18. FURTHERMORE, ON MERITS OF THE ISSUE LEARNED CIT (A) HAS HELD THAT THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN AM ERICAN EXPRESS BANK (SUPRA) AND DEUTSCHE BANK AG (SUPRA) ARE NOT APPLIC ABLE ON THE FACTS OF THE CASE. HOWEVER, EVEN AFTER HOLDING SO LEARNED CIT(A) CONCLUDED THAT THE ASSESSING OFFICER HAS FAILED TO CARRY OUT RELEVANT AND MEANINGFUL INQUIRY AND ASSESSING OFFICER HAS BEEN DIRECTED TO EXAMINE ALL THE ISSUES RAISED TO MAKE A NEW ASSESSMENT. THIS CONCLUDING ACTION OF LEARNED C IT(A) SHOWS THAT HE IS HIMSELF IS NOT SURE THAT DECISION OF HON'BLE JURISD ICTIONAL HIGH COURT REFERRED BY ASSESSEE ARE NOT APPLICABLE IN THIS CASE. MOREOV ER, AS EVIDENTLY BROUGHT BY THE SUBMISSION OF LEARNED COUNSEL OF THE ASSESSEE A S PER THE DECISION OF HON'BLE BOMBAY HIGH COURT & HON'BLE APEX COURT, BRO KEN PERIOD INTEREST HAVE TO BE ALLOWED AS REVENUE EXPENSE IN THE YEAR. 19. SIMILARLY, THE ISSUE OF MARK TO MARKET LOSS IS CONCERNED ASSESSEE HAS DULY GIVEN NOTE IN COMPUTATION OF INCOME AS UNDER : - DURING THE YEAR THE COMPANY HAD ISSUED EQUITY LINKED NOTES A LIABILITY PRODUCT OFFERED BY THE COMPANY. THE COMPANY MARKS TO MARKET THE OPEN POSITIONS AT THE YEAR END AND THE LIABILITY WITH RESPE CT TO MARK TO MARKET LOSS IS RECOGNIZED IN THE PROFIT AND LOSS ACCOUNT IN ACCO RDANCE WITH ACCOUNTING PRUDENCE NORMS. FOR THE CURRENT YEAR, THE COMPANY HA S RECOCGNISED AN AMOUNT OF INR 14,244,981 AS A MARK TO MARKET LIABILITY IN ITS PROFIT AND LOSS ACCOUNT TOWARDS THE SUBJECT PRODUCT. THE SAME HAS ACCO RDINGLY BEEN CLAIMED AS LAX ALLOWABLE IN THE RETURN IN THE RETURN OF INCOME FOR THE CURRENT YEAR I.E. AY 2008-09. 20. THUS IN THE AFORESAID NOTE OF COMPUTATION OF IN COME THE ASSESSEE HAS EXPLAINED THE ACCOUNTING POLICY ADOPTED FOR RECOGNI SING MARK TO MARKET LOSS AND THE ASSESSEE HAS QUANTIFIED THE AMOUNT ALSO. ON THE TOUCHSTONE OF THE HON'BLE BOMBAY HIGH COURT DECISION REFERRED ABOVE S TATE BANK OF INDIA VS. ACIT (SUPRA) IT CANNOT BE HELD THAT THE ASSESSING O FFICER HAS NOT APPLIED HIS MIND OR MADE ENQUIRY ON THE ISSUE. AS HELD ABOVE ON CE IT IS HELD THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND HAS TAKE N ONE OF THE POSSIBLE VIEW, DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 13 LEARNED CIT CANNOT INVOKE ITS JURISDICTION U/S. 263 OF THE ACT. MOREOVER, IN THE ORDER U/S. 263 LEARNED CIT(A) HAS NOWHERE DISLODGED THE DETAIL SUBMISSION ON THIS ISSUE BY THE ASSESSEE, AND THE CASE LAWS WHICH HAVE BEEN CLAIMED BY THE ASSESSEE IN FAVOUR OF THE ASSESSEE BEING SPECIAL BE NCH DECISION IN THE CASE OF BANK OF BAHRAIN AND KUWAIT (SUPRA) AND ALSO THE REF ERENCE TO HON'BLE APEX COURT DECISION IN THE CASE OF WOODWARD GOVERNOR IND IA PVT. LTD. (SUPRA). HENCE, THE VIEW ADOPTED BY THE ASSESSING OFFICER CA NNOT BE SAID TO BE EX FACIE UNTENABLE. 21. THUS ONCE IT IS HELD THAT THE ASSESSING OFFICER HAS ADOPTED ONE OF THE TWO POSSIBLE VIEW WITH WHICH LEARNED CIT DOES NOT A GREE, THE SAME DOES NOT GIVE LEARNED CIT(A) JURISDICTION TO EXERCISE REVISI ONARY POWER U/S. 263 OF THE ACT. MOREOVER, AS WE HAVE ALREADY HELD ABOVE THAT B Y ASKING THE ASSESSING OFFICER TO MAKE FURTHER EXAMINATION WITHOUT ANY FIN DING ABOUT THE ORDER BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E THE LEARNED CIT(A) HAS CLEARLY ERRED AND HENCE HIS ORDER IS NOT SUSTAINABL E. EXPLANATION (2) ADDED TO SECTION 263 OF THE ACT CANNOT COME TO THE RESCUE OF REVENUE AS THE SAME IS NOT APPLICABLE FOR THE CURRENT ASSESSMENT YEAR. 22. MORE SO, BECAUSE WE HAVE HELD THAT THE ASSESSIN G OFFICERS VIEW IS A POSSIBLE VIEW. ON THE TOUCHSTONE OF HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF STATE BANK OF INDIA (SUPRA), THE ISSUE HAVING BEEN DETAILED IN THE COMPUTATION OF INCOME AND CASE LAW REFERRED THEREIN AND THE ASSESSING OFFICER HAVING ACCEPTED THAT, IT CANNOT BE SAID THAT THE AS SESSING OFFICER HAS NOT APPLIED HIS MIND IN THAT ISSUE. THUS IN THE BACKGRO UND OF THE AFORESAID DISCUSSION AND PRECEDENT, WE ARE OF THE CONSIDERED OPINION THAT LEARNED CIT COULD NOT HAVE LEGALLY ASSUMED JURISDICTION U/S. 26 3 OF THE ACT TO ASK THE ASSESSING OFFICER TO MAKE A DENOVO EXAMINATION BY M AKING FURTHER EXAMINATION WITHOUT FINDING ORDER BEING ERRONEOUS A S WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE. WE FURTHER NOTE THAT LEARNED COUNSEL OF THE ASSESSEE HAS GIVEN CASE LAWS FOR THE PROPOSITION THAT THE METHOD ADOPTED BY ASSESSEE FOR CLAIMING DEDUCTION FOR BROKEN PERIOD EXPENSES AND M ARK TO MARKET LOSS IS DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 14 HAVING JUDICIAL ACCEPTANCE. THESE WERE ALSO BEFORE LEARNED CIT(A), WHO HAS NOT COGENTLY DISLODGED THE RELIANCE PLACED ON THE CASE LAW. 23. THE CASE LAW OF RAJ MANDIR ESTATE (SUPRA) REFER RED BY LEARNED DEPARTMENTAL REPRESENTATIVE WAS WITH RESPECT TO BOG US SHARE CAPITAL AND SHARE PREMIUM ALLOWED BY THE ASSESSING OFFICER WITH OUT PROPER ENQUIRY AND IN THAT CONTEXT ON THE FACTS OF THAT CASE HON'BLE APEX COURT HAS OBSERVED THAT NO PREJUDICE WILL BE CAUSED TO THE ASSESSEE BY RE EXAM INATION BY THE ASSESSING OFFICER. THIS CASE LAW IS NOT APPLICABLE ON THE FAC TS HERE. THE CASE LAW FROM HON'BLE DELHI HIGH COURT IN THE CASE OF GEE VEE ENT ERPRISES (99 ITR 375) IS NOT APPLICABLE ON THE FACTS OF THIS CASE. THIS CASE LAW WAS DULY REFERRED TO IN HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF IT O VS. D.G. HOUSING PROJECTS LTD. (343 ITR 329) AND HON'BLE HIGH COURT HAS OBSER VED AS UNDER :- IT IS IN THIS CONTEXT THAT THE SUPREME COURT IN MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX, (2000) 243 ITR 83 ( SC), HAD OBSERVED THAT THE PHRASE PREJUDICIAL TO THE INTEREST OF REVENUE HAS TO BE READ IN CONJUNCTION WITH AN ERRONEOUS ORDER PASSED BY THE ASS ESSING OFFICER. EVERY LOSS OF REVENUE AS A CONSEQUENCE OF AN ORDER OF THE ASSESSING OFFICER CANNOT BE TREATED AS PREJUDICIAL TO THE INTEREST OF REVENUE. T HUS, WHEN THE ASSESSING OFFICER HAD ADOPTED ONE OF THE COURSES PE RMISSIBLE AND AVAILABLE TO HIM, AND THIS HAS RESULTED IN LOSS TO REVENUE; OR TW O VIEWS WERE POSSIBLE AND THE ASSESSING OFFICER HAS TAKEN ONE VIEW WITH WHICH THE CIT MAY NOT AGREE; THE SAID ORDERS CANNOT BE TREATED AS AN ERRONEOUS ORDE R PREJUDICIAL TO THE INTEREST OF REVENUE UNLESS THE VIEW TAKEN BY THE ASSESS ING OFFICER IS UNSUSTAINABLE IN LAW. IN SUCH MATTERS, THE CIT MUST G IVE A FINDING THAT THE VIEW TAKEN BY THE ASSESSING OFFICER IS UNSUSTAINABLE I N LAW AND, THEREFORE, THE ORDER IS ERRONEOUS. HE MUST ALSO SHOW THAT PREJUDIC E IS CAUSED TO THE INTEREST OF THE REVENUE. THE ABOVE CASE LAW DULY SUPPORTS THE CASE OF THE A SSESSEE. 24. SINCE THE ISSUE HAS BEEN DECIDED BY FOLLOWING H ON'BLE SUPREME COURT & HON'BLE BOMBAY HIGH COURT DECISIONS DIRECTLY APPLIC ABLE, DEALING WITH OTHER CASE LAWS REFERRED BY LEARNED DEPARTMENTAL REPRESEN TATIVE IS ONLY OF ACADEMIC INTEREST. 25. WE HAVE ALREADY QUASHED THE ORDER OF LEARNED CI T(A) ON THE GROUND THAT ASSUMPTION OF JURISDICTION ON MATTERS FOR DENOVO EX AMINATION BY THE ASSESSING DEUTSCHE INVESTMENTS INDIA PRIVATE LIMITED 15 OFFICER IS NOT LEGALLY SUSTAINABLE, WE ARE OF THE O PINION THAT ADJUDICATING UPON MERITS OF THE ISSUES IS ONLY OF ACADEMIC INTEREST A ND WE ARE NOT ENGAGING INTO THE SAME. 26. IN THE RESULT, THIS APPEAL BY THE ASSESSEE STAN DS ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S ON 06.11.2020. SD/- SD/- (PAVAN KUMAR GADALE) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 06/10/2020 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI