Appeal details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 8127 (ITAT-CHENNAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 year(s) 6 month(s) 15 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-10-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
03-08-2016
Assessment Year
2005-2006
Appeal Filed On
06-04-2009
Judgement Text
, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1873/MDS/2008 ./ ITA NO.456/MDS/2009 ./ ITA NO.1102/MDS/2011 ./ ITA NOS.115 & 1936/MDS/2012 ' (' / ASSESSMENT YEARS: 2004-05, 2005-06, 2007-08, 2008- 09 & 2009-10 M/S M.CT.M. GLOBAL INVESTMENTS PVT. LTD. , 761, ANNA SALAI, CHENNAI - 600 002. PAN : AABCM 9738 K V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(1), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) ./ ITA NO.1954/MDS/2008 ./ ITA NOS.1438, 1465 & 1654/MDS/2009 & C.O. NOS.167 & 200/MDS/2009 (IN I.T.A. NOS.1438 & 1654/MDS/2009) ./ ITA NO.1285/MDS/2011 ' (' / ASSESSMENT YEAR : 2001-02, 2004-05, 2005-06, 2006- 07 & 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(1), CHENNAI - 600 034. V. M/S M.CT.M. GLOBAL INVESTMENTS PVT. LTD., 761, ANNA SALAI, CHENNAI - 600 002. (*+/ APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) './ 0 1 /ASSESSEE BY : DR. ANITA SUMANTH, ADVOCATE 2 0 1 /REVENUE BY : SH. PATHLAVATH PEERYA, CIT 2 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 3 0 /$ / DATE OF HEARING : 11.08.2016 4!( 0 /$ / DATE OF PRONOUNCEMENT : 21.10.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: ALL THE APPEALS OF THE ASSESSEE AND REVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER O F INCOME TAX (APPEALS)-V, CHENNAI. THE ASSESSEE HAS ALSO FILED CROSS- OBJECTIONS. SINCE COMMON ISSUES ARISE FOR CONSIDER ATION IN THESE APPEALS AND CROSS-OBJECTIONS, WE HEARD THESE APPEAL S AND CROSS- OBJECTIONS TOGETHER AND DISPOSING OF THE SAME BY TH IS COMMON ORDER. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS TAXA TION OF INCOME EARNED BY THE ASSESSEE FROM INVESTMENT MADE IN MALA YSIA. 3. DR. ANITA SUMANTH, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE MALAYSIAN BRANCH OF THE ASSESSEE -COMPANY WAS REGISTERED AS A COMPANY IN MALAYSIA. THE ASSESSEE INVESTED IN BONDS, DEBENTURES, DERIVATIVES, SHARES, ETC. IN MAL AYSIA. SINCE THE ASSESSEE INVESTED ITS FUNDS IN MALAYSIA, THE INCOME EARNED BY THE ASSESSEE-COMPANY FROM MALAYSIAN INVESTMENT IS EXCLU SIVELY 3 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 ATTRIBUTABLE TO MALAYSIAN BRANCH, THEREFORE, THE PR OVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN UNION OF INDIA AND GOVERNMENT OF MALAYSIA WOULD COME INTO OPERATION. ACCORDING TO THE LD. COUNSEL, THE INCOME EARNED BY THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY CANNOT BE ASSESSED IN INDIA. 4. REFERRING TO DOUBLE TAXATION AVOIDANCE AGREEMENT , THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSE T OF THE MALAYSIAN BRANCH WAS ASSESSED BY THE ASSESSEE-COMPA NY IN MAKING INVESTMENT IN MALAYSIA. THEREFORE, ACCORDIN G TO THE LD. COUNSEL, THE INCOME EARNED ON THE INVESTMENTS MADE OUT OF THE ASSETS OF THE MALAYSIAN BRANCH IS ATTRIBUTABLE ONLY TO MALAYSIAN BRANCH, THEREFORE, THE SAME HAS TO BE ASSESSED ONLY IN MALAYSIA AND NOT IN INDIA. REFERRING TO THE DECISION OF THI S BENCH OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2000-01 IN I.T.A. NO. 659/MDS/2005, THE LD.COUNSEL SUBMITTE D THAT IN FACT, THIS TRIBUNAL HAS NOT CONSIDERED THE PROVISIONS OF DOUBLE TAXATION AVOIDANCE AGREEMENT WHILE COMING TO CONCLUSION THAT THERE WAS NO PERMANENT ESTABLISHMENT IN MALAYSIA. ACCORDING TO THE LD. COUNSEL,, THE MALAYSIAN BRANCH OF THE ASSESSEE-COMP ANY WAS REGISTERED AS A SEPARATE COMPANY IN MALAYSIA, THERE FORE, IT HAS TO 4 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 BE CONSTITUTE A PERMANENT ESTABLISHMENT IN MALAYSIA , HENCE THE INCOME EARNED BY THE MALAYSIAN BRANCH OF THE ASSESS EE-COMPANY BY MAKING INVESTMENT FROM THE ASSETS OF MALAYSIAN B RANCH HAS TO BE TREATED AS INCOME OF THE MALAYSIAN BRANCH AND LI ABLE FOR TAXATION UNDER MAYALSIAN INCOME TAX ACT, THEREFORE, THE SAME CANNOT BE SUBJECT MATTER OF TAXATION IN INDIA. THE LD.COUNSE L FURTHER SUBMITTED THAT THE BUSINESS OF THE MALAYSIAN BRANCH OF THE CO MPANY IS INVESTMENT, THEREFORE, THE INCOME EARNED BY THE ASS ESSEE IN INVESTMENTS IN MALAYSIA HAS TO BE TREATED AS BUSINE SS INCOME. SINCE THE ASSESSEE HAS PERMANENT ESTABLISHMENT IN M ALAYSIA, THE CIT(APPEALS) IS NOT JUSTIFIED IN PLACING RELIANCE O N THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2000-01 IN HOLDING THA T THE INCOME IS TAXABLE IN INDIA. 5. ON THE CONTRARY, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE- COMPANY HAD A BRANCH IN MALAYSIA. THE ASSESSEE INV ESTED ITS FUNDS THROUGH MALAYSIAN BRANCH IN MALAYSIA. THE DE CISION TO MAKE INVESTMENT WAS TAKEN AT CHENNAI. IN FACT, ALL THE DIRECTORS OF THE ASSESSEE-COMPANY WERE RESIDING IN CHENNAI. THEREFO RE, ACCORDING TO THE LD. D.R., THE ASSESSEE-COMPANY FUNCTIONS FRO M CHENNAI AND 5 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 MAKING INVESTMENT IN MALAYSIA. THEREFORE, ACCORDIN G TO THE LD. D.R., THE ASSESSEE HAS NO PERMANENT ESTABLISHMENT I N MALAYSIA. IN FACT, THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2000-01 EXAMINED THIS ISSUE ELABORATELY AND FOUND T HAT THE INCOME EARNED BY THE MALAYSIAN BRANCH OF THE ASSESSEE-COMP ANY IS LIABLE FOR TAXATION IN INDIA. 6. REFERRING TO THE CLASSIFICATION OF INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES, THE LD. DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT ONCE THE INCOME EARNED BY THE MALAYS IAN BRANCH OF THE ASSESSEE-COMPANY IS TAXABLE IN INDIA, THE CLASS IFICATION OF INTEREST INCOME HAS TO BE MADE UNDER THE PROVISIONS OF INCOME-TAX ACT. IN FACT, ACCORDING TO THE LD. D.R., THE INCOM E OF THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY WAS FROM INVESTMENTS . THE INCOME WAS IN THE NATURE OF INTEREST AND DIVIDEND F ROM SUCH INVESTMENTS. THEREFORE, IT HAS TO BE CLASSIFIED AS INCOME FROM OTHER SOURCES AND NOT FROM BUSINESS. 7. REFERRING TO THE ORDER OF THIS TRIBUNAL IN THE A SSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2000-01, THE LD. D.R. SUBM ITTED THAT THE TRIBUNAL FOUND THAT THE ASSESSEES BRANCH AT MALAYS IA WAS HOLDING 6 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 THE INVESTMENT NOT AS A STOCK-IN-TRADE BUT AS INVES TMENTS ONLY. THEREFORE, THE PURCHASE AND SALE OF THE INVESTMENTS IS LIABLE FOR CAPITAL GAIN. SINCE IN THE ASSESSEE'S OWN CASE, TH IS TRIBUNAL FOUND THAT THE ASSESSEE WAS HOLDING THE SHARES, DEBENTURE S, ETC. AS INVESTMENTS ONLY AND NOT AS STOCK-IN-TRADE, THE TRI BUNAL FOUND THAT THE LOSS ON SALE OF INVESTMENTS CANNOT BE SET OFF. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS) DISALLO WED THE CLAIM OF THE ASSESSEE BY RIGHTLY PLACING HIS RELIANCE ON THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2000-01. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. D.R., THIS TRIBUNAL EXAMINED T HE ISSUE FOR ASSESSMENT YEAR 2000-01 AND FOUND THAT THERE WAS NO PERMANENT ESTABLISHMENT IN MALAYSIA. THE MALAYSIAN BRANCH OF THE ASSESSEE- COMPANY INVESTED IN M/S GOLDMAN SACHS ON THE BASIS OF THE DECISION TAKEN AT CHENNAI. THIS TRIBUNAL FOUND THA T M/S GOLDMAN SACHS INVESTED IN VARIOUS BONDS AND SHARES. THE MA LAYSIAN BRANCH OF THE ASSESSEE-COMPANY WAS, IN FACT, OPERAT ED FROM CHENNAI. THIS TRIBUNAL, FOR THE ASSESSMENT YEAR 20 00-01, EXAMINED ENTIRE NATURE OF INVESTMENTS MADE BY THE A SSESSEE- 7 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 COMPANY IN MALAYSIA AND FOUND THAT THE INTEREST / I NCOME EARNED BY THE ASSESSEE FROM INVESTMENTS IN MALAYSIA HAS TO BE CONSTRUED AS INCOME FROM OTHER SOURCES. THE LOSS SUFFERED BY THE ASSESSEE ON SALE OF SHARES AND INVESTMENTS CANNOT BE ALLOWED TO SET OFF AGAINST THE CAPITAL GAIN. THIS TRIBUNAL FURTHER FOUND THAT THE INCOME EARNED BY THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY IS TAXABLE IN INDIA AND NOT TAXABLE IN MALAYSIA. IN VIEW OF THE DECISION OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE ASSESSM ENT YEAR 2000- 01, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFE RE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CON FIRMED. 9. THE NEXT ISSUE ARISES FOR CONSIDERATION IS EXPEN DITURE INCURRED BY THE ASSESSEE IN MALAYSIAN BRANCH. THIS ISSUE ARISES FOR CONSIDERATION IN THE REVENUES APPEAL FOR ASSESSMEN T YEAR 2001- 02. 10. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2003-04 FOUND THAT THE EXP ENDITURE CANNOT BE ALLOWED WHILE COMPUTING THE TOTAL INCOME. THEREFORE, ACCORDING TO THE LD. D.R., THE ORDER OF THE CIT(APP EALS) ALLOWING THE 8 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 EXPENDITURE INCURRED BY THE ASSESSEE IN MALAYSIAN B RANCH OF THE ASSESSEE-COMPANY IS NOT JUSTIFIED. 11. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT THE CIT(APPEALS) FOUND THA T THE INCOME EARNED BY THE ASSESSEES BRANCH IN MALAYSIA IS TAXA BLE IN INDIA. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE EXPEND ITURE HAS ALSO TO BE ALLOWED WHILE COMPUTING THE TAXABLE INCOME. SIN CE THE ENTIRE FOREIGN INCOME WAS TAXED UNDER THE HEAD INCOME FRO M OTHER SOURCES, THE CIT(APPEALS) FOUND THAT THE EXPENDITU RE INCURRED BY THE ASSESSEE IN MALAYSIA FOR EARNING SUCH INCOME HA S ALSO TO BE ALLOWED WHILE COMPUTING TAXABLE INCOME IN INDIA. A CCORDING TO THE LD. COUNSEL, THE CLAIM OF THE ASSESSEE IS THAT THE INCOME EARNED IN MALAYSIA IS NOT TAXABLE IN INDIA. THEREFORE, THE E XPENDITURE INCURRED BY THE ASSESSEE FOR EARNING SUCH INCOME HAS TO BE R EDUCED FROM THE INCOME EARNED IN MALAYSIA. ACCORDING TO THE LD . COUNSEL, THE ASSESSEE MADE INVESTMENTS THROUGH GOLDMAN SACHS, SI NGAPORE, THEREFORE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. 9 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. APPARENTLY, THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE ON T HE GROUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE HAS TO BE REDUCED FROM THE INCOME EARNED FROM INVESTMENTS IN MALAYSIA. TH E REVENUE IN GROUND NO.2.2 CLARIFIES THAT THIS TRIBUNAL IN I.T.A . NO.558/MDS/2007 FOR THE ASSESSMENT YEAR 2003-04, BY AN ORDER DATED 26.06.2009, DECIDED THE MATTER IN FAVOUR OF REVENUE. THE REVEN UE HAS FILED A COPY OF THE ORDER OF THIS TRIBUNAL DATED 26.06.2009 IN THE PAPER- BOOK. 13. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THI S TRIBUNAL. THIS TRIBUNAL FOUND THAT THE INCOME FROM MALAYSIAN BRANCH HAS TO BE CLASSIFIED AS INCOME FROM OTHER SOURCES AND IT CANNOT BE SAID TO BE ARISING FROM BUSINESS, THEREFORE, THERE CANNO T ANY QUESTION OF ALLOWING THE EXPENDITURE AGAINST THE BUSINESS INCOM E. IN VIEW OF THIS ORDER OF THE TRIBUNAL, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. IN FACT, THIS ORDER OF THE TRIBUNAL WAS NOT BROUGHT TO THE NOTICE OF THE CIT(APPEALS). BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN I.T.A. NO.558/MDS/2007 DA TED 26.06.2009, 10 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 14. NEXT ISSUE ARISES FOR CONSIDERATION IS INTEREST UNDER SECTION 234B OF THE ACT. THIS WAS RAISED BY THE REVENUE IN I.T.A. NO. 1438/MDS/2009 FOR ASSESSMENT YEAR 2001-02. 15. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICE R LEVIED INTEREST UNDER SECTION 234B OF THE ACT. THE ASSESSING OFFIC ER FOUND THAT THE INCOME OF MALAYSIAN BRANCH OF THE ASSESSEE-COMP ANY HAS TO BE TAXED IN INDIA. HOWEVER, THE CIT(APPEALS) ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE-COMPANY WO ULD NOT HAVE ANTICIPATED THE FOREIGN INCOME WOULD BE HELD TO BE TAXABLE IN INDIA. REFERRING TO SECTION 234B OF THE ACT, THE LD. D.R. SUBMITTED THAT WHEN THE ASSESSEE IS LIABLE TO PAY ADVANCE TAX AND THE ADVANCE TAX PAID BY THE ASSESSEE WAS LESS THAN 90% OF THE ASSES SED TAX, THE ASSESSEE HAS TO PAY A SIMPLE INTEREST AT THE RATE O F 1% EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD. IN THI S CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE IS LIABLE TO PAY ADVANCE TAX AND THE ADVANCE TAX PAID BY THE ASSESSEE IS LESS THAN 90% O F ASSESSED TAX, 11 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY LEVIED UNDER SECTION 234B OF THE ACT. 16. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS NOT ANTIC IPATED THAT THE INCOME OF THE MALAYSIAN BRANCH OF THE ASSESSEE-COMP ANY WOULD BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE IN IND IA. ACCORDING TO THE LD. COUNSEL, THE MALAYSIAN BRANCH HAS TO BE CON STRUED AS HAVING PERMANENT ESTABLISHMENT IN MALAYSIA, THEREFO RE, THE INCOME IS NOT TAXABLE IN INDIA. SINCE THE ASSESSEE WAS UN DER THE BONA FIDE BELIEF THAT THE INCOME OF THE MALAYSIAN BRANCH IS N OT TAXABLE IN INDIA, THERE CANNOT BE ANY LEVY OF INTEREST UNDER S ECTION 234B OF THE ACT. PLACING RELIANCE ON THE JUDGMENT OF MADRAS HI GH COURT IN CIT V. REVATHI EQUIPMENT LIMITED (2008) 298 ITR 67, THE LD.COUNSEL SUBMITTED THAT THE ASSESSEE HAS PAID THE ADVANCE TA X VOLUNTARILY IN RESPECT OF INDIAN INCOME. THE ASSESSEE NEVER ANTIC IPATED THAT THE INCOME EARNED IN MALAYSIAN INVESTMENTS WOULD BE INC LUDED IN THE TOTAL INCOME OF THE ASSESSEE, THEREFORE, THE ASSESS EE IS UNDER THE BONA FIDE BELIEF THAT THE MALAYSIAN INCOME IS NOT TAXABLE IN INDIA, HENCE THE INTEREST UNDER SECTION 234B OF THE ACT IS NOT CHARGEABLE. 