DCIT, New Delhi V. M/s. Albasta Wholesale Services Ltd., New Delhi

ITA 6546/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5664 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 09-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARAMITA M BISWAS
• Keywords: Business income; Business expenditure; Tax effect; Commercial expediency
• Section: 37; 28; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH E EE E : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT AND AND AND AND MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA ITAITA ITA NO NONO NO . .. . 6546/DEL/2015 6546/DEL/2015 6546/DEL/2015 6546/DEL/2015 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2011 2011 2011 2011 - -- - 12 1212 12 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -2(1), 2(1), 2(1), 2(1), NEW DE NEW DE NEW DE NEW DELHI. LHI. LHI. LHI. VS. VS. VS. VS. M/S ALBASTA WHOLESALE SERVICES M/S ALBASTA WHOLESALE SERVICES M/S ALBASTA WHOLESALE SERVICES M/S ALBASTA WHOLESALE SERVICES LIMITED, LIMITED, LIMITED, LIMITED, M MM M- -- -62 & 63, FIRST FLOOR, 62 & 63, FIRST FLOOR, 62 & 63, FIRST FLOOR, 62 & 63, FIRST FLOOR, CONNAUGHT PLACE, CONNAUGHT PLACE, CONNAUGHT PLACE, CONNAUGHT PLACE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. PAN : AAHCA0198F. PAN : AAHCA0198F. PAN : AAHCA0198F. PAN : AAHCA0198F. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. PARAMITA M. BISWAS, CIT - DR. RESPONDENT BY : SHRI GAUTAM JAIN, ADV OCATE & SHRI LALIT MOHAN, CA. DATE OF HEARING : 15.01.2019 15.01.2019 15.01.2019 15.01.2019 DATE OF PRONOUNCEMENT : 04.02.2019 04.02.2019 04.02.2019 04.02.2019 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT : :: :- -- - THIS APPEAL BY THE REVENUE FOR THE ASSESSMENT YEAR 201 1-12 IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-1, NEW DELHI DATED 4 TH SEPTEMBER, 2015. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS :- 1. THE LD.CIT(A) HAS ERRED ON FACTS AND IN LAW IN DE LETING ADDITION OF RS.35,42,20,000/- MADE BY THE AO ON ACCO UNT OF DISALLOWANCE OF FOREIGN EXCHANGE FLUCTUATION LOSS, FOR FOLLOWING REASONS :- ITA-6546/DEL/2015 2 A. THE ASSESSEE COMPANY HAS NOT COMMENCED ITS BUSINESS TILL THE END OF THE YEAR UNDER CONSIDERATION A S APPARENT FROM P&L ACCOUNT SUBMITTED DURING THE COUR SE OF ASSESSMENT PROCEEDINGS. THUS, THE CLAIM OF THE ASSESSEE TOWARDS FOREIGN FLUCTUATION LOSS IS NOT INCURRED WHOL LY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND NOT ALLOWABL E AS PER PROVISION OF IT ACT 1961. B. THE ASSESSEE COMPANY HAS INCURRED THE SAID LOSS WHILE RECEIVING BACK THE MONEY WHICH WAS EARLIER ADVANCED TO ITS SUBSIDIARY COMPANY. HOWEVER, THE ASSESSEE IS NEITHER NBFC NOR ENGAGED IN THE BUSINESS OF LENDING MONEY. THUS, THE LOSS SO CLAIMED HAS NOT BEEN INCURRED TOWARDS REGULAR BUSINESS ACTIVITIES AND NOT ALLOWABLE AS PER PROVISION OF I.T. ACT 1961. C. SECTION 37 OF THE I.T. ACT 1961, PROVIDES FOR DEDUCTION OF ALL EXPENDITURE WHOLLY AND EXCLUSIVELY LAID OUT OR EXPANDED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. ONE OF THE PRIMARY CONDITIONS FOR THE CLAIM O F DEDUCTION U/S 37 IS THAT THE EXPENDITURE MUST BE FOR THE BUSINESS WHICH IS CARRIED ON BY THE ASSESSEE DURING THE PREVIOUS YEAR. D. THE ASSESSEE COMPANY IS NEITHER A NBFC NOR ITS PRIMARY BUSINESS IS LENDING MONEY TO OTHER COMPANIES. ACCORDINGLY, LOSS INCURRED DURING THE COURSE OF MAKING TRANSACTIONS OF ADVANCING MONEY IS NOT A REVENUE LOSS AN D IS CAPITAL IN NATURE AND REQUIRED TO BE CAPITALIZED. E. THE FOREIGN FLUCTUATION LOSS INCURRED WHILE ADVANC ING MONEY TO OTHER COMPANIES IS ADMISSIBLE AGAINST INCOME FROM OTHER SOURCES. SECTION 14 OF THE ACT CLEARLY PR OVIDES THAT EXPENDITURE OF ONE HEAD CANNOT BE ADJUSTED AGAI NST THE INCOME OF OTHER HEAD. THUS, FOREIGN FLUCTUATION LOSS CANNOT BE ADJUSTED AGAINST INCOME FROM BUSINESS & PROFESSION U/S 28 OF THE ACT. 3. AT THE TIME OF HEARING BEFORE US, LEARNED DR HEAV ILY RELIED UPON THE ASSESSMENT ORDER AND SHE STATED THAT FOR THE YEAR UND ER CONSIDERATION, THE ASSESSEE FILED THE RETURN DISCLOSING DI VIDEND INCOME, INTEREST ON INTERCORPORATE DEPOSITS AND PROFIT ON SALE OF INVESTMENT. ITA-6546/DEL/2015 3 THUS, NO BUSINESS INCOME WAS DISCLOSED. THAT EVEN OTHERW ISE, NO BUSINESS IS BEING CARRIED ON BY THE ASSESSEE EITHER IN TH IS YEAR OR IN THE PRECEDING YEAR. SHE STATED THAT THESE FACTUAL FI NDINGS ARE VERY CLEARLY RECORDED BY THE ASSESSING OFFICER AT PAGE 2 PAR AGRAPH 3 AND FURTHER PAGE 5 PARAGRAPH 4.3. THUS, WHEN NO BUSINESS I S BEING CARRIED ON BY THE ASSESSEE, THE ASSESSING OFFICER RIGHTLY DISALLOWED THE LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION LOSS. SHE FU RTHER STATED THAT THE ASSESSEE CLAIMED TO HAVE INCURRED THIS LOSS IN RESPECT OF MONEY ADVANCED TO ITS SUBSIDIARY FOR THE PURPOSE OF SETTING UP OF THE PLANT. SINCE NO SUCH PLANT WAS SET UP, THE MONEY WAS RETURNED BACK BY SUCH SUBSIDIARY AND IN THE PROCESS, THE ASSESSEE SUFFERED THE LOSS BECAUSE OF THE FLUCTUATION IN THE RATE OF DOLLAR. THAT ADV ANCING OF MONEY TO THE SUBSIDIARY CANNOT BE SAID TO BE A BUSINESS. SHE, THEREFO RE, SUBMITTED THAT THE ASSESSING OFFICER HAD RIGHTLY DISALLOWED THE FO REIGN EXCHANGE FLUCTUATION LOSS AND LEARNED CIT(A), WITHOUT CONSIDERI NG THE FACTS OF THE CASE, DIRECTED TO ALLOW THE SAME. 4. LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, RELIED UPON THE ORDER OF LEARNED CIT(A) AND HE STATED THAT LEARN ED CIT(A) AFTER CONSIDERING THE FACTS AS WELL AS LEGAL POSITION IN DETAI L HAS ARRIVED AT THE CONCLUSION THAT THE BUSINESS WAS ALREADY COMMENCED B Y THE ASSESSEE DURING THE FINANCIAL YEAR 2008-09. HE STATED T HAT IN THE ASSESSMENT YEAR 2009-10, THE ASSESSING OFFICER HIMSELF HAS AC CEPTED THE RETURNED LOSS OF `75,946/-, MEANING THEREBY, THE REVENUE ACCEPTED THAT THE ASSESSEE HAD CARRIED ON THE BUSINESS. IN ASSESSMENT YEAR 2010-11, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD N OT COMMENCED THE BUSINESS IN THE YEAR UNDER CONSIDERATION AND ACCORDINGLY, HE DISALLOWED THE LOSS CLAIMED AT `12,85, 278/-. ON APPEAL, LEARNED CIT(A), VIDE ORDER DATED 20 TH AUGUST, 2015 RECORDED THE FINDING THAT THE ASSESSEE HAD COMMENCED THE BUSINESS O N 23 RD ITA-6546/DEL/2015 4 JULY, 2009. THAT THE ABOVE ORDER OF LEARNED CIT(A) WAS ACCEPTED BY THE REVENUE AND LEARNED DR HAS FILED THE LETTER FROM THE ASSESSING OFFICER ACCEPTING THE FACT THAT NO APPEAL WAS FILED FOR ASSESSMENT YEAR 2010-11 BECAUSE THE THEN ASSESSING OFFICER IN THE CENTRA L SCRUTINY REPORT HAS MENTIONED THAT THE ORDER OF THE CIT(A) IS ACCEPTABLE ON MERITS. HE STATED THAT ONCE THE REVENUE HAS ACCEPTED THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2010-11 HOLDING THAT THE ASSESSE E HAS COMMENCED THE BUSINESS WITH EFFECT FROM 23 RD JULY, 2008, THERE WOULD BE NO JUSTIFICATION FOR HOLDING IN THE YEAR UNDER CO NSIDERATION THAT NO BUSINESS WAS COMMENCED. HE HAS ALSO RELIED UPON THE FOLL OWING DECISIONS IN SUPPORT OF HIS CLAIM :- (I) CIT VS. ESPN SOFTWARE INDIA P.LTD. [2008] 301 ITR 368 (DEL). (II) CIT VS. DHOOMKETU BUILDERS AND DEVELOPMENT P.LTD . [2014] 368 ITR 680 (DEL). 5. HE FURTHER STATED THAT THE ASSESSEE COMPANY MADE INVE STMENT IN ONE SUBSIDIARY COMPANY KNOWN AS M/S GALACTIC VENTURE S LIMITED ( HEREINAFTER REFERRED TO AS GVL ) OF 10,00,00,000 DOLLARS ON 22 ND DECEMBER, 2008. AS PER THE PREVAILING RATE OF DOLLA R IN RUPEE TERMS, IT WORKED OUT TO `478,49,30,000/-. THE ABOVE SUBSIDIARY WAS FORMED BY THE ASSESSEE COMPANY TO EXPLORE THE POWER BUSINESS OUTSIDE INDIA. THE ASSESSEE, THROUGH THE ABOVE SUBSIDIARY COMPANY, FILED EXPRESSION OF INTEREST FOR POWER PROJECTS BEING DEVELOPED BY OMA N, BARKA AND SOHAR. THE BOARD OF DIRECTORS OF THE ASSESSEE COMPANY A UTHORIZED IT TO PURSUE THE OBJECT OF DEVELOPMENT OF POWER PROJECT S THROUGH ITS SUBSIDIARY COMPANY GVL. THAT AS PER OBJECT CLAUSE OF T HE ASSESSEE COMPANY, IT CAN CARRY ON THE BUSINESS EITHER ON ITS OWN OR THROUGH ANY OTHER ENTITY. FURTHER, THE OBJECT OF THE ASSESSEE COMP ANY INCLUDED THE ITA-6546/DEL/2015 5 BUSINESS OF ESTABLISHING, COMMISSIONING, SETTING UP, OPERAT ING AND MAINTAINING POWER GENERATING STATIONS. HE STATED THAT LEARNED CIT(A) HAS CONSIDERED ALL THIS FACTUAL POSITION AT PAGES 23 AND 24 OF HIS ORDER. THAT THE MAIN OBJECT OF GVL IS THAT OF CONSTRUCTION A ND MAINTENANCE OF POWER PLANT. THUS, THE ASSESSEE, THROUGH GVL, WAS PURSUIN G ITS OBJECT OF ESTABLISHING, COMMISSIONING, SETTING UP, OPERATING AN D MAINTAINING POWER PLANT. THAT UNFORTUNATELY, THE PROJECT OF CO MMISSIONING OF POWER PLANT BY GVL OUTSIDE INDIA COULD NOT MATERIALI ZE AND IT REFUNDED THE MONEY TO THE ASSESSEE ON 8 TH APRIL, 2010. THAT AS AGAINST 10,00,00,000 DOLLARS, IT PAID TO THE ASSESSEE 10,01,50,0 00 DOLLARS. 1,50,000 DOLLARS WAS OFFERED AS INCOME OF THE ASSESSEE FOR THE CURRENT YEAR WHICH IS ACCEPTED BY THE ASSESSING OFFICER. HOWEV ER, DUE TO FLUCTUATION IN THE RATE OF DOLLAR VIS-A-VIS RUPEE, F OR 10,00,00,000 DOLLARS IN INDIAN RUPEE, THE ASSESSEE REALIZED `443,07,1 0,000/-. THE DIFFERENCE BETWEEN THE RUPEE VALUE OF 10,00,00,000 DOLLARS ADVANCED IN 2008 AND RECEIVED BACK IN 2010 WAS `35,42,20,000/ - (478,49,30,000 MINUS 443,07,10,000). THIS DIFFERENCE WAS CLAIMED AS LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. HE STATED THAT THE MONEY WAS ADVANCED TO THE SUBSIDIARY ON ACCOUNT OF COMMERCIAL E XPEDIENCY. THE ASSESSEE WAS PURSUING ITS OBJECT OF GENERATING POWER THROU GH ITS SUBSIDIARY GVL AND, FOR THIS PURPOSE, ONLY THE ADVANCE WAS GIVEN TO THE SUBSIDIARY. THEREFORE, GIVING OF ADVANCE WAS FOR THE PURPOSE OF ASSESSEES BUSINESS. IN SUPPORT OF THIS CONTENTION, HE RELI ED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.A. BU ILDERS LTD. VS. CIT(A) AND ANOTHER [2007] 288 ITR 1 (SC). (I) HERO CYCLES P.LTD. VS. CIT [2015] 379 ITR 347 ( SC). (II) CIT VS. MODI ENTERTAINMENT LTD. [2014] 89 CCH 0014 (DEL). ITA-6546/DEL/2015 6 HE, THEREFORE, STATED THAT THE ORDER OF LEARNED CIT( A) SHOULD BE SUSTAINED AND REVENUES APPEAL MAY BE DISMISSED. 6. IN THE REJOINDER, IT IS STATED BY THE LEARNED CIT -DR THAT THE APPEAL FOR ASSESSMENT YEAR 2010-11 WAS NOT FILED BECAUSE OF LOW TAX EFFECT AND THIS IS ALSO MENTIONED BY THE ASSESSING OFFICER IN THE CENTRAL SCRUTINY REPORT SENT BY THE ASSESSING OFFICER TO HIGHER A UTHORITIES. THEREFORE, MERELY BECAUSE NO APPEAL WAS FILED BY THE REVENUE IN ASSESSMENT YEAR 2010-11, IT SHOULD NOT BE CONCLUDED THAT THE REVENUE HAS ACCEPTED THE ORDER OF THE LEARNED CIT(A) THAT BU SINESS HAS BEEN COMMENCED BY THE ASSESSEE. SHE FURTHER STATED THAT EVEN OTHERWISE, LAW OF RES JUDICATA IS NOT APPLICABLE TO THE ASSESSMENT PROCEEDINGS AND EACH YEAR SHOULD BE DECIDED ON ITS OWN FACTS. 7. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. AFTER GOI NG THROUGH THE ORDER OF LOWER AUTHORITIES AS WELL AS CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES, WE ARE OF THE OPINION THAT IN THIS APP EAL, BASICALLY TWO ISSUES ARISE (I) WHETHER THE ASSESSEE HAS COMMENCED THE BUSINESS AND; (II) WHETHER THE ADVANCEMENT OF MONEY TO THE SUBSIDIA RY CAN BE SAID TO BE FOR THE PURPOSE OF BUSINESS. 8. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, HAS RECOR DED THE FINDING AT PAGE 2 PARAGRAPH 3 THE ASSESSEE COMPANY DURING THE YEAR AND PRIOR TO THIS HAS NOT STARTED ANY BUSINESS . SIMILAR FINDING IS RECORDED BY HIM AT PARAGRAPH 4.4. HOWEVER, THE ASSESSE E HAS FILED THE YEAR-WISE POSITION OF EVENTS IN THIS CASE. FOR ASSESSME NT YEAR ITA-6546/DEL/2015 7 2009-10, THE ASSESSEE FILED THE RETURN DISCLOSING THE LO SS OF `75,946/- UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION. I N THE ORDER PASSED U/S 143(3) DATED 20 TH DECEMBER, 2011, THE ASSESSING OFFICER ACCEPTED THE RETURNED LOSS OF `75,946/-. THUS, HE ACC EPTED THAT THE ASSESSEE WAS CARRYING ON THE BUSINESS. IN ASSESSMENT YEAR 201 0-11, THE ASSESSEE DECLARED THE LOSS OF `12,85,278/-. IN THIS Y EAR, THE ASSESSING OFFICER RECORDED THE FINDING THAT THE BUSINESS W AS NOT COMMENCED BY THE ASSESSEE AND ACCORDINGLY, HE ASSESSED THE TOTAL INCOME AT NIL. ON APPEAL, LEARNED CIT(A), VIDE ORD ER DATED 20 TH AUGUST, 2015, HELD AS UNDER :- THE APPELLANTS CASE IS SQUARELY COVERED BY THE RATIO OF THE PRINCIPLES LAID DOWN IN THE AFORESAID JUDICIAL PRONOUNCEMENTS OF HON'BLE DELHI HIGH COURT. SINCE T HE APPELLANT COMPANY WAS INCORPORATED ON 25.04.2008 AND THEREAFTER, APPOINTED DIRECTORS, INCORPORATED A SUBSID IARY COMPANY IN MAURITIUS AND OBTAINED CONSULTANCY SERVICES FROM INDIA BULLS POWER LTD FOR DEVELOPMENT OF POWE R PROJECTS. ALL THESE ACTIVITIES GOES TO PROVE THAT BUSIN ESS OF THE APPELLANT COMPANY WAS SET UP ON 25.04.2008 AND COMMENCED ITS BUSINESS ON 23/07/2008 ON RECEIPT OF CERTIFICATE OF COMMENCEMENT OF BUSINESS AND INCORPORAT ED A SUBSIDIARY COMPANY IN MAURITIUS FOR BIDDING FOR CONSTRUCTION OF POWER PROJECTS IN FOREIGN COUNTRIES. IN VIEW OF THE ABOVE, IT IS HELD THAT BUSINESS OF THE APPELLANT COMPANY WAS SET UP AND COMMENCED IN F.Y. 2008-09 AND ANY EXPENDITURE INCURRED IN THE FURTHER ANCE OF ITS OBJECTIVE IS FULLY ALLOWABLE AS BUSINESS EXPENDITU RE. AS A RESULT, GROUND OF APPEAL NO.2 AND 3 ARE ALLOWED. 9. THUS, IN THE ABOVE ORDER, LEARNED CIT(A) HAS RECOR DED THE FACTUAL FINDING THAT THE ASSESSEE COMMENCED ITS BUSINESS ON 23 RD JULY, 2008 ON RECEIPT OF CERTIFICATE OF COMMENCEMENT OF BUSINESS AND INCORPORATION OF A SUBSIDIARY COMPANY IN MAURITIUS FOR BIDDING UP OF POWER PROJECTS IN FOREIGN COUNTRIES. THE ASSESSEE HAD INCORPORATED GVL IN MAURITIUS, ITA-6546/DEL/2015 8 AND THROUGH GVL, IT SUBMITTED THE BID FOR CONSTRUCTIO N OF POWER PROJECTS IN FOREIGN COUNTRIES. WHEN IT WAS ENQUIRED FR OM THE LEARNED DR WHETHER THE REVENUE HAD ACCEPTED THE ABOVE ORDER OR WHETHER ANY APPEAL IS FILED. THE LD. CIT-DR SUBMITTED THE COPY OF LETTER RECEIVED FROM THE ASSESSING OFFICER. THE INFORMATION AS SUBMITTE D BY THE ASSESSING OFFICER VIDE LETTER DATED 14 TH JANUARY, 2019 IS REPRODUCED BELOW FOR READY REFERENCE :- REQUIRED INFORMATION ON THREE QUESTIONS IS AS UNDER : 1. WHETHER DEPARTMENT HAS FILED APPEAL ON SIMILAR ISSUES IN EARLIER YEARS? ANS : AS PER RECORD AND CSR FOR AY 2010-11, THE ASSESSING OFFICER HAS NOT RECOMMENDED FILING OF APPEAL FOR AY 2010- 11. 