ACIT, New Delhi V. C 1 India Pvt. Ltd., New Delhi

ITA 418/DEL/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6982 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 20-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIDHI SRIVASTAVA CIT DR
• Keywords: Search and seizure; Earning of tax free income; Wholly owned subsidiary; Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 143(3); 14A; 37(1); 132

Judgement Text

PAGE | 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI ! ! ! ! $ $$ $ $ $$ $ $ $$ $ $ $$ $ %&% %&% %&% %&% ' ' ' ' BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER & DR. B.R.R.KUMAR, ACCOUNTANT MEMBER ! ! ! !$ $$ $ / ITA NOS. 615 TO 618/DEL/2013 (( (( (( (( / ASSESSMENT YEARS: 2005-06, 2007-08 TO 2009-10 C-1 INDIA PVT.LTD., D-5, DEFENCE COLONY, NEW DELHI. PAN-AABCC4078L ........... )* /APPELLANT VS ACIT, CENTRAL CIRCLE-13, NEW DELHI. . +,)* / RESPONDENT ! ! ! !$ $$ $ / ITA NO. 418/DEL/2015 (( (( (( (( / ASSESSMENT YEAR: 2009-10 ACIT, CENTRAL CIRCLE-13, NEW DELHI. . +,)* / RESPONDENT VS C-1 INDIA PVT.LTD., D-5, DEFENCE COLONY, NEW DELHI. PAN-AABCC4078L ........... )* /APPELLANT )*-.% / APPELLANT BY : SH. AJAY WADHWA, ADV. +,)*-.% / RESPONDENT BY : MS. NIDHI SRIVASTAVA, CIT DR -/0& / DATE OF HEARING : 09.10.2019 12-/0& / DATE OF PRONOUNCEMENT: 22.10.2019 ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 2 % % % % / ORDER PER SUSHMA CHOWLA, JM: OUT OF THIS BUNCH OF APPEALS, THE ASSESSEE IS IN AP PEAL AGAINST THE ORDER OF CIT(A)-1, NEW DELHI DATED 06.12.2012 RELAT ING TO ASSESSMENT YEARS 2005-06, 2007-08, 2008-09 & 2009-10 RESPECTIV ELY PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHOR T THE ACT). FURTHER, THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER O F CIT(A)-1, NEW DELHI DATED 17.11.2014 RELATING TO ASSESSMENT YEAR 2009-1 0 PASSED UNDER SECTION 271(1)(C) OF THE ACT. 2. THIS BUNCH OF APPEALS WERE HEARD TOGETHER AND AR E BEING DISPOSED OF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVE NIENCE. 3. THE ASSESSEE IN ASSESSMENT YEAR 2005-06 HAS RAIS ED THE FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-T AX (APPEAL) IS BAD IN LAW AND IN FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) HAS ERR ED IN UPHOLDING THE DISALLOWANCE OF RS. 5,22,238/- BEING 20% OF FEE PAID TO ROC AS CAPITAL EXPENDITURE. 4. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS WHETHER IN THE ABSENCE OF ANY INCRIMINATING DOCUMENT FOUND DURING THE COURSE OF SEARCH IN THE PREMISES OF THE SEARCHED PERSON, ANY PROCEED INGS CAN BE INITIATED AGAINST THE ASSESSEE U/S 153C OF THE ACT. ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 3 5. BRIEFLY THE FACTS AND CIRCUMSTANCES OF THE CASE ARE THAT SEARCH AND SEIZURE OPERATION U/S 132 OF THE ACT WAS CARRIED OU T IN SURESH NANDA GROUP OF CASES ON 28.02.2007. IN THE SAID OPERATIO N, RESIDENTIAL PREMISES OF SH. VIVEK AGRAWAL, THE PRESIDENT AND CH IEF OPERATING OFFICER OF THE ASSESSEE COMPANY WAS ALSO COVERED. THEREAF TER, NOTICE U/S 153C OF THE ACT WAS ISSUED TO THE ASSESSEE COMPANY AFTER RECORDING SATISFACTION. IN RESPONSE THERETO, THE ASSESSEE FI LED RETURN OF INCOME DECLARING NIL INCOME. THE CASE OF THE ASSESSEE WA S TAKEN UP FOR SCRUTINY. THE ASSESSING OFFICER VIDE PARA 3 NOTES THAT ON PERUSAL OF RETURN OF INCOME AND OTHER DOCUMENTS, IT WAS OBSERV ED THAT THE ASSESSEE HAD CHARGED EXPENDITURE AS PRELIMINARY EXPENSES AN D PRE-OPERATIVE EXPENSES OF RS.4,26,862/- & RS.9,38,187/- RESPECTIV ELY. THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS. THE ASSESSING OFF ICER ON ITS PERUSAL NOTED THAT ROC CHARGES WERE TO BE CAPITALIZED. ACC ORDINGLY, DISALLOWANCE OF RS.5,22,238/- WAS MADE. NEXT ADDITION MADE IN T HE HANDS OF THE ASSESSEE WAS ON ACCOUNT OF PRE-INCORPORATION EXPENS ES WHEREIN THE ASSESSEE HAD CLAIMED 1/5 TH AS WRITTEN OFF DURING THE YEAR. THE ASSESSING OFFICER ALSO MADE ADDITION ON ACCOUNT OF 1/5 TH PRE-OPERATIVE EXPENSES BEING CAPITAL IN NATURE. THE CIT(A) HAS CONFIRMED THE SAID ADDITION IN THE HANDS OF THE ASSESSEE. 6. THE ASSESSEE BEFORE US HAS RAISED AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER:- THAT THE ASSESSMENT MADE U/S 153(C) READ WITH SECT ION 143(3) OF THE ACT WAS BAD IN LAW BECAUSE OF THE REASON THAT T HE IMPUGNED ASSESSMENT YEAR WAS COMPLETED ASSESSMENT ON THE DAT E OF SEARCH ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 4 AND THERE WAS NO INCRIMINATING MATERIAL FOUND/SEIZE D RELATING TO THE DISALLOWANCE OF RS.5,22,238/0 BEING 20% FEES PAID T O ROC FOR INCREASE IN AUTHORIZED SHARE CAPITAL MEANING THEREB Y THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF HONBLE DELHI HIGH COURT IN THE CASE KABUL CHAWLA 380 ITR 573. 7. THE LD.AR FOR THE ASSESSEE STATED THAT THE ISSUE RAISED IN THE ADDITIONAL GROUND WAS PURELY LEGAL AND DID NOT REQU IRE ANY INVESTIGATION INTO FACTS. HENCE, THE SAME MAY BE ADMITTED. 8. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN TH IS REGARD AND THE ADDITIONAL GROUND OF APPEAL IS ADMITTED FOR ADJUDIC ATION. COMING TO THE ISSUE RAISED VIDE ADDITIONAL GROUND OF APPEAL, THE CASE OF THE ASSESSEE IS THAT IN THE ABSENCE OF ANY INCRIMINATING MATERIAL F OUND/SEIZED RELATING TO DISALLOWANCE OF 20% FEE PAID ROC OF RS.5,22,238/-, NO ASSESSMENT COULD BE MADE U/S 153C OF THE ACT. IN THIS REGARD, RELIA NCE WAS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SI NHGAD TECHNICAL EDUCATION SOCIETY [2017] 397 ITR 344 AND THE DECISI ON OF HONBLE DELHI HIGH COURT IN THE CASE OF KABUL CHAWLA 380 ITR 573. 