Bumi Hiway (India) P.Ltd, New Delhi V. DCIT,Circle-5(1), New Delhi

ITA 489/DEL/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 2750 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 19-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K KATARIA
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 489/DEL/2018 : ASSTT. YEAR : 2013-14 BUMI HIWAY (INDIA) P. LTD., A1/292, PANKHA ROAD, JANAKPURI, NEW DELHI-110058 VS DCIT, CIRCLE-5(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCB5995M ASSESSEE BY : NONE REVENUE BY : SH. V. K. KATARIA, SR. DR DATE OF HEARING: 18.02.2021 DATE OF PRONOUNCEMENT: 05.03.2021 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A)-2, NEW DELHI DATED 24.1 0.2017. 2. FOLLOWING GROUNDS HAVE BEEN RAISED BY THE ASSESS EE: THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 2, NEW DELHI (HEREINAFTER REFERRED TO A S THE LD CIT (APPEAL)) ERRED IN UPHOLDING DISALLOWAN CE MADE BY THE ASSESSING OFFICER TOWARDS FOREIGN EXCHANGE FLUCTUATION LOSS OF RS 3,38,97,823. 1. THAT THE LD CIT (APPEAL) ERRED IN LAW IN UPHOLDING THE 50% OF DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS FOREIGN EXCHANGE LOSS OF RS 3,38,97,823 WITHOUT APPLYING HIS MIND TO THE MERITS OF THE CASE, AND ON AD-HOC BASIS AS NOT BEING ITA NO. 489/DEL/2018 BUMI HIWAY (INDIA) P. LTD. 2 INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE APPELLANT. 2. THAT THE LD CIT (APPEAL) FAILED TO APPRECIATE THAT THE GAIN ON REVALUATION OF FOREIGN EXCHANGE OF SIMILAR BASIS HAS BEEN TAXED AS INCOME IN EARLIER YEARS BY THE APPELLANT FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IN ACCORDANCE WITH THE ACCOUNTING POLICY PRESCRIBED IN ACCOUNTING STANDARD 11 - ACCOUNTING FOR THE EFFECTS OF CHANGES IN FOREIGN EXCHANGE RATES. 3. AT THE OUTSET, IT WAS BROUGHT TO OUR NOTICE THAT THE SIMILAR ISSUE IN THE CASE OF THE ASSESSEE STANDS ADJUDICATE D FOR EARLIER ASSESSMENT YEARS 2010-11 AND 2011-12. 4. THE BRIEF FACTS AND THE DECISION OF THE LD. CIT (A) ARE AS UNDER: THE APPELLANT COMPANY HAS CATEGORICALLY SUBMITTED T HAT IT SUPERVISED THE TWO PROJECTS (JALANDHAR AND ORISSA) DIRECTLY UN DERTAKEN BY ITS MALAYSIAN AE I.E. M/S BOMI HIWAY (M) SDN. BHD (BHM) IN INDIA WHILE IT ALSO SUPERVISED ONE ROAD PROJECT (VIJAYAWADA), A WARDED TO IT DIRECTLY BY SWAMA TOLLWAY PRIVATE LIMITED (STPL). R EGARDING THE PROJECTS OF JALANDHAR AND ORISSA, THE SAME WERE ORI GINALLY AWARDED BY THE NATIONAL HIGHWAY AUTHORITY OF INDIA (NHAI) T O M/S BUM! HIWAY (M) (BHM) BUT SUBSEQUENTLY M/S BUMI HIWAY (M) (BHM) SUB CONTRACTED THEM TO THE APPELLANT COMPANY. MOREOVER, BH1 (APPELLANT COMPANY) HELD 16.8% EQUITY SHARES IN STPL, A CONSOR TIUM COMPANY SPECIFICALLY INCORPORATED IN EXECUTING AGREEMENT BE TWEEN THE GOVERNMENT OF INDIA AND DIE GROUP OF COMPANIES IN M ALAYSIA, TO BUILD A CERTAIN LENGTH OF NATIONAL HIGHWAY, BY WAY OF DES IGN, BUILD, OPERATE AND TRANSFER AND AS A SHAREHOLDER OF STPL, THE APPELLANT WAS AWARDED PROJECT BY STPL TO CONSTRUCT CERTAIN STRETC H OF HIGHWAYS. IN ORDER