2. WHETHER DEPARTMENT DID NOT FILE APPEAL ON ACCOUN T OF LOW TAX EFFECT? ANS : THE AO IN THE CSR FOR AY 2010-11 HAS ALSO NOT RECOMMENDED FILING OF APPEAL FOR AY 2010-11. 3. WHETHER DEPARTMENT CHOOSE NOT TO FILE APPEAL FOR AY 2010-11 &/OR AY 2011-12? ANS : THE DEPARTMENT HAS FILED APPEAL BEFORE HONBLE ITAT FOR AY 2011-12 AS PER RECORD AVAILABLE IN THIS OFFICE . -- REGARDS INCOME TAX OFFICER WARD-2(2), C R BUILDING, NEW DELHI 110002 REFER TO THE ABOVE SUBJECT. IN THIS CONNECTION IT IS SUBMITTED THAT THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME FOR AY 2009-10, 2 010-11 WHICH WERE SELECTED FOR SCRUTINY. THE ASSESSMENT IN THIS CASE FOR AY 2010-11 WAS COMPLETED AT NIL INCOME AGAIN ST THE DECLARED LOSS OF RS.12,85,278/-. THE AO HAD DISALL OWED THE LOSSES CLAIMED BY THE ASSESSEE BASED ON THE REASON ITA-6546/DEL/2015 9 THAT THE ASSESSEE HAD NOT COMMENCE ITS BUSINESS ACTIVITY AND AS SUCH, IT WAS NOT ENTITLED FOR ANY DEDUCTION U/ S 37 OF THE IT ACT, 1961. THE CIT(A) DELETED THE DISALLOWANCE OF EXPENSES OF RS.12,96,459/- VIDE ORDER NO.06/2013-14 DATED 20.08. 2015. THE AO HAS SENT THE CSR WHICH IS AS UNDER : 1. IN VIEW OF THE FACTS OF THE CASE THE RELIEF ALLOWE D BY THE CIT(A) WHICH IS THE BASED ON THE DECISION OF VARIO US HIGH COURTS INCLUDING THE JURISDICTIONAL HIGH COURT ON THE ISSUE OF ALLOWABILITY OF BUSINESS EXPENSES AS REDUCTION AFTER THE BUSINESS IS SET UP AND READY TO COMMENCE IS ACCEPTABLE ON MERIT. 2. FURTHER THE TAX EFFECT IN THIS CASE IS ONLY NOTIO NAL RS.3,88,938/- AND ALSO BELOW THE LIMIT PRESCRIBED BY T HE CBDT FOR FILING OF APPEAL TO ITAT, HENCE NO APPEAL IS RECOMMENDED IN THIS CASE. COPY OF CSR SENT BY AO IS ENCLOSED. -- REGARDS INCOME TAX OFFICER WARD-2(2), C R BUILDING, NEW DELHI 110002. 10. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFF ICER HAS INFORMED THAT AS PER CENTRAL SCRUTINY REPORT, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS CLEARLY MENTIONED THAT THE RELIEF ALLOWED BY THE CIT(A) IS BASED UPON THE DECISIONS OF VARIOUS HIGH COURT S INCLUDING HON'BLE JURISDICTIONAL HIGH COURT ON THE ISSUE OF ALLO WABILITY OF BUSINESS EXPENSES AFTER THE BUSINESS IS SET UP AND READY TO COMMENC E. HE HAS ALSO MENTIONED THAT THE ORDER OF LEARNED CIT(A) IS AC CEPTABLE ON MERITS. THOUGH THEREAFTER, IN PARAGRAPH 2, HE HAS A LSO MENTIONED THAT THE TAX EFFECT IS BELOW THE LIMIT PRESCRIBED BY THE C BDT FOR FILING OF APPEALS TO THE ITAT. THUS, THE FACT REMAINS THAT IN A SSESSMENT YEAR 2009-10, THE REVENUE, IN THE ORDER PASSED U/S 143(3), ACCEPTED THE ITA-6546/DEL/2015 10 BUSINESS LOSS DECLARED BY THE ASSESSEE, IN 2010-11, ACCEPTED THE ORDER OF THE CIT(A) ON MERITS WHERE HE HAS GIVEN CLEAR FIND ING THAT THE ASSESSEE HAS COMMENCED BUSINESS THROUGH ITS SUBSIDIARY IN MAU RITIUS FOR BIDDING UP OF POWER PROJECTS IN FOREIGN COUNTRIE S. AFTER THESE FACTS, IN OUR OPINION, IN ASSESSMENT YEAR 2011-12, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE ASSESSEE COMPANY DID NOT START ANY BUSINESS EITHER DURING THE YEAR OR PRIOR TO THE YEAR UNDER CONSIDERATION. 11. THE FOLLOWING DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT ALSO SUPPORT THE CASE OF THE ASSESSEE :- (I) IN THE CASE OF ESPN SOFTWARE INDIA P.LTD. (SUPRA) , HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER :- A BUSINESS IS NOTHING MORE THAN A CONTINUOUS COURSE OF ACTIVITIES AND FOR COMMENCEMENT OF BUSINESS ALL THE ACTIVITIES WHICH GO TO MAKE UP THE BUSINESS NEED NOT BE STARTED SIMULTANEOUSLY. AS SOON AS AN ACTIVITY WHICH IS THE ESSENTIAL ACTIVITY IN THE COURSE OF CARRYING ON THE BU SINESS IS STARTED, THE BUSINESS MUST BE SAID TO HAVE COMMENCED. (II) IN THE CASE OF DHOOMKETU BUILDERS AND DEVELOPMEN T P.LTD. (SUPRA), THE FACTS WERE THAT THE ASSESSEE WAS A COMPANY IN CORPORATED ON AUGUST 22, 2005, AND ACCORDING TO ITS MEMORANDUM O F ASSOCIATION, IT WAS TO CARRY ON THE BUSINESS OF REAL ESTATE DEVELOPME NT INCLUDING PURCHASE AND SALE OF LAND. THE OFFICIAL LIQUIDATOR OF THE KARNATAKA HIGH COURT FLOATED A TENDER FOR SALE OF 140 ACRES OF LAND BELONGING TO A COMPANY WHICH HAD GONE INTO LIQUIDATION. IN ORDER TO PARTICIPATE IN THE TENDER, THE ASSESSEE OBTAINED A LOAN OF RS.186 CRORES ON NOVEMBER 29, 2005, FROM ITS HOLDING COMPANY AND ON THE SAME DA Y DEPOSITED THE AMOUNT AS EARNEST MONEY IN RESPONSE TO THE TENDER F LOATED BY THE ITA-6546/DEL/2015 11 OFFICIAL LIQUIDATOR. THE ASSESSEE WAS, HOWEVER, NOT SUC CESSFUL IN PURCHASING THE LAND AND, THEREFORE, THE EARNEST MONEY WAS RETURNED TO IT WITH INTEREST OF RS.62,28,333. ON THE AMOUNT BORR OWED FROM ITS HOLDING COMPANY THE ASSESSEE WAS LIABLE TO PAY INTEREST O F RS.1,79,37,534. THE ASSESSEE CLAIMED THE DIFFERENCE BET WEEN THE INTEREST RECEIVED AND THE INTEREST PAID AS LOSS UNDER TH E HEAD BUSINESS. THE CLAIM WAS REJECTED BY THE ASSESSING OFFICE R. THE TRIBUNAL OBSERVED THAT HAVING REGARD TO THE BUSINESS OF THE ASSESSEE, WHICH WAS THE DEVELOPMENT OF REAL ESTATE, THE PARTICI PATION IN THE TENDER REPRESENTED COMMENCEMENT OF ONE ACTIVITY WHIC H WOULD ENABLE THE ASSESSEE TO ACQUIRE THE LAND FOR DEVELOPMENT. THE ASSESSEE WAS IN A POSITION TO COMMENCE BUSINESS AND THAT MEANT THAT THE BUSINESS HAD BEEN SET UP. IT ALLOWED THE CLAIM OF THE ASSESSEE. ON THESE FACTS, HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER :- HELD, DISMISSING THE APPEALS, THAT THE FINDING OF THE TRIBUNAL WAS A FINDING OF FACT AND IT COULD NOT BE SA ID THAT THE FINDING WAS WITHOUT ANY BASIS OR MATERIAL. MOREOV ER, THE TRIBUNAL DID TAKE NOTE OF THE DISTINCTION BETWEE N THE COMMENCEMENT OF A BUSINESS AND SETTING UP OF A BUSINESS. THE LOSS WAS A BUSINESS LOSS. 12. HON'BLE JURISDICTIONAL HIGH COURT HAS ALSO ELABORA TED UPON THE DIFFERENCE BETWEEN SETTING UP AND COMMENCEMENT OF TH E BUSINESS AND HELD AS UNDER :- THERE IS A DIFFERENCE BETWEEN THE SETTING UP AND COMMENCEMENT OF BUSINESS. WHEN A BUSINESS IS ESTABLISHED AND IS READY TO COMMENCE BUSINESS THEN IT CAN BE SAID OF THAT BUSINESS THAT IT IS SET UP. BUT BEFORE I T IS READY TO COMMENCE BUSINESS IT IS NOT SET UP. BUT THREE MAY BE AN INTERREGNUM, THERE MAY BE AN INTERVAL BET WEEN A BUSINESS WHICH IS SET UP AND A BUSINESS WHICH IS COMMENCED AND ALL EXPENSES INCURRED AFTER THE SETTING UP OF THE BUSINESS AND BEFORE THE COMMENCEMENT OF THE ITA-6546/DEL/2015 12 BUSINESS, ALL EXPENSES DURING THE INTERREGNUM, WOULD BE PERMISSIBLE DEDUCTIONS. THE QUESTION AS TO WHEN A BUSINESS CAN BE SAID TO HAVE BEEN SET UP IS A QUESTION OF FACT TO BE ASCERTAINED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND CONSIDERING THE NATURE AND TYPE OF THE PARTICULAR BUSINESS AND NO UNIVERSAL TEST OR FORMULA APPLICABLE TO ALL TYPES OF BUSINESSES CAN BE LAID DOWN. THE COMMENCEMENT OF REAL ESTATE BUSINESS WOULD NORMALLY START WITH THE ACQUISITION OF LAND OR IMMOVABLE PROPE RTY. WHEN AN ASSESSEE WHOSE BUSINESS IS TO DEVELOP REAL ESTATE, IS IN A POSITION TO PERFORM CERTAIN ACTS TOWARD S THE ACQUISITION OF LAND, THAT WOULD CLEARLY SHOW THAT IT IS READY TO COMMENCE BUSINESS AND, AS A COROLLARY, THAT IT HAS ALREADY BEEN SET UP. THE ACTUAL ACQUISITION OF LAND IS THE RESULT OF SUCH EFFORTS PUT IN BY THE ASSESSEE; ONCE THE LA ND IS ACQUIRED THE ASSESSEE MAY BE SAID TO HAVE ACTUALLY COMMENCED ITS BUSINESS WHICH IS THAT OF DEVELOPMENT OF REAL ESTATE. THE ACTUAL ACQUISITION OF LAND MAY BE T HE FIRST STEP IN THE COMMENCEMENT OF THE BUSINESS BUT SECTION 3 O F THE ACT DOES NOT SPEAK OF COMMENCEMENT OF THE BUSINESS, IT SPEAKS ONLY OF SETTING-UP OF THE BUSINESS. 13. THAT THE RATIO OF THE ABOVE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE CASE OF TH E ASSESSEE BECAUSE, IN THE ABOVE MENTIONED CASE ALSO, THE ASSESSEE H AD ONLY SUBMITTED THE BID FOR PURCHASE OF LAND, WHICH WAS NOT SUCCESSFUL. ON THESE FACTS, HONBLE HIGH COURT HAS HELD THAT THE ASSESSEE HAS SET UP THE BUSINESS. IN THE CASE OF THE ASSESSEE ALSO, IT SUBMITTE D THE BID FOR CONSTRUCTION OF THE POWER PLANT THROUGH ITS SUBSIDIARY, WHICH WAS NOT SUCCESSFUL. IN VIEW OF THE HISTORY IN THE ASSESSEES CASE AS WELL AS THE ABOVE DECISIONS OF HON'BLE JURISDICTIONAL HIGH COURT, WE ARE OF THE OPINION THAT LEARNED CIT(A) RIGHTLY HELD THAT THE A SSESSEE HAS ALREADY SET UP THE BUSINESS. 