9. THE LD.DR FOR THE REVENUE PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE RAISED VIDE ADDITIONAL GROUND OF APPEAL IS AG AINST THE EXERCISE OF JURISDICTION BY THE ASSESSING OFFICER U/S 153C OF T HE ACT, IN THE ABSENCE OF ANY INCRIMINATING MATERIAL FOUND FROM THE PREMIS ES OF SEARCHED PERSON. NATURE OF ADDITION WHICH IS MADE IN THE HA NDS OF THE ASSESSEE IS ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 5 20% FEE PAID TO ROC FOR INCREASE IN SHARE CAPITAL. THE DISALLOWANCE HAS NOT BEEN MADE ON THE BASIS OF ANY INCRIMINATING MAT ERIAL FOUND DURING THE COURSE OF SEARCH. IN ABSENCE OF THE SAME, THE ASSESSING OFFICER CANNOT EXERCISE HIS JURISDICTION U/S 153C OF THE AC T FOR THE CAPTIONED ASSESSMENT YEAR. WE PLACE RELIANCE ON THE RATIO LA ID DOWN BY THE HONBLE APEX COURT IN THE CASE OF SINHGAD TECHNICAL EDUCATI ON SOCIETY(SUPRA) AND HONBLE DELHI HIGH COURT IN THE CASE OF KABUL C HAWLA (SUPRA). HENCE, THE ASSESSMENT ORDER PASSED BY THE ASSESSEE U/S 153C R.W.S. 143(3) DO NOT STAND. THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS THUS ALLOWED. 11. SINCE WE HAVE HELD THE ASSESSMENT TO BE BAD IN LAW, THERE IS NO NEED TO GO INTO THE MERITS OF THE ISSUE RAISED. 12. NOW, COMING TO THE APPEAL OF THE ASSESSEE FOR A SSESSMENT YEARS 2007-08 & 2008-09 WHEREIN THE SIMILAR ISSUES HAVE B EEN RAISED. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN ASSESSM ENT YEAR 2007-08 READ AS UNDER:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEAL) IS BAD IN LAW AND IN FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) HAS ERR ED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS. 55,12,800/- ON THE GROUND THAT LOAN OF RS. 9,77,60,000/- TAKEN FROM M/S Y2K SYSTEMS INT ERNATIONAL LTD, MAURITIUS WAS TREATED AS UNEXPLAINED AND ADDED TO T HE INCOME OF THE APPELLANT FOR A.Y. 2003-04 WITHOUT APPRECIATING THE WRITTEN SUBMISSIONS FILED BEFORE HIM AND ORDER OF THE ITAT DATED 24.07.2012 ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 6 IN APPELLANTS OWN CASE IN ITA NOS. 1424 TO 1427/DE L/2012 FOR A.YS. 2001-02 TO 2004-05. 13. THE ISSUE RAISED IN ASSESSMENT YEAR 2007-08 IS AGAINST THE DISALLOWANCE OF INTEREST PAID TO Y2K SYSTEM, ON THE GROUND THAT THE LOAN TAKEN FROM Y2K SYSTEM, WAS TREATED AS UNEXPLAINED I N ASSESSMENT YEAR 2003-04. THE LD.AR FOR THE ASSESSEE AT THE OUTSET POINTED OUT THAT THE INTEREST WAS DISALLOWED AS THE LOAN WAS HELD TO BE UNEXPLAINED. HE POINTED OUT THAT TRIBUNAL IN ASSESSMENT YEAR 2003-0 4 VIDE PARA 23 HAS HELD THE LOAN RECEIVED FROM Y2K SYSTEM IS GENUINE A ND THE ADDITION HAS BEEN DELETED VIDE ORDER DATED 01.07.2019. HE ALSO POINTED OUT THAT ANOTHER GROUND ON WHICH THE SAID INTEREST WAS DISAL LOWED IN THE HANDS OF THE ASSESSEE WAS THAT UPTO 31.03.2005, NO INTEREST WAS BEING PAID ON THE SAID LOAN AND NOW INTEREST WAS MADE CHARGED @ 6 %. IN THIS REGARD, HE REFERRED TO THE AGREEMENT BETWEEN THE PARTIES WHICH WAS W.E.F. 01.04.2006 UNDER WHICH IT WAS AGREED THAT FOR TERM OF FOUR YEARS, INTEREST WOULD BE CHARGED @ 6 %. THE LD.AR FOR THE ASSESSE E ALSO EXPLAINED THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACC OUNTING AND HENCE EXPENDITURE WAS DEBITED; BUT SINCE THE ASSESSEE WAS INCURRING LOSSES, THE PARENT COMPANY I.E. Y2K SYSTEM AGREED TO REVERSE TH E INTEREST, WHICH WAS REVERSED IN ASSESSMENT YEAR 2009-10 IN WHICH YEAR T HE ASSESSEE PAID TAXES ON ITS REVERSAL. IN THIS REGARD, RELIANCE WA S PLACED ON THE RATIO BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS M/S . EXCEL INDUSTRIES LTD. IN CIVIL APPEAL NO.125 OF 2013 DATED 08.10.201 3. ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 7 14. THE LD. DR FOR THE REVENUE PLACED RELIANCE ON T HE ORDER OF CIT(A) WITH SPECIAL REFERENCE TO PARA 3.4. 15. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ISSUE WHICH ARISES IN THE PRESENT APPEAL IS AGAINST THE CLAIM OF INTEREST EXPENDITURE OF RS.52,12,800/-, PAYABLE ON LOAN ADVA NCED BY Y2K SYSTEM OF WHICH THE ASSESSEE WAS 100% SUBSIDIARY. THE SAI D LOAN WAS ADVANCED TO THE ASSESSEE ON 16.03.2002 AS PER THE LOAN AGREE MENT ENTERED INTO BETWEEN THE PARTIES. IT WAS ACKNOWLEDGED THAT Y2K SYSTEM WAS THE HOLDING COMPANY OF THE ASSESSEE COMPANY AND THE LOA N WAS ADVANCED TO MEET THE GENERAL CORPORATE EXPENSE AND WORKING CAPI TAL REQUIREMENTS AND ALSO TO REPAY EXISTING OVERDRAFT LOAN. THE LOAN WA S US DOLLARS 2 MILLION. THE LOAN HAD TO BE REPAID AFTER THREE YEARS FROM TH E DATE ON WHICH THE ASSESSEE RECEIVED THE FUNDS OR SUCH LATER DATES AS MAY BE MUTUALLY AGREED IN WRITING. THE SAID LOAN WAS PROVIDED INTE REST FREE TO THE ASSESSEE. THE COPY OF THE AGREEMENT IS PLACED AT P AGE 32 TO 39 OF THE PAPER BOOK. THE AGREEMENT WAS FOR A PERIOD OF FOUR YEARS I.E. UPTO 31.03.2005. THE ASSESSEE ENTERED INTO AGREEMENT DA TED 04.10.2006 UNDER WHICH THE EARLIER AGREEMENT ENDING ON 31.03.2 005 WAS EXTENDED UPTO 31.03.2010. IN THE SAID AGREEMENT, INTEREST @ 6 % WAS TO BE CHARGED W.E.F. 01.04.2006. THE CASE OF THE AUTHORI TIES BELOW IS THAT THE INTEREST WAS DISALLOWABLE IN THE HANDS OF THE ASSES SEE AS THE LOAN RECEIVED BY THE ASSESSEE IN ASSESSMENT YEAR 2003-04 WAS HELD TO BE UNEXPLAINED. IN THIS REGARD, LD.AR FOR THE ASSESSEE HAS POINTED OUT THAT THE TRIBUNAL IN ITA NO.5854/DEL/2014, RELATING TO ASSESSMENT YEAR 2 003-04 WITH LEAD ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 8 ORDER IN ITA NO.5852/DEL/2014, ORDER DATED 01.07.20 19 HAS ACCEPTED THE CASE OF THE ASSESSEE. CONSEQUENTLY, THE INTEREST P AID ON SUCH LOAN IS TO BE ALLOWED AS AN EXPENDITURE IN THE HANDS OF THE AS SESSEE. WE FIND MERIT IN THE PLEA OF THE ASSESSEE. 16. WE MAY ALSO NOTE THAT THE CASE OF THE REVENUE I S ALSO ON THE GROUND THAT EARLIER THE SAID LOAN WAS INTEREST FREE AND NOW THE LOAN BEARS INTEREST WHICH WAS NOT ALLOWABLE IN THE HANDS OF TH E ASSESSEE. ADMITTEDLY, THE SAID LOAN WHICH WAS RAISED VIDE LOA N AGREEMENT DATED 16.03.2002 WAS ADVANCED TO THE ASSESSEE WAS INTERES T FREE FOR A PERIOD OF FOUR YEARS. THEREAFTER, THE EARLIER AGREEMENT CAME TO AN END AND A FRESH LOAN AGREEMENT WAS ENTERED INTO BETWEEN THE PARTIES , UNDER WHICH IT WAS AGREED THAT THE INTEREST @ 6 % WOULD BE CHARGED. T HERE IS NO DISPUTE OF THE AFORESAID STAND OF THE ASSESSEE. THE ONLY QUES TION IS WHETHER BY A SUBSEQUENT AGREEMENT BETWEEN THE PARTIES, INTEREST FREE LOAN CAN BE CONVERTED TO INTEREST BEARING LOAN. THE ANSWER TO THE SAME IS YES. THE PARTIES IN THE FIRST GO HAD AGREED THAT THE LOAN WO ULD BE NON INTEREST BEARING BUT LATER ON LENDER HAD DEMANDED INTEREST @ 6 % W.E.F. 01.04.2006 WHICH WAS AGREED UPON BY THE BORROWER OF THE ASSESSEE COMPANY. IN THESE CIRCUMSTANCES, THE INTEREST CLAI MED BY THE ASSESSEE WAS TO BE ALLOWED IN ITS HANDS IN ITS ENTIRETY. 17. NOW COMING TO THE NEXT STATEMENT OF THE ASSESSE E THAT SINCE IT HAD LOSSES, THE INTEREST EXPENDITURE WAS REVERSED B ACK IN ASSESSMENT YEAR 2009-10 ON WHICH TAXES WERE PAID IN THE SAID Y EAR. THE SAID FACT IS AGAIN NOT DISPUTED AND WHILE DECIDING THE PRESENT A PPEAL, WE CONSIDER THE ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 9 FACTS FOR THE PRESENT YEAR AND DECIDE THE ISSUE ON ITS MERIT. ACCORDINGLY, WE ALLOW THE CLAIM OF THE ASSESSEE VIS--VIS THE I NTEREST EXPENDITURE. THUS, THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 18. THE LD.AR FOR THE ASSESSEE FAIRLY POINTED OUT T HAT THE ISSUE IN ASSESSMENT YEAR 2008-09 WAS SIMILAR TO THE ISSUE R AISED IN ASSESSMENT YEAR 2007-08. FOLLOWING THE SAME PARITY OF REASONI NG, WE ALLOW THE CLAIM OF THE ASSESSEE IN ASSESSMENT YEAR 2008-09. 19. LET US TAKE THE APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2009- 10 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS IN THIS APPEAL:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEAL) IS BAD IN LAW AND IN FACTS. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL) HAS ERR ED IN UPHOLDING THE DISALLOWANCE OF FOREIGN EXCHANGE LOSS OF RS. 2, 20,90,211/- ON THE GROUND THAT LOAN OF US$ 20,00,000 OBTAINED FROM M/S Y2K SYSTEMS INTERNATIONAL LTD, MAURITIUS, WAS TREATED AS UNEXPL AINED IN A.Y. 2003- 04 AND INCREASE IN LOAN AMOUNT DUE TO FOREIGN EXCHA NGE LOSS CANNOT BE ALLOWED IN A.Y. 2009-10. 2.1 THAT THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF FOREIGN EXCHANGE LOSS WITHOUT CONSIDERING THE SUBMI SSIONS MADE BEFORE HIM AND ORDER OF THE ITAT DATED 24.07.2012 I N APPELLANTS OWN CASE IN ITA NOS. 1424 TO 1427/DEL/2012 FOR A.YS. 20 01-02 TO 2004- 05. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, THE LD. CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWANCE OF R S. 32,935/- MADE U/S 14A OF THE INCOME-TAX ACT, 1961 IGNORING THE DE CISION OF BOMBAY ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 10 HIGH COURT IN CIT V. RELIANCE UTILITY AND POWER LTD 178 TAXMAN 135 (BOM). 20. THE FIRST ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST THE DISALLOWANCE OF FOREIGN EXCHANGE LOSS OF RS.2,20,90 ,211/-. THE SECOND ISSUE RAISED IS AGAINST THE DISALLOWANCE MADE U/S 1 4A OF THE ACT OF RS.32,935/-. 21. BRIEF FACTS RELATING TO GROUND NOS. 2 & 3 ARE I N RELATION TO THE LOAN RAISED BY THE ASSESSEE ARE FROM Y2K SYSTEM. THE S AID LOAN WAS RECEIVED IN US DOLLARS AND SINCE THE LOAN WAS RAISED FOR THE WORKING CAPITAL REQUIREMENTS, IT WAS TREATED AS BUSINESS LOAN. THE ASSESSEE FROM YEAR TO YEAR WAS DETERMINING THE VALUE OF THE LOAN AS ON TH E CLOSE OF THE YEAR AND THE GAIN/LOSS ON SUCH FOREIGN LOAN WAS OFFERED DEDU CTED, AS THE CASE MAY BE, IN THE RETURNS OF THE INCOME. THE ASSESSEE HAS FILED A TABULATED CHART WHICH IS AVAILABLE ON RECORD. THE ASSESSING OFFICE R HOWEVER DISALLOWED THE LOSS CLAIM ON DIMINUTION IN VALUE OF FOREIGN EX CHANGE LOAN TO THE EXTENT OF RS.2.22 CRORES DURING THE YEAR UNDER CONS IDERATION. THE CASE OF THE ASSESSING OFFICER WAS THAT THE SAID LOAN WAS TR EATED AS UNEXPLAINED LOAN/CREDIT IN ASSESSMENT YEAR 2003-04 AND ALSO ON THE GROUND THAT IT WAS NOT A BUSINESS LOSS. THE CIT(A) UPHELD THE ORD ER OF ASSESSING OFFICER. 22. THE CASE OF THE ASSESSEE BEFORE US IS THAT THE LOSS SUFFERED BY THE ASSESSEE WAS AN ITEM OF EXPENDITURE TO BE ALLOWED U/S 37(1) OF THE ACT. IN THIS REGARD, RELIANCE WAS PLACED ON THE RATIO LA ID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS WOODWARD GOVERN OR INDIA PVT.LTD. [2009] 312 ITR 254(SC) AND VARIOUS OTHER DECISIONS. ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 11 23. THE LD.DR FOR THE REVENUE ON THE OTHER HAND, PL ACED STRONG RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW AND STRESSED THAT IT WAS NOTIONAL LOSS ON THE LOAN RECEIVED AND HENCE, IT WA S A CAPITAL LOSS. 24. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE ASSESSEE HAD RAISED LOAN IN ASSESSMENT YEAR 2003-04 , WHICH DURING THE ASSESSMENT PROCEEDINGS WAS HELD TO BE NON-GENUINE. HOWEVER, THE TRIBUNAL VIDE ORDER DATED 01.07.2019 HAS ACCEPTED T HE CASE OF THE ASSESSEE AND HELD THAT THE LOAN WAS RAISED BY THE ASSESSEE FROM ITS HOLDING COMPANY IN ORDER TO MEET ITS WORKING CAPITA L REQUIREMENT. THE INTEREST PAID ON SUCH LOAN HAS BEEN ALLOWED BY US A S REVENUE EXPENDITURE IN THE PARAS ABOVE FOR ASSESSMENT YEARS 2007-08 & 2 008-09. DURING THE YEAR UNDER CONSIDERATION, THE ISSUE WHICH ARISES IS IN RESPECT OF THE DIMINUTION IN VALUE OF FOREIGN EXCHANGE LOAN. THE LOSS ON RE-STATEMENT OF THE FOREIGN EXCHANGE LOAN WAS CLAIMED AS DEDUCTIBLE IN THE HANDS OF THE ASSESSEE. AS PER THE STANDARD AS-11 OF ACCOUNTING PRINCIPLES, SUCH RE- STATEMENT OF FOREIGN EXCHANGE LOAN IS THE REQUIREME NT OF ACCOUNTING PRINCIPLES. ON SUCH RE-STATEMENT, THE LOSS OR GAI N ARISING THERE FROM IS TO BE ALLOWED AS A DEDUCTION OR ADDED AS INCOME IN THE HANDS OF THE ASSESSEE, AS THE CASE MAY BE. THE ASSESSEE HAS FIL ED TABULATED CHART IN THIS REGARD WHEREIN IN ASSESSMENT YEAR 2005-06 LOSS ARISES IN THE HANDS OF THE ASSESSEE OF RS.17,20,000/-, WHICH HAS BEEN A LLOWED AS A DEDUCTION. FURTHER, THE GAIN ARISING IN ALL THE OT HER YEARS HAS BEEN ADDED IN THE HANDS OF THE ASSESSEE. FOLLOWING THE SIMILA R PRINCIPLE OF ACCOUNTING, THE ASSESSEE IN THE YEAR UNDER CONSIDER ATION HAD DEBITED ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 12 EXPENDITURE OF RS.2.22 CRORE, WHICH MERITS TO BE AL LOWED AS REVENUE EXPENDITURE. ACCORDINGLY, WE HOLD SO. WE ALSO FIN D THAT THE SAID ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE DECISI ON OF HONBLE SUPREME COURT IN THE CASE OF CIT VS WOODWARD GOVERNOR INDIA PVT.LTD. (SUPRA). HENCE, GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE ARE ALLOWED. 25. NOW COMING TO THE NEXT ISSUE THAT THE DISALLOWA NCE MADE U/S 14A OF THE ACT WHEREIN NO EXEMPT INCOME HAS BEEN EARNED BY THE ASSESSEE DURING THE YEAR. FOLLOWING THE RATIO LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF CHEMINVEST LTD. VS CIT [2015] 378 IT R 33 (DEL.), WE HOLD THAT NO DISALLOWANCE IN SUCH CASES IS TO BE MAD E IN THE HANDS OF THE ASSESSEE. HENCE, GROUND NO.4 RAISED BY THE ASSESSE E IS THUS ALLOWED. 26. THE LAST APPEAL FILED BY THE REVENUE IS AGAINST THE DELETION OF PENALTY LEVIED U/S 271(1)(C) OF THE ACT RELATING TO ASSESSMENT YEAR 2009- 10. THE REVENUE HAS RAISED FOLLOWING GROUNDS IN TH IS APPEAL:- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE PENALTY U/S 271(L)(C) OF THE IT ACT, 1961 OF RS. 75,76,443/- IMPOSED BY AO ON THE BASIS OF DISAL LOWANCE OF FOREIGN EXCHANGE LOSS OF RS.2,22,90,211/-. 27. THE ASSESSING OFFICER HAD LEVIED THE AFORESAID PENALTY ON THE GROUND ON DISALLOWANCE OF FOREIGN EXCHANGE LOSS OF RS.2.22 CRORE AND THE DISALLOWANCE MADE U/S 14A OF THE ACT. THE CIT(A) D ELETED THE PENALTY AGAINST WHICH THE REVENUE IS IN APPEAL. WE HAVE IN PARAS ABOVE ALREADY DELETED THE DISALLOWANCE MADE IN THE HANDS OF THE A SSESSEE BOTH ON ITA NOS:- 615 TO 618/DEL/2013 & 418/DEL/2015 PAGE | 13 ACCOUNT OF FOREIGN EXCHANGE LOSS AND ADDITION U/S 1 4A OF THE ACT. HENCE, THERE IS NO BASIS FOR LEVY OF ANY PENALTY FOR CONCE ALMENT OF INCOME U/S 271(1)(C) OF THE ACT. ACCORDINGLY, WE HOLD SO. TH US, GROUNDS RAISED BY THE REVENUE IN THIS APPEAL ARE DISMISSED. 28. IN THE RESULT, ALL THE FOUR APPEALS FILED BY TH E ASSESSEE ARE ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DAY OF OCTOBER, 2019. SD/- SD/- (B.R.R.KUMAR) (SUSHMA CH OWLA) %& %& %& %& /ACCOUNTANT MEMBER /JUDICIAL MEMBER / ! DATED : 22 ND OCTOBER, 2019 . * AMIT KUMAR * %-+/45%4/6 COPY OF THE ORDER IS FORWARDED TO : 1. )* / THE APPELLANT; 2. +,)* / THE RESPONDENT; 3. 7 8 9 / THE CIT(A) 4. 4:;+/ / DR, ITAT, DELHI 5. ;(< 6 GUARD FILE. % % % % / BY ORDER , ,4/+/ // TRUE COPY // >?@ , ASSISTANT REGISTRAR, ITAT, DELHI