TO FINANCE THE WORKING CAPITAL REQUIREMENT AN D INVESTMENT IN STPL, THE APPELLANT SECURED LOAN FINANCING FROM M/S BANK OF NOVA ITA NO. 489/DEL/2018 BUMI HIWAY (INDIA) P. LTD. 3 SCOTIA, INDIA IN 2002, THE LOAN USED FOR INVESTMENT IN STPL EQUITY AMOUNTING TO RS.20,67,83,000 WAS REPAID BY THE APPE LLANT COMPANY IN THE FY 2002-03 ITSELF. THEREFORE, THE ADVANCES RECEIVED FROM BUMI HIWAY VE NTURES BERHAD, BUMI HIWAY (M) (SDN BHD). BUMI HIWAY MAURITIUS LIMI TED, ECB LOAN A/C WERE UTILIZED FOR BUSINESS PURPOSES AND SINCE T HE ADVANCES RECEIVED WERE IN FOREIGN CURRENCY, THEY HAVE BEEN R EVALUED IN ACCORDANCE WITH AS-11 ISSUED BY ICAI AND ALSO FOLLO WING ACCRUAL SYSTEM OF ACCOUNTING. THEREFORE, THE APPELLANT COMP ANY HAS ESTABLISHED THAT- I. LOANS, FUNDS AND ECB LOANS AS APPEARING IN THE FINANCIAL STATEMENTS OF THE APPELLANT COMPANY FOR THE YEAR EN DING 2013 HAVE BEEN USED FOR REVENUE EXPENDITURE AND FOR BUSINESS PURPOSE. II. THE INVESTMENT MADE IN STPL EQUITY WAS UNDER C OMMERCIAL EXPEDIENCY TO SECURE CONTRACT AND ITS GROUPING IN T HE BOOKS OF ACCOUNT AS INVESTMENT WAS AS PER COMPANIES ACT AND ALSO ACCORDING TO THE ACCOUNTING STANDARDS ISSUED BY THE ICAI. III. THE APPELLANT COMPANY HAS RIGHTFULLY TRANSFER RED PROFIT AS WELL AS LOSS ACCRUING ON REVALUATION OF UNSECURED LOAN T O ITS PROFIT AND LOSS ACCOUNT FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING FOLLOWED CONSISTENTLY AND AS PER THE AS-11 IN THE RESPECTIVE YEAR. 5. THE LD. CIT (A) HELD THAT THE IDENTICAL ISSUE WA S INVOLVED IN THE CASE OF THE APPELLANT FOR A.Y. 2011-12 AND T HE CIT (APPEALS)-14 VIDE HIS ORDER IN A.NO. 551/14-15/I.T. /DEL/2015- 16 DATED 23.03.2016 AND RESTRICTED THE DISALLOWANCE TO 50% OF RS.6,77,95,765/- MADE BY THE ASSESSING OFFICER. 6. AGGRIEVED, THE ASSESSEE FILED APPEAL BEFORE US. ITA NO. 489/DEL/2018 BUMI HIWAY (INDIA) P. LTD. 4 7. WE HAVE GONE THROUGH THE ORDER OF THE CO-ORDINAT E BENCH OF THE TRIBUNAL FOR THE EARLIER YEARS IN ITA NO.587 1/DEL/2013 AND IN CO NOS. 239 & 240/DEL/2016 WHEREIN THE MATTE R HAS BEEN REFERRED TO THE FILE OF THE ASSESSING OFFICER FOR VERIFICATION OF THE UTILIZATION OF THE LOAN FOR BUSINESS PURPOSE BY TAKING INTO ACCOUNT THE AMOUNT OF THE LOAN RAISED, THE QUANTUM OF THE OWN CAPITAL AND THE RESERVES & SURPLUS, UTILIZATION OF THE AMOUNT FOR DAY-TO-DAY RUNNING OF THE BUSINESS AND UTILIZATION OFF THE AMOUNT FOR INVESTMENT IN THE EQUITY SHARES OF THE S UBSIDIARY COMPANY OR THE AMOUNT INVESTED FOR INFUSION OF THE CAPITAL IN ANY OTHER COMPANY. 8. THE AO MAY THEN TAKE A CONSIDERED DECISION IN TU NE WITH THE DIRECTIONS GIVEN EARLIER WITH REGARD TO DISALLO WANCE OF INTEREST ON LOAN AND BANK CHARGES IN ACCORDANCE WIT H THE PROVISIONS OF THE INCOME TAX ACT. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE ALLOWE D FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 05/03/2021. SD/- SD/- (SUCHITRA KAMBLE) (DR . B. R. R. KUMAR) JUDICIAL MEMBER AC COUNTANT MEMBER DATED: 05/03/2021 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR