ACIT, New Delhi V. National Agricultural Cooperative Marketing Federation of India, New Delhi

ITA 4108/DEL/2015

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 3759 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 22-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ISHTIYAQUE AHMED
• Keywords: Business expenditure; Speculation loss; Notional interest; Commercial expediency; Revised return; Rule 8D
• Section: 37; 10; 43B; 143(3); 14A; 40(a)(ia); 37(1); 43(5); 139(5); 43; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No. 4108/DEL/2015 [A.Y 2010-11) The Asst. C.I.T Vs. National Agricultural Co-operative Circle 54(1) Marketing Federation of India New Delhi NAFED House, Ashram Chowk New Delhi PAN: AAAAN 4629 F (Applicant) (Respondent) Assessee By : Shri Hiren Mehta, CA Shri Nirbhay Mehta, Adv Department By : Shri Ishtiyaque Ahmed, Sr. DR Date of Hearing : 10.08.2022 Date of Pronouncement : 24.08.2022 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the Revenue is preferred against the order of the ld. CIT(A) - 18, New Delhi dated 30.03.2015 pertaining to Assessment Year 2010-11. 2 2. The grievances of the Revenue read as under: 1. The CIT(A) has erred in deleting the addition of Rs. 7,67,96,031/- made by the AO towards interest liability relating to M/s Alimenta, Geneva as firstly the liability was contingent in nature and secondly provisions of section 40(a)(ia) were applicable. 2. The CIT(A) has erred in deleting the addition of Rs. 4,57,02,000/- made by the AO u/s 40(a)(ia) of the IT Act, 1961 when the relation of Principal and agent between the two was substantiated by the fact that as per the agreement enacted bv NAFED itself and from the Manual of Business Procedure of NAFED, state/ district/primarv level co-operatives were working as 'procuring agencies' of the assessee and commission is paid to these societies for undertaking the work of procurement agent and the same is known as ‘service charges’ and the provisions of section 194H read with section 40(a)(ia) of the FT. act were clearly applicable. 3. The CIT(A) has erred in deleting the addition of Rs. 1,05,69,459/- made by the AO u/s 14A as provisions of section 14A are not restricted to section 10 only but are applicable to ‘income which does not form part of the total income under this act' including section 80(P)(2)(d). Also, the assessee had deliberately not claimed the deduction of income received as dividend as per provisions of section 80P(2)(d) of the IT Act. 3 4. The CIT(A) has erred in deleting the addition of Rs. 3,92,289/- made by the AO on account of ‘Claims Rejected’ as the said expenses were rejected by CAB branch of Ministry of Finance and thus the same come under penal nature. 5. The CIT(A) has erred in deleting the addition of Rs. 6,42,56,952/- in relation to ‘other selling expenses’ without appreciating the fact that the said amount is already included in the amount reimbursable to the assessee by Govt, of India. Also, the saiu amount is neither in the nature of tax/cess nor has the assessee been able to prove that the said expenses were laid out wholly and exclusively for the purpose of the business of the assessee. 6. The CIT(A) has erred in deleting the addition of Rs. 1,33,42,570/- made by the AO on account of prior period expenses as the assessee follows mercantile system of accounting and hence prior period expenses are not allowable. 7. The CIT(A) has erred in deleting the addition of Rs. 118,01.74,500/- being notional interest @ 10.5% (moderate rate of interest as the assessee has obtained fresh loans @ 9% to 11.75%) made by the AO by not appreciating the fact that the AO had 1123,97,57,150/- were not for the purpose of business whereas the assessee has paid interest on borrowed funds from banks. 8. The CIT(A) has erred in deleting disallowance of Rs. 4,08,16,376/- u/s 43B of the IT Act without appreciating the fact that the same was not actually paid during the year, which is pre requisite for 4 allowance u/s 43B of the IT Act. Also, the deduction was not claimed in the original or the revised return as required by the section 139(5) of the Income Tax Act. 9. The CIT(A) has erred in deleting the addition of Rs. 30,80,16,743/- being remission or cessation of the liability made by the AO u/s 41(1) of the IT Act as the said liabilities pertain to the year 2000-01 to 2006-07 and has not been added back the liability as unpaid. Also, the CIT(A) has erred in not appreciating the fact that if the liability pertaining to section 43 B relates to current year, the same had not been paid upto filing of return for the AY 2010-11 and thus not allowable. 10. The CIT(A) has erred in deleting the addition of Rs. 4,15,40.056/- without appreciating the fact that the said loss was rightly held as speculative loss as per section 43(5)(d) by the AO as the transactions were not done through recognized stock exchange and this loss can’t be set off against income from non speculative business as per section 72 of the Income Tax Act. 3. The representatives of both the sides were heard at length, the case records carefully perused and relevant documentary evidences brought on record duly considered. 5 4. Briefly stated, the facts of the case are that the assessee is a Multi-State Co-operative Society and is one of the canalized agency under the aegis of Ministry of Agriculture, Government of India. 5. During the course of scrutiny assessment proceedings, the Assessing Officer noticed that the assessee has computed loss of Rs. 85,25,87,816/- which also includes an amount of Rs. 7,67,,96,031/- claimed as ‘Alimenta interest’ due for the year on the decretal debt as per the judgment of the Hon'ble Delhi High Court dated 28.01.2000 and subsequent decree dated 28.01.2000. 6. The Assessing Officer made addition because the assessee has claimed it in the computation of income but has not charged as an expense in the audited books of account. We find that this issue is squarely covered in favour of the assessee and against the Revenue by an order of the co-ordinate bench in assessee’s own case for Assessment Year 2009-10 in ITA No. 4107/DEL/2015 dated 03.03.2022. The relevant findings of the co-ordinate bench read as under: “4. We find that the issue stands examined in the case of the assessee itself for earlier assessment years as under: 6 “The disallowance on the identical issue was made for A.Y. 2003-04 which was con firmed by ld. CIT(A). However, the addition was deleted by ITAT, New Delhi on second appeal filed by the appellant against the order of the ld. CIT(A). The ITAT has held that liability to pay interest @18% in the case of NAFED crystalized on 28.1 .2000 and the yearly interest claimed by NAFED was therefore allowed for A.Y . 2003-04. Addition for A.Y . 2004-05 was also deleted by the ITAT following their order for A.Y. 2003- 04. For A .Y . 2001-02 and 2002-03, the succeeding bench of ITAT, New Delhi could not agree with the order of the co-ordinate bench for A.Y. 2003-04 and referred the matter for Special Bench for A.Y . 2001-02 & 2002-03. The Special Bench vide its order dated 16.10.2015 disagreed with the view o f the Bench disposing of the appeal of the assessee for A.Y . 2003-04 that liability to pay interest @18% to Alimenta was crystalized on 28.1 .2000. According to the Special Bench the assessee incurred a legally and en forceable liability to pay interest to Alimenta on 6 .9.2000 i.e. for A .Y . 2011-12, the year under appeal. The Hon'ble Delhi High Court vide its order dated 19.04.2017 81 taxmann.com 117 quashed the order of the Special Bench. In the instant year, the said disallowance has been deleted by the ld. CIT(A) vide order dated 30.03.2015.” 7. Respectfully following the findings of the co-ordinate bench, no interference is called for. Ground No. 1 is dismissed. 7 8. The Assessing Officer further noticed that the assessee is a nodal organization for purchase of agricultural produce under the Price Support Scheme (PSS) and the Marketing Intervention Scheme (MIS) of Govt. of India (GOI) for protecting the interest of the farmers and the customers. To effectively carry out the scheme, the assessee is required to purchase certain agricultural produces from primary agricultural societies for purchase of various agricultural products in respect of which the Government has to interfere for supporting the price and supply to deficient states by procuring from surplus states. 9. The minimum support price is fixed every year which is considered as basic price. Since the state/district level cooperatives are also engaged for procuring the agricultural produce from the farmers, they are paid charges for handling and for their expenses. The mark-up is normally called as “Society charges/society commission”. 