14. NOW, COMING TO THE SECOND ISSUE WHETHER THE ADVAN CEMENT OF MONEY TO THE SUBSIDIARY CAN BE SAID TO BE FOR THE PURP OSE OF BUSINESS, WE FIND THIS ISSUE TO BE NOW FAIRLY SETTLED BY THE DECI SION OF HONBLE ITA-6546/DEL/2015 13 APEX COURT AS WELL AS HON'BLE JURISDICTIONAL HIGH COUR T. IN THE CASE OF S.A. BUILDERS LTD. (SUPRA), HON'BLE SUPREME COURT HEL D AS UNDER :- IN ORDER TO DECIDE WHETHER INTEREST ON FUNDS BORROWE D BY THE ASSESSEE TO GIVE AN INTEREST FREE LOAN TO A SISTER CONCERN (E.G., A SUBSIDIARY OF THE ASSESSEE) SHOULD BE ALLOWED AS A DEDUCTION UNDER SECTION 36(1)(III) OF TH E INCOME-TAX ACT, 1961, ONE HAS TO ENQUIRE WHETHER THE LOAN WAS GIVEN BY THE ASSESSEE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE EXPRESSION COMMERCIAL EXPEDIENCY I S ONE OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER AN Y LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BUSINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCI AL EXPEDIENCY. DECISIONS RELATING TO SECTION 37 WILL ALSO BE APPLICABL E TO SECTION 36(1)(III) BECAUSE IN SECTION 37 ALSO THE EXPRE SSION USED IS FOR THE PURPOSE OF THE BUSINESS. FOR THE PURP OSE OF BUSINESS INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY, AND IT IS IMMATERIAL IF A THI RD PARTY ALSO BENEFITS THEREBY. 15. IN THE CASE OF HERO CYCLES P.LTD. (SUPRA), HON'BLE SUPREME COURT HELD AS UNDER :- HELD, ALLOWING THE APPEAL, (I) THAT THE ADVANCE TO THE SUBSIDIARY BECAME IMPERATIVE AS A MATTER OF BUSINESS EXPEDIENCY IN VIEW OF THE UNDERTAKING GIVEN TO THE FINANCIAL INSTITUTIONS BY THE ASSESSEE TO THE EFFECT THAT IT WOULD PROVIDE ADDITIONAL MARGIN TO THE SUBSIDIARY TO MEET THE WORKING CAPITAL FOR MEETING ANY CASH LOSSES. 16. IN THE CASE OF MODI ENTERTAINMENT LTD. (SUPRA), HON'BLE JURISDICTIONAL HIGH COURT HELD AS UNDER :- THE FINDING OF THE TRIBUNAL WAS THAT THE ADVANCING OF INTEREST-FREE MONIES TO THE SUBSIDIARY COMPANIES WAS ITA-6546/DEL/2015 14 DRIVEN BY BUSINESS CONSIDERATIONS SINCE THE SUBSIDIARIES WERE ALSO ENGAGED IN THE SAME BUSINESS IN WHICH THE ASSESSEE WAS ENGAGED. THE TRIBUNAL ACCORDINGLY HELD THA T IT WOULD BE IN THE INTEREST OF BUSINESS OF THE ASSESSEE AND CERTAINLY WOULD BE COMMERCIALLY EXPEDIENT FOR THE ASSESSEE TO ADVANCE INTEREST-FREE MONIES TO THE SUBSIDIARIES AS PART OF THE CORPORATE BUSINESS STRATEGY TO EXPAND ITS BUSINESS OPERATIONS THROUGH ITS SUBSIDIARIES. THIS FINDING OF FACT HAS NOT BEEN DISPUTED. FINDINGS OF TRIBUNAL UPHELD. 17. THAT THE ABOVE DECISIONS OF HONBLE APEX COURT AS WELL AS OF HON'BLE JURISDICTIONAL HIGH COURT WOULD SQUARELY SUPPO RT THE CASE OF THE ASSESSEE. NO CONTRARY DECISION IS BROUGHT TO OUR KNO WLEDGE BY THE REVENUE. IN THE CASE OF MODI ENTERTAINMENT LTD. (SU PRA), HON'BLE JURISDICTIONAL HIGH COURT HAS STATED THAT THE ADVANCI NG OF INTEREST FREE MONEY TO SUBSIDIARIES AS PART OF THE CORPORATE BUSINESS ST RATEGY TO EXPAND ITS BUSINESS THROUGH ITS SUBSIDIARIES WOULD BE COMM ERCIALLY EXPEDIENT. THE FACTS OF THE ASSESSEES CASE ARE IDENTICA L. THE ASSESSEE IS IN THE BUSINESS OF ESTABLISHING, COMMISSIONING, SET TING UP, OPERATING AND MAINTAINING POWER PROJECTS. THAT ITS SU BSIDIARY GVL HAD ALSO SIMILAR OBJECTS. THE ASSESSEE TRIED TO PURSUE ITS OBJ ECTS THROUGH ITS SUBSIDIARY GVL AND SUBMITTED A BID FOR A POWER PRO JECT ABROAD. THEREFORE, ON THESE FACTS, THE RATIO OF THE ABOVE DEC ISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MODI ENTERTA INMENT LTD. WOULD BE SQUARELY APPLICABLE. THAT HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS LTD. (SUPRA) HELD THAT THE EXPRESSION COMMERC IAL EXPEDIENCY IS ONE OF WIDE IMPORT AND INCLUDES SUCH BUSINESS EXPENDI TURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. A FTER CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE OPINI ON THAT THE ADVANCING OF MONEY TO GVL FOR SETTING UP OF THE POWE R PROJECT WAS DRIVEN BY COMMERCIAL EXPEDIENCY AND THEREFORE, WAS F OR THE PURPOSE ITA-6546/DEL/2015 15 OF BUSINESS. THAT LEARNED CIT(A) HAS ALSO CONSIDERED AL L THIS FACTUAL POSITION AND HELD AS UNDER :- IN VIEW OF THE ABOVE FINDING, IT IS HELD THAT APPEL LANT COMPANY HAD COMMENCED TO BUSINESS IN F.Y. 2008-09 ITSELF. IN FURTHERANCE OF ITS OBJECTIVES APPELLANT COM PANY HAS INVESTED MONEY OF RS.478,49,30,000/- IN ITS OVERSEAS SUBSIDIARY M/S GALACTIC VENTURES LTD. FOR SETTING UP A N EW BUSINESS VENTURE IN THE LINE OF SETTING UP OF POWER PLA NT: FOR THIS THE APPELLANT COMPANY TOOK LOAN FROM ITS HOL DING COMPANY M/S ELLENA POWER AND INFRASTRUCTURE LTD. AND GAVE THIS MONEY TO THE ABOVE MENTIONED OVERSEAS COMPANY FOR STARTING THE POWER BUSINESS. HOWEVER, THE HOLDING COMPANY COULD NOT SET UP THE BUSINESS AND RETURNED BAC K THE MONEY TO THE APPELLANT. WHILE RECEIVING BACK MO NEY, THE APPELLANT COMPANY SUFFERED A LOSS OF RS.35,42,20,00 0/- BECAUSE OF THE EXCHANGE RATE DIFFERENCE. THE ACTIVIT IES UNDERTAKEN BY THE APPELLANT COMPANY FOR TAKING LOAN FROM ITS HOLDING COMPANY AND GIVING IT TO THE OVERSEAS SUBSIDIARY FOR SETTING UP A POWER PLANT IN OVERSEAS AMOUNTS TO THE COMMENCEMENT OF THE BUSINESS AND THESE TRANSACTIONS WERE CARRIED OUT IN THE COURSE OF NORMAL BUSINESS ACTIVITIES. IT IS NOT NECESSARY THAT STEPS TAKEN BY THE APPELLANT COMPANY WILL RESULT INTO EARNING OF IN COME. SOMETIMES, THE EFFORTS MAY FRUCTIFY OR SOMETIME IT MAY NOT FRUCTIFY. BUT ALL THESE ACTIVITIES INITIATED BY THE A PPELLANT COMPANY CONSTITUTE BUSINESS ACTIVITY. THE APPELLANT COMPANY HAS ALSO GIVEN INTER CORPORATE DEPOSITS AND FRO M THERE IT HAS EARNED INTEREST INCOME OF RS.4,79,86,849 /-. THE BUSINESS MODEL OF THE COMPANY IS SUCH THAT IT CAN CARRY BUSINESS ON ITS OWN OR BY FORMING JOINT VENTURES O R SUBSIDIARIES. IN ORDER TO CAPTURE THE MARKET AND EXTEN D ITS ARM GLOBALLY, THE APPELLANT INVESTED INTO A COMPANY WHICH IS IN THE SAME LINE OF BUSINESS AS THAT OF APPELLANT IN ACCORDANCE WITH ITS MAIN OBJECTS. FOR THIS PURPOSE, THE OBJECT CLAUSE OF THE APPELLANT COMPANY HAS TO BE READ AND SAME IS REPRODUCED HEREUNDER: 1. TO PROMOTE, UNDERTAKE, CARRY ON EITHER ON ITS OW N OR EITHER ON ITS OWN OR EITHER ON ITS OWN OR EITHER ON ITS OWN OR THROUGH ANY OTHER ENTITY THROUGH ANY OTHER ENTITY THROUGH ANY OTHER ENTITY THROUGH ANY OTHER ENTITY OR TO ENTER INTO AGREEMENTS, CONTRACTS, PARTNERSHIP, ALLIANCE OR ANY OTHER ARRANG EMENT FOR TECHNICAL, FINANCIAL AND OPERATIONAL ASSISTANCE OR SHARING OF PROFITS / LOSSES WITH ANY PERSON / BODY / BODI ES ITA-6546/DEL/2015 16 CORPORATE INCORPORATED IN INDIA OR ABROAD EITHER UN DER A EITHER UNDER A EITHER UNDER A EITHER UNDER A STRATEGIC ALLIANCE OR JOINT VE STRATEGIC ALLIANCE OR JOINT VE STRATEGIC ALLIANCE OR JOINT VE STRATEGIC ALLIANCE OR JOINT VENTURE OR ANY OTHER NTURE OR ANY OTHER NTURE OR ANY OTHER NTURE OR ANY OTHER ARRANGEMENT, IN INDIA OR ANY PART OF THE WORLD, ARRANGEMENT, IN INDIA OR ANY PART OF THE WORLD, ARRANGEMENT, IN INDIA OR ANY PART OF THE WORLD, ARRANGEMENT, IN INDIA OR ANY PART OF THE WORLD, THE BUSINESS OF GENERATING, DEVELOPING, TRANSMITTING, DISTRIBUTING , TRADING AND SUPPLYING ALL FORMS OF ELECTRICAL POWER/ ENERGY FROM ANY SOURCE WHATSOEVER AND TO CONSTRUCT, LAY DOWN, ESTABLISH, FIX AND CARRY OUT NECESSARY POWER STATIONS, CABLES, WIRES, LINES, ACCUMULATORS, LAMPS AND WORKS AND TO CARRY ON THE BUSINESS OF ELECTRICIAN, ELECTRICAL AND MECHANICAL ENGINEERS, TRADERS, SUPPLIERS OF ELECTRICITY FOR THE PURPOSES OF LIGHT, HEAT, MOTIVE POWER OR OTHERWISE , AND MANUFACTURERS OF AND DEALERS IN APPARATUS AND THINGS REQUIRED FOR OR CAPABLE OF BEING USED IN CONNECTION WITH THE GENERATION, DISTRIBUTION, TRADING, SUPPLY, ACCUMU LATION AND EMPLOYMENT OF ELECTRICITY, GALVANISM, MAGNETISM O R OTHERWISE AND BUSINESS OF ESTABLISHING, COMMISSIONING, SETTING UP, OPERATING AND MAINTAINING ELECTRIC POWER GENERATING STATIONS BASED ON CONVENTIONAL/NON- CONVENTIONAL RESOURCES, TIE-LINES, SUB-STATIONS AND TRANSMISSION LINES ON BUILD, OWN AND OPERATE (BOO) AND /OR BUILD, OWN AND TRANSFER (BOT), AND/OR BUILD, OWN, LE ASE AND TRANSFER (BOLT) AND/OR BUILD, OWN, OPERATE AND TRANSFER (BOOT) BASIS AND/OR OTHERWISE, AND TO CARRY O N THE BUSINESS OF ACQUIRING, OPERATING, MANAGING AND MAINTAINING EXISTING POWER' GENERATION STATIONS, TIE-L INES, SUB-STATIONS AND TRANSMISSION LINES, EITHER OWNED BY THE PRIVATE SECTOR OR PUBLIC SECTOR OR THE GOVERNMENT OR GOVERNMENTS OR OTHER PUBLIC AUTHORITIES AND FOR ANY O R ALL OF THE AFORESAID PURPOSES, TO DO ALL THE NECESSARY OR ANCILLARY ACTIVITIES AS MAY BE CONSIDERED NECESSARY OR BENEFICIAL OR DESIRABLE AND IN ANY MANNER DEAL WITH OR DISPOSE OF UNDERTAKING, PROPERTY, ASSETS, RIGHTS AND ALL OTHER EFFECTS WHICH IN THE OPINION OF THE COMPANY IS CONDUCIVE TO THE ATTAINMENT OF ANY OR ALL OF ITS BU SINESS OBJECTIVES OR TO ACQUIRE AND DISPOSE OF SHARES, SECURITIE S AND INTEREST IN SUCH BUSINESSES. 3. TO FORM, SETTLE, ACQUIRE, SET UP, INCORPORATE, E STABLISH, 3. TO FORM, SETTLE, ACQUIRE, SET UP, INCORPORATE, E STABLISH, 3. TO FORM, SETTLE, ACQUIRE, SET UP, INCORPORATE, E STABLISH, 3. TO FORM, SETTLE, ACQUIRE, SET UP, INCORPORATE, E STABLISH, PROMOTE, SUBSIDIZE, ORGANIZE AND ASSIST OR AID IN FO RMING, PROMOTE, SUBSIDIZE, ORGANIZE AND ASSIST OR AID IN FO RMING, PROMOTE, SUBSIDIZE, ORGANIZE AND ASSIST OR AID IN FO RMING, PROMOTE, SUBSIDIZE, ORGANIZE AND ASSIST OR AID IN FO RMING, PROMOTING, SUBSIDING, ORGANIZING PROMOTING, SUBSIDING, ORGANIZING PROMOTING, SUBSIDING, ORGANIZING PROMOTING, SUBSIDING, ORGANIZING OR AIDING, COMPANIE S, OR AIDING, COMPANIES, OR AIDING, COMPANIES, OR AIDING, COMPANIES, TRUSTS, FUNDS, ENTITIES OR PARTNERSHIPS OF ALL KINDS FOR ANY TRUSTS, FUNDS, ENTITIES OR PARTNERSHIPS OF ALL KINDS FOR ANY TRUSTS, FUNDS, ENTITIES OR PARTNERSHIPS OF ALL KINDS FOR ANY TRUSTS, FUNDS, ENTITIES OR PARTNERSHIPS OF ALL KINDS FOR ANY PURPOSE INCLUDING FOR THE PURPOSE OF ACCEPTING AND PURPOSE