12 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE PAYMENT OF ADVANCE TAX WAS INCREASED DUE TO INCLUSION OF INCOM E OF MALAYSIAN BRANCH IN INDIA. THE ASSESSEE CLAIMS THAT THERE WA S A BONA FIDE BELIEF THAT THE MALAYSIAN INCOME WOULD NOT FORM PAR T OF TOTAL INCOME OF THE ASSESSEE IN INDIA. 18. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF MADRAS HIGH COURT IN REVATHI EQUIPMENT LIMITED (SUPRA). I N THE CASE BEFORE MADRAS HIGH COURT, THE ASSESSEE HAS PAID ADV ANCE TAX VOLUNTARILY. SECTION 35DDA OF THE ACT WAS INTRODUC ED BY FINANCE ACT, 2001 WITH EFFECT FROM 01.04.2001. IN FACT, FI NANCE BILL RECEIVED ASSENT OF PRESIDENT ON 11.05.2000. THEREFORE, THE MADRAS HIGH COURT FOUND THAT THE ASSESSEE COULD NOT HAVE ENVISA GED THAT THE VOLUNTARY RETIREMENT PAYMENTS ARE LIABLE FOR TAXATI ON. IN VIEW OF THE LEGISLATIVE CHANGE BROUGHT IN BY FINANCE ACT, 2001, THE MADRAS HIGH COURT FOUND THAT THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF, THEREFORE, THE INTEREST IS NOT LEVIABLE. IN THE CA SE BEFORE US, IT IS NOT THE CASE OF LEGISLATIVE CHANGE. THE INCOME OF MALA YSIAN BRANCH OF INDIAN COMPANY WAS NOT INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE. IT IS A WELL SETTLED PRINCIPLE OF LAW TH AT THE GLOBAL INCOME 13 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 OF THE RESIDENT COMPANY IS LIABLE FOR TAXATION IN I NDIA UNLESS OTHERWISE IT WAS EXCLUDED BY DOUBLE TAXATION AVOIDA NCE AGREEMENT BETWEEN TWO SOVEREIGN COUNTRIES. 19. IN THE CASE BEFORE US, THIS TRIBUNAL IN THE ASS ESSEE'S OWN CASE, FOR ASSESSMENT YEAR 2000-01, AFTER EXAMINING THE DOUBLE TAXATION AVOIDANCE AGREEMENT, AND THE INVESTMENT SA ID TO BE MADE BY THE MALAYSIAN BRANCH, FOUND THAT THE ASSESS EE IS NOT DOING ANY BUSINESS IN MALAYSIA OTHER THAN MAKING INVESTME NTS IN M/S GOLDMAN SACHS. THE ASSESSEE-COMPANY IS NOT MAKING INVESTMENTS IN ANY ANOTHER COMPANIES. THE OTHER CO MPANY M/S GOLDMAN SACHS WAS DOING BUSINESS. THE DECISION TO MAKE INVESTMENT WAS TAKEN IN INDIA, THEREFORE, THE MALAY SIAN BRANCH CANNOT BE CONSTRUED A PERMANENT ESTABLISHMENT. IN THOSE FACTUAL CIRCUMSTANCES, THIS TRIBUNAL FOUND FOR THE ASSESSME NT YEAR 2000- 01, IN THE ASSESSEE'S OWN CASE, THAT THE INCOME EAR NED ON INVESTMENTS BY MALAYSIAN BRANCH OF THE ASSESSEE-COM PANY IS TAXABLE IN INDIA. THE TAXABILITY OF INCOME AT MALA YSIAN BRANCH IS NOT BECAUSE OF ANY LEGISLATIVE CHANGE BROUGHT IN SUBSEQ UENTLY. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE WAS UNDER THE BONA FIDE BELIEF. THIS IS THE CASE OF LEVY OF TAX ON TH E INCOME. SINCE 14 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 THERE WAS NO LEGISLATIVE CHANGE BROUGHT IN BY THE P ARLIAMENT, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE JUDG MENT OF MADRAS HIGH COURT IN REVATHI EQUIPMENT LIMITED (SUPRA) MAY NOT BE APPLICABLE TO THE FACTS OF THE CASE. THEREFORE, WH EN THE ASSESSEE ADMITTEDLY PAID ADVANCE TAX, WHICH IS LESS THAN 90% OF ASSESSED TAX, THE ASSESSEE IS LIABLE TO PAY INTEREST UNDER S ECTION 234B OF THE ACT. THEREFORE, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDER OF THE CIT(APPEALS). ACCORDINGLY, THE ORDER OF THE CIT(AP PEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED . 20. THE NEXT ISSUE ARISES FOR CONSIDERATION IS LEVY OF INTEREST UNDER SECTION 234D OF THE ACT. 21. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE INTEREST UNDER S ECTION 234D OF THE ACT WAS LEVIED ON THE AMOUNT REFUNDED TO THE AS SESSEE. REFERRING TO THE JUDGMENT OF MADRAS HIGH COURT IN C IT V. INFRASTRUCTURE DEVELOPMENT FINANCE CO. LTD. (2013) 33 TAXMANN.COM 622, THE LD. D.R. SUBMITTED THAT SINCE THE EXCESS AMOUNT WAS REFUNDED TO THE ASSESSEE, THE ASSESSEE I S LIABLE TO PAY INTEREST ON THE EXCESS AMOUNT REFUNDED. THE LD. D. R. HAS ALSO PLACED RELIANCE ON THE DECISION OF THE BANGALORE BE NCH OF THIS 15 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 TRIBUNAL IN SIGMA ALDRICH FOREIGN HOLDING COMPANY V . ACIT (104 ITD 95) AND AHMEDABAD BENCH OF THIS TRIBUNAL IN JCI T V. SARDAR SAROVAR NARMADA NIGAM LTD. (93 ITD 321). 22. WE HAVE HEARD DR. ANITA SUMANTH, THE LD.COUNSEL FOR THE ASSESSEE, ALSO. IT IS NOT IN DISPUTE THAT THE EXCE SS AMOUNT WAS REFUNDED AND THE LEVY OF INTEREST UNDER SECTION 234 D WAS MADE ON EXCESS AMOUNT REFUNDED. THE CLAIM OF THE ASSESSEE BEFORE THE LOWER AUTHORITIES WAS THAT NO INTEREST COULD BE CHA RGEABLE UNDER SECTION 234D OF THE ACT PRIOR TO ASSESSMENT YEAR 20 01-02. THE MADRAS HIGH COURT IN INFRASTRUCTURE DEVELOPMENT FIN ANCE CO. LTD. (SUPRA) FOUND THAT SECTION 234D OF THE ACT CAME INT O FORCE WITH EFFECT FROM 01.06.2003. WHEN THE REGULAR ASSESSMEN T WAS COMPLETED AFTER THE PROVISIONS OF SECTION 234D OF T HE ACT CAME INTO FORCE, THE ASSESSEE WAS LIABLE TO PAY INTEREST ON T HE EXCESS AMOUNT REFUNDED AS CONTEMPLATED UNDER SECTION 234D OF THE ACT. IN THIS CASE ALSO, THE REGULAR ASSESSMENT WAS ADMITTEDLY MA DE ON 21.01.2009 AFTER SECTION 234D OF THE ACT CAME INTO OPERATION. THEREFORE, THE ASSESSEE IS LIABLE TO PAY INTEREST U NDER SECTION 234D OF THE ACT ON THE EXCESS AMOUNT REFUNDED IN VIEW OF THE JUDGMENT OF MADRAS HIGH COURT IN INFRASTRUCTURE DEVELOPMENT FIN ANCE CO. LTD. 16 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 (SUPRA). BY RESPECTFULLY FOLLOWING THE JUDGMENT OF MADRAS HIGH COURT IN INFRASTRUCTURE DEVELOPMENT FINANCE CO. LTD . (SUPRA), THE ORDER OF THE CIT(APPEALS) IS SET ASIDE AND THAT OF THE ASSESSING OFFICER IS RESTORED. 23. NOW COMING TO THE CROSS-OBJECTION OF THE ASSESS EE FOR ASSESSMENT YEAR 2001-02, THE FIRST ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO REOPENING OF ASSESSMENT. 24. DR. ANITA SUMANTH, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE MALAYSIAN BRANCH OF THE ASSESSEE -COMPANY CONSTITUTES A PERMANENT ESTABLISHMENT IN TERMS OF A RTICLE 5 OF DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN INDIA A ND MALAYSIA. THEREFORE, THE INCOME OF MALAYSIAN BRANC H IS NOT LIABLE FOR TAXATION. HENCE, ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER IS NOT JUSTIFIED IN REOPENING THE ASSESSMEN T. 25. ON THE CONTRARY, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE INC OME OF THE ASSESSEE ESCAPED ASSESSMENT, THEREFORE, THE ASSESSI NG OFFICER HAS RIGHTLY REOPENED THE ASSESSMENT BY ISSUING NOTI CE UNDER SECTION 148 OF THE ACT. REFERRING TO THE JUDGMENT OF MADRAS HIGH 17 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 COURT IN AREVA T&D INDIA LTD. V. ACIT (2007) 294 IT R 233, THE LD. D.R. SUBMITTED THAT WHEN THE INCOME WAS ESCAPED ASS ESSMENT, REASSESSMENT WAS INITIATED BY ISSUING NOTICE UNDER SECTION 148 OF THE ACT WITHOUT GIVING NOTICE UNDER SECTION 143(2) OF THE ACT AMOUNTS TO PROCEDURAL IRREGULARITY, THEREFORE, IT W OULD NOT MAKE REASSESSMENT NULLITY IN LAW. THEREFORE, THE ASSESS ING OFFICER HAS RIGHTLY REOPENED THE ASSESSMENT. SIMILARLY, FOR AS SESSMENT YEAR 2003-04, THIS TRIBUNAL FOUND THAT THE ASSESSMENT WA S RIGHTLY REOPENED ON IDENTICAL SITUATION. 26. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE IS CHALLENGING THE REOPENING OF ASSESSMENT ON THE GROU ND THAT THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY CONSTITUTE S A PERMANENT ESTABLISHMENT IN MALAYSIA, THEREFORE, THE INCOME DOES NOT ESCAPE FROM ASSESSMENT. THIS TRIBUNAL FOR ASSE SSMENT YEAR 2000-01, IN THE ASSESSEE'S OWN CASE, FOUND THAT THE MALAYSIAN BRANCH OF THE ASSESSEE-COMPANY CANNOT CONSTITUTE A PERMANENT ESTABLISHMENT AND THE ASSESSEES MALAYSIAN BRANCH I S NOT DOING ANY BUSINESS OTHER THAN MAKING INVESTMENTS. THEREF ORE, INCOME FROM MALAYSIAN BRANCH IS TAXABLE INDIA. IN VIEW OF THE FINDING OF THIS 18 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 TRIBUNAL FOR ASSESSMENT YEAR 2000-01 THAT THE INCOM E ESCAPED ASSESSMENT, THEREFORE, THE ASSESSING OFFICER HAS RI GHTLY REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. ON ID ENTICAL SITUATION, FOR ASSESSMENT YEARS 2002-03 AND 2003-04 , THIS TRIBUNAL CONFIRMED THE ORDER OF THE ASSESSING OFFICER FOR RE OPENING ASSESSMENT. THEREFORE, THIS TRIBUNAL DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 27. THE NEXT ISSUE ARISES FOR CONSIDERATION IS THE CLASSIFICATION OF INTEREST INCOME AND DIVIDEND INCOME. 28. DR. ANITA SUMANTH, THE LD.COUNSEL FOR THE ASSES SEE, SUBMITTED THAT THE BUSINESS OF THE ASSESSEE IS INVE STMENT, THEREFORE, THE INTEREST INCOME EARNED BY THE ASSESS EE FROM INVESTMENTS AND DIVIDEND INCOME HAVE TO BE CLASSIFI ED AS INCOME FROM BUSINESS. HOWEVER, THE CIT(APPEALS) CLASSIF IED THE SAME AS INCOME FROM OTHER SOURCES AND THUS CONFIRMED T HE ORDER OF THE ASSESSING OFFICER. 29. ON THE CONTRARY, SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASS ESSEE WAS NOT 19 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 ENGAGED IN ANY BUSINESS IN MALAYSIA. THE ASSESSEE HAS SIMPLY INVESTED IN MALAYSIA IN M/S GOLDSMAN SACHS THROUGH MALAYSIAN BRANCH AND EARNED INTEREST INCOME AND DIVIDEND INCO ME. IN FACT, THE BUSINESS WAS DONE BY M/S GOLDSMAN SACHS. THERE FORE, ACCORDING TO THE LD. D.R., THE INTEREST INCOME RECE IVED BY THE ASSESSEE ON INVESTMENT IN M/S GOLDSMAN SACHS AND DI VIDEND INCOME HAVE TO BE NECESSARILY CLASSIFIED AS INCOME FROM OTHER SOURCES UNDER INDIAN INCOME-TAX ACT. THE ENTIRE IN VESTMENT MADE BY THE ASSESSEE IN M/S GOLDSMAN SACHS WAS TREATED A S MERE INVESTMENT AND NOT AS STOCK-IN-TRADE. THEREFORE, A CCORDING TO THE LD. D.R., THE CIT(APPEALS) HAS RIGHTLY FOUND THAT T HE INCOME HAS TO BE CLASSIFIED AS INCOME FROM OTHER SOURCES. 30. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS INVESTED IN ONE M/S G OLDSMAN SACHS THROUGH ITS MALAYSIAN BRANCH. THE ASSESSEE HAS NOT DONE ANY OTHER BUSINESS OTHER THAN MAKING INVESTMENT IN M/S GOLDSMAN SACHS. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE INCOME BY WAY OF INTEREST AND DIVI DEND INCOME RECEIVED FROM M/S GOLDSMAN SACHS HAVE TO BE CLASSIF IED AS INCOME 20 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 FROM OTHER SOURCES AND NOT AS INCOME FROM BUSINESS. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 31. THE NEXT ISSUE ARISES FOR CONSIDERATION IS UNRE ALISED GAIN ON CURRENCY TRANSLATION. 32. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT RULE 115 OF INCOME-TAX RULES, 1962 W AS NOT TAKEN INTO CONSIDERATION BY THE CIT(APPEALS). THE ASSESS EE CLAIMED BEFORE THE ASSESSING OFFICER THAT THE GAIN ON CURRE NCY CONVERSION IS ONLY A NOTIONAL GAIN AND OUGHT NOT TO HAVE BEEN INC LUDED IN THE TAXABLE INCOME. THE ASSESSEE ALSO CLAIMED THAT THE PROFIT ON ACCOUNT OF FOREIGN EXCHANGE CURRENCY HAS TO BE EXCL UDED FROM TAXABLE INCOME. HOWEVER, THE ASSESSING OFFICER DIS ALLOWED THE CLAIM OF THE ASSESSEE. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) FOUND THAT THE UNREALISED GAIN ON FORE IGN TRANSACTION IS ONLY A NOTIONAL GAIN, THE SAME WAS NOT CRYSTALLI SED. THE CIT(APPEALS) PLACED HIS RELIANCE ON THE JUDGMENT OF UTTARAKHAND HIGH COURT IN CIT V. ONGC (301 ITR 415). ACCORDING LY, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. REFERR ING TO RULE 115, 21 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 THE LD. D.R. SUBMITTED THAT THE RATE OF EXCHANGE FO R THE CALCULATION OF VALUE IN RUPEES HAS TO BE DEEMED TO BE RECEIVED OR ARRIVED OR ACCRUED TO THE ASSESSEE DEPENDING UPON FOREIGN EXCH ANGE RATE PREVAILING ON THE PARTICULAR DATE. THIS RULE WAS N OT TAKEN INTO CONSIDERATION BY THE CIT(APPEALS) WHILE PLACING REL IANCE ON THE JUDGMENT OF UTTARAKHAND HIGH COURT IN ONGC (SUPRA). 33. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT UNREALISED FOREIGN CURRENC Y TRANSLATION IS ONLY A CONTINGENT AND NOTIONAL GAIN. EVEN THOUGH I T WAS CREDITED TO THE PROFIT & LOSS ACCOUNT, IT IS NOT A REAL INCOME. THEREFORE, ACCORDING TO THE LD. COUNSEL, IT HAS TO BE EXCLUDED , HENCE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE A SSESSEE. 34. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE GAIN ON FOREIGN CURRENCY TRANSLATION FROM VARIOUS INTERNATI ONAL CURRENCIES IS NOTIONAL ONE. THE UTTARAKHAND HIGH COURT IN ONGC C ASE (SUPRA) EXAMINED THIS ISSUE AND FOUND THAT THE GAIN IS ONLY A NOTIONAL ONE AND IT IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. SINCE THE CIT(APPEALS) HAS FOLLOWED THE JUDGMENT OF UTTARAKHA ND HIGH COURT, 22 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 35. THE NEXT GROUND OF APPEAL IS WITH REGARD TO PRO VISION FOR DIMINUTION IN THE VALUE OF CURRENT INVESTMENT. 36. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSEE-COMPANY INVESTED IN VAR IOUS INVESTMENTS AND THE SAME WAS CLASSIFIED AS CURRENT INVESTMENT AND PERMANENT INVESTMENT. THE ASSESSEE HAS VALUE D THE INVESTMENTS AT COST OR MARKET VALUE, WHICHEVER IS L ESS, ON THE DATE OF THE BALANCE SHEET. THE DIFFERENCE BETWEEN THE O PENING VALUE OR THE COST PRICE OF THE PREVIOUS YEAR AND THE MARKET VALUE ON THE LAST DAY OF FINANCIAL YEAR WAS CHARGEABLE TO PROFIT & LO SS ACCOUNT. THE STATEMENT SHOWING THE COMPUTATION OF AMOUNT CLAIMED AS PROVISION FOR DIMINUTION IN THE VALUE OF CURRENT INVESTMENT W AS CLAIMED AS DEDUCTION. THE ASSESSING OFFICER DISALLOWED THE CL AIM OF THE ASSESSEE ON THE GROUND THAT IT IS ONLY A PROVISION. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) ALLOWED TH E CLAIM OF THE ASSESSEE ON THE GROUND THAT DIMINUTION IN THE VALUE OF INVESTMENT CLAIMED AS DEDUCTED IN THE PROFIT & LOSS ACCOUNT IS PERMISSIBLE 23 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 DEDUCTION UNDER THE INCOME-TAX ACT. ACCORDINGLY HE DELETED THE ADDITION. ACCORDING TO THE LD. D.R., IT IS ONLY A PROVISION MADE IN THE BOOKS OF ACCOUNT, THEREFORE, IT CANNOT BE ALLOW ED. 37. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT SECTION 145 OF THE ACT PRO VIDES FOR COMPUTATION OF PROFITS AND GAINS OF THE BUSINESS OR PROFESSION ARE INCOME FROM OTHER SOURCES IN ACCORDANCE WITH METHOD OF ACCOUNT REGULARLY EMPLOYED BY THE ASSESSEE. THE ASSESSEE I S REGULARLY VALUING ITS CURRENT INVESTMENT AT COST OR MARKET VA LUE, WHICHEVER IS LOWER. THIS PRACTICE OF VALUING CURRENT ASSET WAS APPROVED BY ACCOUNTING STANDARDS ALSO. THE DIMINUTION IN THE V ALUE OF CURRENT ASSET ON THE LAST DATE OF FINANCIAL YEAR WAS ASCERT AINED. THEREFORE, IT CANNOT BE SAID THAT IT IS ONLY A PROVISION. THE REFORE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE A SSESSEE. 38. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, THE A SSESSEE CONTINUOUSLY VALUING THE CURRENT INVESTMENTS AT COS T OR MARKET PRICE, WHICHEVER IS LOWER THEREFORE, AS ON THE LAST DAY O F THE FINANCIAL 24 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 YEAR, THE QUANTUM OF DIMINUTION IN THE VALUE OF CUR RENT ASSET CAN BE ASCERTAINED. HENCE, AS RIGHTLY SUBMITTED BY THE LD .COUNSEL FOR THE ASSESSEE, IT IS NOT A PROVISION. THEREFORE, THE CI T(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. THIS TR IBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 39. NOW COMING TO REVENUES APPEAL FOR ASSESSMENT Y EAR 2007- 08, THE FIRST GROUND OF APPEAL IS WITH REGARD TO DI MINUTION IN THE VALUE OF STOCKS. 40. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE PROFIT ON SALE OF INVESTMENTS WA S FOUND TO BE A CAPITAL GAIN BY THIS TRIBUNAL FOR ASSESSMENT YEARS 2002-03 AND 2003-04. THEREFORE, DIMINUTION IN THE VALUE CANNOT BE ALLOWED AS DEDUCTION. 41. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT THE CURRENT INVESTMENT WAS FOUND TO BE AN INVESTMENT BY THIS TRIBUNAL. THE ASSESSEE IS VALUI NG THE CURRENT INVESTMENT EITHER AT MARKET VALUE OR AT COST, WHICH EVER IS LOWER. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE DIMINU TION IN THE VALUE 25 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 IS ASCERTAINABLE AT THE LAST DAY OF FINANCIAL YEAR. ACCORDINGLY, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF THE A SSESSEE. 42. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE INVESTMENT MADE BY THE ASSESSEE HAS BEEN CONTINUOUSLY VALUED E ITHER AT MARKET PRICE OR AT COST, WHICHEVER IS LOWER, AS PER THE PROVISIONS OF SECTION 145 OF THE ACT. THEREFORE, THE DIMINUTION IN THE VALUE OF INVESTMENT IS ASCERTAINABLE AT THE END OF THE FINAN CIAL YEAR. HENCE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE CLAIM OF T HE ASSESSEE. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 43. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE MADE UNDER SECTION 14A OF THE ACT. 44. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE EXPENDITURE FOR EARNING THE EXEMPT INCOME BY APPLYING THE PROVISION S OF RULE 8D OF THE INCOME-TAX RULES, 1962. HOWEVER, THE CIT(APPEA LS) RESTRICTED THE DISALLOWANCE TO 2% OF THE EXEMPT INCOME. SINCE RULE 8D IS 26 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 MANDATORY, ACCORDING TO THE LD. D.R., THE CIT(APPEA LS) IS NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE AT 2%. 45. ON THE CONTRARY, DR. ANITA SUMANTH,, THE LD.COU NSEL FOR THE ASSESSEE, SUBMITTED THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09. THE ASSESSMENT YEAR UNDER CONSIDERAT ION IS 2007- 08, THEREFORE, RULE 8D CANNOT BE APPLIED FOR ASSESS MENT YEAR UNDER CONSIDERATION. HENCE, ACCORDING TO THE LD. COUNSEL , BY PLACING RELIANCE ON THE DECISION OF THIS TRIBUNAL, THE CIT( APPEALS) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 2%. 46. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD.COUNSEL FOR THE ASSESSEE, RULE 8D OF INCOME- TAX RULES, 1962 IS NOT APPLICABLE FOR ASSESSMENT YE AR 2007-08. THIS TRIBUNAL IS UNIFORMLY TAKING A VIEW THAT 2% OF THE EXEMPT INCOME HAS TO BE TAKEN AS EXPENDITURE FOR EARNING T HAT INCOME. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SA ME IS CONFIRMED. 47. THE NEXT ISSUE ARISES FOR CONSIDERATION IS FORE IGN EXCHANGE FLUCTUATION LOSS. 27 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 48. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT IT IS ONLY A NOTIONAL L OSS. HOWEVER, THE CIT(APPEALS) FOUND THAT THE LOSS IS A CAPITAL LOSS, THEREFORE, IT HAS TO BE CONSIDERED UNDER THE HEAD CAPITAL GAIN. ACCOR DING TO THE LD. D.R., THE LOSS IS ON ACCOUNT OF RESTATEMENT OF VALU ING OF INVESTMENT MADE IN FOREIGN CURRENCY, THEREFORE, IT CANNOT BE A LLOWED AS LOSS. 49. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT ON IDENTICAL SITUATION, FO R THE ASSESSMENT YEAR 2001-02, THE CIT(APPEALS), PLACING HIS RELIAN CE ON THE JUDGMENT OF UTTARAKHAND HIGH COURT IN CIT V. ONGC ( 301 ITR 415), DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. REFERRING TO RULE 115, THE LD. D.R. SUBMITTED THAT THE RATE OF E XCHANGE FOR THE CALCULATION OF VALUE IN RUPEES HAS TO BE DEEMED TO BE RECEIVED OR ARRIVED OR ACCRUED TO THE ASSESSEE DEPENDING UPON F OREIGN EXCHANGE RATE PREVAILING ON THE PARTICULAR DATE. T HIS RULE WAS NOT TAKEN INTO CONSIDERATION BY THE CIT(APPEALS) WHILE PLACING RELIANCE ON THE JUDGMENT OF UTTARAKHAND HIGH COURT IN ONGC ( SUPRA). 28 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 50. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE GAIN ON FOREIGN CURRENCY TRANSLATION FROM VARIOUS INTERNATI ONAL CURRENCIES ARE NOTIONAL ONE. THE UTTARAKHAND HIGH COURT IN ONGC C ASE (SUPRA) EXAMINED THE ISSUE AND FOUND THAT THE GAIN IS ONLY A NOTIONAL ONE AND IT IS NOT TAXABLE IN THE HANDS OF THE ASSESSEE. SINCE THE CIT(APPEALS) HAS FOLLOWED THE JUDGMENT OF UTTARAKHA ND HIGH COURT, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 51. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXP ENSES INCURRED ON BANK GUARANTEE TO THE EXTENT OF ` 5,45,500/-. 52. SH. PATHLAVATH PEERYA, THE LD. DEPARTMENTAL REP RESENTATIVE, SUBMITTED THAT THE ASSESSEE HAS PAID A SUM OF ` 5,45,500/- TO M/S GOLDSMAN SACHS FOR THE PURPOSE OF ISSUING A BANK GU ARANTEE TO HDFC BANK. ACCORDING TO THE LD. D.R., THE EXPENDIT URE INCURRED BY THE ASSESSEE IS NOT RELATABLE TO BUSINESS OF THE AS SESSEE. THEREFORE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALL OWING THE CLAIM OF THE ASSESSEE. 29 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 53. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUN SEL FOR THE ASSESSEE, SUBMITTED THAT THE BANK GUARANTEE WAS GIV EN FOR INSTALLATION OF WINDMILL BY THE ASSESSEE. IN FACT, THE GUARANTEE WAS TAKEN FROM BANK SINCE THE INTEREST RATE CHARGEABLE BY HDFC BANK WAS VERY LOWER. THEREFORE, THE EXPENDITURE IS ONLY FOR THE PURPOSE OF BUSINESS, HENCE, THE CIT(APPEALS) HAS ALLOWED TH E SAME UNDER SECTION 37(1) OF THE ACT. 54. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE BORROWED LOAN FROM HDFC B ANK ON THE BASIS OF THE BANK GUARANTEE GIVEN BY M/S GOLDSMAN S ACHS. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE HAS PAID LOWE R RATE OF INTEREST. THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE IN GIVING BANK GUARANTEE OF ` 5,45,500/- IS FOR BUSINESS PURPOSE. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY ALLOWED THE SAME. THEREFO RE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 55. IN THE RESULT, WHILE THE ASSESSEES APPEALS IN I.T.A. NO.1873/MDS/2008 & 456/MDS/2009 ARE DISMISSED, APPE ALS IN 30 ITA NOS.1873, 1954/MDS/08 ITA NOS.456, 1438, 1465 & 1654/MDS/09 ITA NOS.1102, 1285/MDS/11 ITA NOS.115 & 1936/MDS/12 CO NOS.167 & 200/MDS/09 I.T.A. NO. 1102/MDS/2011, 115 & 1936/MDS/2012 ARE P ARTLY ALLOWED. THE REVENUES APPEALS IN I.T.A. NO.1954/MDS/2008 AN D 1438/MDS/2009 ARE ALLOWED AND I.T.A. NO.1465/MDS/20 09 & 1654/MDS/2009 ARE PARTLY ALLOWED AND I.T.A. NO. 128 5/MDS/2011 IS DISMISSED. COMING TO THE ASSESSEES CROSS-OBJECTI ONS, C.O. NO.167/MDS/2009 IS DISMISSED AND C.O. NO.200/MDS/20 09 IS PARTLY ALLOWED. ORDER PRONOUNCED ON 21 ST OCTOBER, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 21 ST OCTOBER, 2016. KRI. 0 ,/78 98(/ /COPY TO: 1. './ /ASSESSEE 2. ASSESSING OFFICER 3. 3 :/ () /CIT(A)-V, CHENNAI-34 4. 3 :/ /CIT, CHENNAI-III, CHENNAI 5. 8; ,/ /DR 6. <' = /GF.
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