10. Taking a leaf out of the Contract Act, the Assessing Officer formed a belief that the agreement in essence is a contract for sale between the assessee and state level co-operatives. The assessee is required to implement the scheme of the Government for managing its 8 PSS/MIS. The Government has fixed the support priced for naked seeds. However, between the farmers and the suppliers at which such agricultural purchases are to be sent, various other actions are required. The Government to implement the scheme, required the assessee to do all such acts. 11. Invoking the provisions of section 194H of the Act and drawing support from the findings given in Assessment Years 2006-07 to 2009- 10, it was claimed that no tax is required to be deducted at source. The Assessing Officer found that during the year, the assessee has deducted tax on the payments made on account of service charges and commission on all other payments except the payment of Rs. 457.02 lakhs which has been made without deducting tax at sources. Invoking the provisions of section 40(a)(ia) of the Act, the Assessing Officer made addition of Rs. 457.02 lakhs. We find that this issue has been settled by the decision of the co-ordinate bench [supra] in favour of the assessee and against the Revenue. The relevant findings of the co- ordinate bench read as under: “11. The issue of applicability of deduction o f tax in respect of service charges/commission is covered in the appellant's own case for A.Y . 2006-07 to A.Y. 2009-10 by the order of the ITAT, 9 Jaipur Branch 'A' , Jaipur in ITA Nos. 23, 24 , 50 & 51/JP/2010. The ITAT vide their order dated 31.8.2010 while disposing of the above appeal o f the appellant has given a categorical finding that the Society commission charged in the sale bills by the Societies is a payment of commission by assessee in terms of section 194H is not correct as per law and accordingly the issue is decided against the revenue. 12. The amount paid by the assessee is the cost o f purchase and not in the nature of commission . The procuring organization i.e. the Village, District & State Level Co-operative Societies had to incur expenses on maintaining offices and administrative staff to carry out the work o f procurement. They also had to earn some net pro fit from all their effort/work. Accordingly, the appellant allowed the Village , District &. State Level Co-operative Societies to raise their sales invoices on the appellant on a similar basis which the Govt . o f India (GOI) has prescribed for the appellant i.e . cost plus a fixed gross margin . In fact even the market/mandi charges and other taxes etc. are also charged as a percentage. The State Level Cooperatives raise their sale bills on NAFED giving various components o f the direct costs like "basic price , purchase tax, marketing fees, packing charges etc ." as well as their margin of profit for meeting their own administrative costs etc. 13. In view o f the above stated facts and the pricing mechanism fixed by the Government o f India, it is clear that the assessee has merely paid the purchase price as agreed . However, only to monitor the pricing , the cost components are separately shown so 10 as to reimburse the assessee for any loss incurred by it in execution of PSS/MIS . 14. Therefore, since the amount paid by the assessee to the Dist/State Level Cooperatives is only the purchase price and not in the nature of commission, no disallowance under section 40(a)(ia)is called for .” 12. Respectfully following the findings of the co-ordinate bench, no interference is called for. Ground No. 2 is dismissed. 13. Facts relating to Ground No. 3 are that during the course of scrutiny assessment proceedings, the assessee has not shown/declared any tax free/exempt income but as per Annexure – IX of the Audit Report, the Assessing Officer found details of income which is covered by deduction u/s 80P(2)(d) of the Act which contained details of dividend received from co-operative societies claimed to be exempt under this section. 14. Invoking provisions of section 14A of the Act and applying Rule 8D of the Rules, the Assessing Officer computed the disallowance at Rs. 1,05,69,459/-. We find that this quarrel was before the co-ordinate bench [supra]. The relevant findings read as under: 11 “18. During the year, the assessee received dividend income o f Rs .1 ,01,33 ,000/- from IFFCO and Cooperative Bank of India. The similar issue has been adjudicated by the Co-ordinate Bench of ITAT in the case of the assessee in ITA No. 301/Del/2011 for the A .Y. 2007-08 vide order dated 18.04.2012 wherein the disallowance made by the AO has been deleted . Since, the matter stands adjudicated, in the absence o f any material change and the legal proposition, we decline to interfere with the order of the ld. CIT(A) .” 15. Respectfully following the findings of the co-ordinate bench, no interference is called for. Ground No. 3 is dismissed. 16. Facts relating to Ground No. 4 show that while perusing the balance sheet, the Assessing Officer found that in Schedule 12, an amount of Rs. 3,92,289/- has been debited as ‘claim rejected’. The assessee was asked to explain the debit entry though the assessee submitted a detailed reply but the Assessing Officer was of the opinion that no supporting evidence/explanation has been given by the assessee and, therefore, made the addition of Rs. 3,92,289/-. 17. This issue was there before the co-ordinate bench in Assessment Year 2009-10 [supra] and the same has been dealt with as under: 12 19. The assessee claimed from railways and Government of India and an amount of Rs.20 ,75,889/- for loss su ffered in stock transfer from one branch to another and on account of purchase & sale of agriculture products on behalf of the Government of India . This is the rejection o f expenses incurred by the assessee and not reimbursed by the GOI/Railways on account of Price Support Scheme and Market Intervention Scheme . These expenses are not penal in nature and hence claimed u/s 37 of the Income Tax Act, 1961. Since , the expenses are incurred in connection with the business o f the assessee , no disallowance is called for . 18. Respectfully following the findings of the co-ordinate bench, no interference is called for. Ground No. 4 is dismissed. 19. The underlying facts relating to Ground No. 5 are that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that the other selling expenses claimed by the assessee is Rs. 10,71,52,653/- out of which Rs. 4,17,41,634/- has already been dealt and balance Rs. 6,54,11,018/- was in respect of miscellaneous services purchased. The Assessing Officer further noticed that out of total amount of Rs. 6,54,11,018/-, an amount of Rs. 6,42,56,962/- is cost of gunny bags which have been booked under miscellaneous services purchased by Bhubaneswar Branch. 13 20. The Assessing Officer was of the opinion that the total amount of Rs. 6,54,11,018/- is basically an expenditure shown after netting of debt and credit of various branches account and by incurring other selling expenses, the assessee neither created any asset nor expenditure incurred by it anywhere relates to earning of income which is the foremost condition to earn enduring benefit under the provisions of section 37(1) of the Act and referring to certain judicial decisions, the Assessing Officer finally came to the conclusion that other selling expenses of Rs. 6,42,56,952/- does not fulfill the condition of section 37(1) and cannot be treated as revenue expenditure and accordingly, made addition of Rs. 6,42,56,952/-. 21. The assessee carried the matter before the ld. CIT(A) and reiterated its claim of expenditure. 22. The ld. CIT(A) was convinced with the claim and deleted the addition. 23. Before us, the ld. DR strongly supported the findings of the Assessing Officer and read the relevant operative part of the assessment order. 14 24. Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 25. We have given thoughtful consideration to the orders of the authorities below. The undisputed fact is that NAFED incurred cost of gunny bags for supply of rice to FCI as per Government of India MSP operation. Cost of gunny bags were booked by Bhubaneswar Branch under the head ‘Misc. services purchased”. The debit amounts in the ledger aggregated Rs. 18,80,37,772/- and the credits aggregated Rs. 12,37,80,809/- and the balance of Rs. 6,42,56,952/- is the cost of gunny bag not reimbursed by the government of India and, therefore, claimed as expenditure by the assessee. 26. These facts clearly show that the income of Rs. 12,37,772/- which has been shown by the assessee already includes amount of reimbursable to the assessee by the government of India and deficit has to be as allowed as business expenditure and the same cannot be simply disallowed because it has not been reimbursed by the Government of India. We do find any error or infirmity in the findings of the ld. CIT(A). Ground No. 5 is accordingly dismissed. 15 27. Ground No. 6 relates to the disallowance of prior period adjustment of Rs. 1,33,42,570/-. 28. On a perusal of the accounts and, in particular, branch wise details of expenses the Assessing Officer noticed that an amount of Rs. 1,33,42,570/- related to prior period. The assessee was asked to explain as to why prior period expenses should not be disallowed. 29. The assessee explained that bills for respective expenses were received during the year under consideration and, therefore, the liability has crystallized during the year under consideration and claim should be allowed. 30. Contention of the assessee was dismissed by the Assessing Officer who was of the opinion that merely for the reasons that few bills were received late, the expenses cannot be allowed on payment basis and made addition of Rs. 1,33,42,570/-. 31. An identical issue was considered by this Tribunal in assessee’s own case in Assessment Year 2008-09 [supra]. The relevant findings of the co-ordinate bench read as under: 16 “34. As per the details furnished the audited accounts contain the prior period expenses aggregating to Rs. 52,81,079/-. The submissions o f the assessee brie fly are as under: “From the details of the respective branches it will be noted that the bills for the expenses were received during the year and therefore the liability has crystallized during the year, the depiction in the tax audit report does not necessarily lead to disallowance . Reliance in this regard is placed upon following case laws: Saurashtra Cement and Chemical Industries Ltd . 213 ITR¬ 523 (Guj) Egmore Benefit Societyl48 CTR 158 (Mad .)¬ Toyo Engg . Ltd . 5 SOT 616 (Mum)¬ Issue regarding allowability o f prior period expenses came up for consideration for the ITAT in the case of appellant itself for A.Y . 1984-85 in ITA No. 2296/D/88. The tribunal vide its order dated 12-08-91 upheld the action of the CIT(A) in deleting the addition made by the Assessing Officer on this count and for A.Y . 2004-05 came up for consideration before the ITAT and ITAT Delhi bench "F" following the decision o f coordinate bench for A.Y. 1984-85 allowed relief to assessee. ”35. Since, the expenses were found to have been crytalized during the year, no disallowance is called for.” 32. Respectfully following the findings of the co-ordinate bench, no interference is called for. Ground No. 6 is dismissed. 17 33. Ground No. 7 relates to proportionate disallowance of interest u/s 36/37 of the Act. 34. The Assessing Officer made proportion disallowance of interest by applying interest rate of 10.5% per annum on advances made for tie-up business in the earlier years alleging that these advances were not for the purpose of the business. 35. The main reason for making the disallowance is that huge advances have been made by the assessee in the name of tie-up business from which not a single penny has been earned during the year under consideration and the immediately preceding Assessment Year. Drawing support from the findings given in earlier Assessment Years, the Assessing Officer made addition of Rs. 1,18,01,74,500/-. 36. This quarrel was also before the co-ordinate bench in Assessment Year 2009-10 [supra]. The relevant findings read as under: “36. The proportionate disallowance of interest has been made by applying interest rate of 10.5% per annum on advances made for tie-up business in the earlier years alleging that these advances were not for the purpose of the business. 18 37. The main allegation by the A.O forming the basis for disallowance is that the huge advances have been made by the assessee in the name of tie- up business from which not a single penny has been earned during the year under assessment and the immediately preceding assessment year. 38. The A.O is o f the view that there exists no tie-up business during the year under assessment. The amount advanced towards the tie-up business has therefore been held by the A.O not for the business purposes . The claim o f interest expenditure to the extent attributable to the tie-up advances is held by the A.O . not allowable under the provisions of section 36(1)(iii) of the Income Tax Act as the amount is not used for the purpose of business. The claim of interest expenditure by the assessee is also held by the AO not allowable under the provisions o f Section 37(1) of the Act as the basic ingredients for allowability of expenses were not satisfied . 39. It was explained that the tie-up advances are driven out of commercial expediency and the same for business purposes only. NAFED on account o f its diversification of business had undertaken trading activities under Tie-up arrangement as per Clause 3(A) of bye- laws of NAFED duly approved by Central Registrar of Cooperative, GOI. Copies of MOU/Agreements entered into by NAFED with parties for tie-up business reveal that in order to tap international market, NAFED has diversified into import/export business for various Agricultural/Non-agricultural 19 Commodities. 41. It was argued that the business activity with the parties, known as tie-up parties was undertaken with an objective to earn income . 42. The business activity with the parties, known as tie-up parties was undertaken since A .Y. 2003-04. And for A.Y. 2004- 05 to A .Y . 2006-07 when the transactions of sales with tie-up parties were at large scale . Out o f outstanding recoverable from tie-up parties aggregating to Rs. 1123.98 crores as on 31.03.2011 and Rs. 1191.56 as on 31.03.2012 the advance of Rs .428.55 crores are secured against stocks. The security in the form of stocks against these advances proves itself that the same were towards business purposes. It is uncontroverted that these tie-up advances were given by the assessee company during the previous assessment year A .Y. 2003-04 to A.Y . 2005-06 and the same were held as for business purposes in the assessment framed u/s 143(3) of the Income Tax Act, for those assessment years and the interest claimed was fully allowed and no proportionate disallowance was made during those assessment years. 43. It was argued that the business activity with the parties, known as tie-up parties was undertaken with an objective to earn income. In fact, in the earlier years the transaction has generated income which has been already taxed. Mere nonaccrual of any income does not ipso facto make the tie-up advances as not for business purposes and very importantly when the same were given as held driven out of commercial expediency and the income has been earned in the past and duly included in the taxable income and 20 assessed under section 143(3) of the Income Tax Act for those years and for subsequent assessment years. NAFED is persistently pursuing the recoveries against these tie-up advances. A Year Wise breakup of recoveries made against Tie-Up Advances and total recoveries aggregated to Rs 158.24 crores. To expedite the remaining recovery, all the efforts are being made by the NAFED including legal proceedings which have been initiated against the defaulting parties at various levels i.e ., CBI, Enforcement o f Economics Of fences Wing , High Court, etc. 44. Since, the tie-ups could be said to be a part of the business operation, no disallowance of interest on this account is called for and hence we decline to interfere with the order o f the ld . CIT(A) .” 37. On finding parity of facts, we decline to interfere. Ground No. 7 is dismissed. 38. Ground No. 8 relates to deletion of disallowance made u/s 43B of the Act amounting to Rs. 4,08,16,376/-. 39. The underlying facts in this issue show that the Assessing Officer made disallowance of interest/expenditure of Rs. 4,08,16,376/- pertaining to Army Purchase Obligations [APO]. The reasons given by the Assessing Officer is that the assessee has claimed deduction but has not actually paid the amount during the year under consideration. 21 40. The assessee agitated the matter before the ld. CIT(A) who was convinced with the claim and deleted the disallowance. 41. Before us, the ld. DR strongly supported the findings of the Assessing Officer. 42. Per contra, the ld. counsel for the assessee relied upon the findings of the ld. CIT(A). 43. We have carefully perused the orders of the authorities below qua the underlying facts in this issue. We find that the liability was accounted for on the basis of Award dated 08.08.2000 of the arbitrator whereby the interest liability on NAFED was fixed @ 18% per annum. The Hon'ble Delhi High Court vide order dated 04.03.2010 in OMP No. 286/2000 has decreased the rate of interest awarded by the arbitrator from 18% to 9% and pursuant to the order of the Hon'ble Delhi High Court interest payable to APO was reversed to Rs. 4,08,16,376/-. 44. This fact clearly shows that reversal entry is credit entry and no interest payment was made by NAFED to APO and amount of interest liability reduced is shown in the profit and loss account as ‘Excess 22 Provision Written Back’. Since the amount is already offered for taxation, the same cannot be taxed during the year under assessment again. The said amount has been claimed ss deduction in computation statement for Assessment Year 2010-11 which has been denied by the Assessing Officer on the ground that no benefit of revised computation can be given to the assessee since the same is not accompanied with the return in accordance with section 139(5) of the Act. 45. We have given thoughtful consideration to the orders of the authorities below. We are of the considered view that such deduction can be claimed before the appellate authority and drawing support from the decision of the Hon'ble Bombay High Court in the case of Pruthvi Brokers and Shareholders Pvt Ltd ITA No. 3908 of 2010, we direct the Assessing Officer to delete the impugned disallowance and decline to interfere with the findings of the ld. CIT(A). Ground No. 8 is, accordingly, dismissed. 46. Ground No. 9 relates to deletion of addition of Rs. 30,80,16,743/- on account of remission and cessation of liability by invoking provisions of section 41(1) of the Act. 23 47. While scrutinizing the return of income, the Assessing Officer examined the following details of interest accrued and payable: Particulars Amount (Rs) (A) Upto A.Y. 2009-10 Outstanding pertaining to earlier years Total 34,88,33,119.08 (B) A.Y. 2010-11 (i) Central Bank STL A/c JV-2250 1,51,23,409.00 GO Syndicate Bank STL A/c JV-- 2251 47,01,590.55 (iii) Indian Overseas Bank JV-2158 1,07,664.00 (iv) APO A/c JV-2286 15,11,766.00 (v) Indian Overseas Bank JV-2986 18,64,772.00 Total (B) 2,33,09,201.55 Grand Total (A) + (B) 37,21,42,320.63 Less: Excess provision written back during A.Y. 2010-11 4,08,16,376.85 Balance 33,13,25,943.78 48. The Assessing Officer further noticed that only an amount of Rs. 15,11,766/- pertaining to interest/APO has been mentioned in tax audit report and interest amounting to Rs. 2,17,97,435/- has been paid before filing return of income and since interest amounting to Rs. 24 15,11,766/- has been added back in the computation, therefore, net figure of Rs. 30,80,16,743/- has to be disallowed as interest not paid till the date of filing of return by applying provisions of section 43B of the Act. 49. When the assessee pointed out that the said amount pertains to earlier Assessment Years and the said interest has been paid before filing of return, the Assessing Officer invoked provisions of section 41(1) of the Act and treated the same as remission/cessation of liability and made addition. 50. The assessee challenged the addition before the ld. CIT(A) and the ld. CIT(A) was convinced with the contention of the assessee and deleted the addition. 51. The ld. DR strongly supported the findings of the Assessing Officer and the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 25 52. We have given thoughtful consideration to the orders of the authorities below. We find that the figures reported in Annexure attached to the tax audit report are only in respect of the statutory liabilities created during the Assessment Year under consideration and the liabilities pertaining to earlier years which have not been claimed in the profit and loss account are not reported in the tax audit report. 53. Outstanding interest remaining payable has been made in the computation of earlier years and facts on record clearly demonstrate that this is not a case of remission/cessation of liabilities and, therefore, the action of the Assessing Officer is uncalled for and the ld. CIT(A) has rightly deleted the impugned disallowance. Therefore, no interference is called for. 54. Ground No. 10 relates to deletion of addition of Rs. 4,15,40,056/. 55. The underlying facts in issue show that NAFED purchases exchange specified commodities from the open market through societies and sell it through online future trade through the commodity exchanges NMCE, NCDEX and the transactions are squared off by actual 26 delivery of the commodity and the transactions have been accounted for by NAFED as business transactions. 56. The losses suffered have been included under the head ‘other selling expenses’. The Assessing Officer made disallowance on the basis that the said claim of loss is a speculative loss suffered by the assessee on commodity trading made through unrecognized stock exchange. As per the Government notification only MCX has been notified as the recognized exchange. 57. Addition was been challenged before the ld. CIT(A). 58. The ld. CIT(A) was of the considered opinion that the issue whether loss in commodities Futures & Options trade is a business loss or a speculative loss is dealt under the provisions of section 43(5) of the Act and clauses (a) to (d) to the proviso to the said section 43(5) of the Act states the circumstances under which the transaction shall not be deemed to be a speculative transaction. The said proviso reads as under: 27 “Provided that for the purposes of this clause- (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or (b) a contract in respect of stocks and shares (c) a contract entered into by a member of a forward market (d) (d) an eligible transaction in respect of trading in derivatives referred to in clause (ac) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) carried out in a recognised stock exchange; 76 Shall not be deemed to be a speculative transaction.” 59. Referring to Board Circular No. 23D - F. No. 412/(4)/60/TPL dated 12.09.1960, the ld. CIT(A) came to the conclusion that the hedging transactions entered into by NAFED through NCDEX and NMCE NAFED are genuine and valid as the same have been entered into safeguard against losses through future price fluctuations in respect of actual trading of the commodities by the NAFED and, therefore, the 28 said transaction is not speculative transactions and directed the Assessing Officer to delete the impugned addition. 60. We have given thoughtful consideration to the findings of the ld. CIT(A). We do not find any error or infirmity in the findings of the ld. CIT(A) which calls for no interference. Ground No. 10 is, accordingly, dismissed. 61. In the result, the appeal of the Revenue in ITA No. 4108/DEL/2015 is dismissed The order is pronounced in the open court on 24.08.2022. Sd/- Sd/- [ANUBHAV SHARMA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 24 th August, 2022. VL/ 29 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order