INCLUDING FOR THE PURPOSE OF ACCEPTING AND PURPOSE INCLUDING FOR THE PURPOSE OF ACCEPTING AND PURPOSE INCLUDING FOR THE PURPOSE OF ACCEPTING AND UNDERTAKING ANY PROPERTIES, BUSINESSES, ASSETS, LIABILIT IES OF UNDERTAKING ANY PROPERTIES, BUSINESSES, ASSETS, LIABILIT IES OF UNDERTAKING ANY PROPERTIES, BUSINESSES, ASSETS, LIABILIT IES OF UNDERTAKING ANY PROPERTIES, BUSINESSES, ASSETS, LIABILIT IES OF THIS COMPANY, OR WITH OBJECTS SIMILAR IN WHOLE OR PAR T WITH THIS COMPANY, OR WITH OBJECTS SIMILAR IN WHOLE OR PAR T WITH THIS COMPANY, OR WITH OBJECTS SIMILAR IN WHOLE OR PAR T WITH THIS COMPANY, OR WITH OBJECTS SIMILAR IN WHOLE OR PAR T WITH THAT OF COMPANY AND INVEST THEREIN. THAT OF COMPANY AND INVEST THEREIN. THAT OF COMPANY AND INVEST THEREIN. THAT OF COMPANY AND INVEST THEREIN. ITA-6546/DEL/2015 17 FURTHER, THE OBJECT CLAUSE OF THE GVL WHICH WAS AN OVERSEAS SUBSIDIARY OF THE APPELLANT COMPANY READS AS UNDER: THE PRINCIPAL ACTIVITY OF THE COMPANY IS THAT OF THE PRINCIPAL ACTIVITY OF THE COMPANY IS THAT OF THE PRINCIPAL ACTIVITY OF THE COMPANY IS THAT OF THE PRINCIPAL ACTIVITY OF THE COMPANY IS THAT OF CONSTRUCTION AND MAINTENANCE OF POWER PLANTS INCLUDIN CONSTRUCTION AND MAINTENANCE OF POWER PLANTS INCLUDIN CONSTRUCTION AND MAINTENANCE OF POWER PLANTS INCLUDIN CONSTRUCTION AND MAINTENANCE OF POWER PLANTS INCLUDIN G G G G TRADING IN POWER PLANT EQUIPMENTS. TRADING IN POWER PLANT EQUIPMENTS. TRADING IN POWER PLANT EQUIPMENTS. TRADING IN POWER PLANT EQUIPMENTS. FROM THE READING OF THE OBJECT CLAUSE OF THE APPELLANT AS WELL AS ITS SUBSIDIARY, IT IS EVIDENT THAT T HE INCORPORATION OF THE SUBSIDIARY COMPANY, HAVING THE BUSINESS OBJECT SAME AS OF THE ASSESSEE, AND IT WAS NOTHING BUT AN EXPANSION OF ITS BUSINESS AND HAS BEEN DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY AND ACCORDINGLY THE LOSS INCURRED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION ON REALIZATION OF INVESTMENT MO NEY IN SUBSIDIARY IS NOTHING BUT AN EXPENDITURE INCURRED WHOL LY AND EXCLUSIVELY FOR THE BUSINESS PURPOSES OF THE APPELLAN T COMPANY. SECTION 28 OF THE INCOME TAX ACT WHICH IS A COMPUTING SECTION FOR THE INCOME FROM THE BUSINESS AND PROFESSION READS AS UNDER: THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME- TAX UNDER THE HEAD 'PROFIT AND GAINS OF BUSINESS OR PROFESSIO N - (III) THE PROFIT AND GAINS OF ANY BUSINESS PROFIT AND GAINS OF ANY BUSINESS PROFIT AND GAINS OF ANY BUSINESS PROFIT AND GAINS OF ANY BUSINESS OR PROFESSION WHICH WAS CARRIED ON BY THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR; (IV) . FURTHER, SECTION 37 OF THE ACT IS A RESIDUARY SECTION WHICH ALLOWS THE CLAIM OF THE EXPENDITURES WHICH ARE NOT CO VERED IN ANY OTHER SECTION FROM 30 TO 36 AND HAVE BEEN INC URRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. SINCE, IN THE INSTANT CASE, THE INVESTMENT HAS BEEN DONE TO PROMOTE ITS BUSINESS GLOBALLY, THE SAME IS NOTHIN G BUT A BUSINESS ACTIVITY OF THE APPELLANT COMPANY AND ITA-6546/DEL/2015 18 ACCORDINGLY THE FOREIGN EXCHANGE FLUCTUATION LOSS, IN CURRED BY THE APPELLANT COMPANY, IS AN EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. 18. AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE SIDES AN D THE FACTS OF THE CASE, WE DO NOT FIND ANY JUSTIFICATION TO INTE RFERE WITH THE ABOVE FINDING RECORDED BY THE LEARNED CIT(A). IN VIEW OF THE ABOVE, WE, RESPECTFULLY FOLLOWING THE DECISIONS OF HONBLE APEX C OURT IN THE CASE OF S.A. BUILDERS LTD. (SUPRA) AND HERO CYCLES P.LTD. (SUPRA) AND OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ESPN SOFTWARE INDIA P.LTD. (SUPRA), DHOOMKETU BUILDERS AND DEVELOPERS P.LT D. (SUPRA) AND MODI ENTERTAINMENT LTD. (SUPRA), UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 19. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. DECISION PRONOUNCED IN THE OPEN COURT ON 04.02.2019. SD/- SD/- (SUCHITRA KAMBLE (SUCHITRA KAMBLE (SUCHITRA KAMBLE (SUCHITRA KAMBLE ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE VICE VICE VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TAX , DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -2(1), NEW DELHI. 2(1), NEW DELHI. 2(1), NEW DELHI. 2(1), NEW DELHI. 2. RESPONDENT : M/S ALBASTA WHOLESALE SERVICES LIMITED , M/S ALBASTA WHOLESALE SERVICES LIMITED, M/S ALBASTA WHOLESALE SERVICES LIMITED, M/S ALBASTA WHOLESALE SERVICES LIMITED, M MM M- -- -62 & 62 & 62 & 62 & 63, FIRST FLOOR, CONNAUGHT PLACE, 63, FIRST FLOOR, CONNAUGHT PLACE, 63, FIRST FLOOR, CONNAUGHT PLACE, 63, FIRST FLOOR, CONNAUGHT PLACE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR