ACIT, Coimbatore V. M/s. Rajshree Sugars & Chemicals Ltd., Coimbatore

ITA 851/CHNY/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7763 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 18-04-2012
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure; Transactions in derivatives; Speculation loss; Tax effect; Capital receipt; Condonation of delay; Revenue expenditure
• Section: 143(3); 43(5); 37

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER I.T.A.NO S . 851 /MDS/201 2 AND 2235/MDS/2014 ASSESSMENT YEAR S : 200 8 - 0 9 AND 2010 - 11 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(1), INCOME TAX BUILDING, RACE COURSE ROAD, COIMBATORE 641 018. VS. M/S. RAJSHREE SUGARS & CHEMI CALS LIMITED, 1168, AVANASHI ROAD, PEELAMEDU, COIMBATORE 641 004 . [PAN: AA B C R4179D ] ( / APPELLANT ) ( / R ESPONDENT / ) I.T.A.NO. 755/MDS/2012 ASSESSMENT YEAR :200 8 - 0 9 M/S. RAJSHREE SUGARS & CHEMICALS LIMITED, 1168, AVANASHI ROAD, PEELAMEDU, COIMBATORE 641 004. VS. THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE IV, COIMBA TORE 641 018. ( / APPELLANT ) ( / R ESPONDENT / ) DEPARTMENT B Y : SHRI SHIVA SRINIVAS , J CIT ASSESSEE BY : SHRI K. RAGHU , C.A. / DATE OF HEARING : 07 . 11 .201 6 / DATE OF P RONOUNCEMENT : 28 . 1 2 .201 6 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : BOTH T HE APPEALS FILED BY THE REVENUE ARE DIRECTED AGAINST DIFFERENT ORDER S OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) I , C OIMBATORE DATED I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 2 2 4 .0 1 .201 2 AND 04.06.20914 FOR THE ASSESSMENT YEAR S 200 8 - 0 9 AND 2010 - 11 RESPECTIVELY. THE ASSESSEE IS ALSO IN APPEAL FOR THE ASSESSMENT YEAR 2008 - 09. 2. THE APPEAL OF THE REVENUE IN I.T.A. NO. 851/MDS/2012 IS FOUND TO HAVE BEEN FILED LATE BY NIN E DAYS IN FILING THE APPEAL. THE ASSESSING OFFICER HAS FILED AN AFFIDAVIT FOR CONDONATION OF DELAY BY STATING THAT THE RECORDS OF THE CASE WERE UNABLE TO TRACE OUT IN TIME INADVERTENTLY GOT MIXED UP WITH OTHER FILES AND THEREBY THERE WAS SHORT DELAY OF NINE DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. BY RE FERRING TO THE AFFIDAVIT, THE LD. DR HAS REQUESTED FOR CONDONING THE DELAY AND TO ADMIT THE APPEAL FOR HEARING. THE LD. COUNSEL FOR THE ASSESSEE DID NOT SERIOUSLY OBJECT TO THE SUBMISSIONS OF THE LD. DR. ACCORDINGLY, WE CONDONE THE DELAY OF THREE DAYS IN F ILING THE APPEAL AND ADMIT THE APPEAL FOR HEARING. I.T.A. NOS. 851/MDS/2012 AND 2235/MDS/2014 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE TAX EFFECT IN BOTH THE APPEAL S FILED BY THE REVENUE IS LESS THAN THE MONETARY LIMIT OF .10,00,000/ - FIXED BY THE CBDT TO FILE AN APPEAL BY THE REVENUE BEFORE THE TRIBUNAL AS PER THE CBDT CIRCULAR NO. 21/2015, DATED 10.12.2015. THE LD. DR FAIRLY CONCEDED THE SUBMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE. BEING SO, THE REVENUE AUTHORITIES ARE PRECLUDED FROM FILING THE APPEAL S BEFORE THE TRIBUNAL, SINCE THE TAX EFFECT I S LESS THAN I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 3 .10,00,000/ - IN THE S E APPEAL S . ACCORDINGLY, THE APPEAL S FILED BY THE REVENUE ARE DISMISSED AS UN - ADMITTED FOR BOTH THE ASSESSMENT YEARS 2008 - 09 AND 2 010 - 11. I.T.A. NO. 755/MDS/2012 [A.Y. 2008 - 09] 4. IN THE APPEAL OF THE ASSESSEE, THE ASSESSEE HAS RAISED TWO EFFECTIVE GROUNDS, VIZ., (I) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF .1,95,56,190/ - TREATING IT AS SPECULATIVE TRANSACTION, PROHIBITED BY FEMA REGULATIONS AND HENCE CANNOT BE ALLOWED UNDER SECTION 37 OF THE ACT AND THE TRANSACTION GIVING RISE TO THE LOSS, AS NOT LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS UNDER SECTION 37 OF THE ACT AND (II) THE LD. C I T(A) HAS E RRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF .1,95,02,045/ - ACCRUED ON ECB IN FOREIGN CURRENCY, WHICH WAS CREDITED TO CAPITAL WORK IN PROGRESS . 4.1 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A DOMESTIC COMPANY, ENGAGED IN MANUFACTURE OF WHITE SUGAR AND FILED ITS RETURN OF INCOME ON 26.09.2008 DECLARING TOTAL INCOME OF .68,482/ - AND VALUE OF FRINGE BENEFITS OF .37,86,572/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND SUBSEQUENTLY SELECTED FOR SCRUTINY AN D NOTICE UNDER SECTION 143(2) OF THE ACT. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND EXAMINING VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 4 ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT .4,15,08,400/ - AFTER MAKING VARIOUS ADDITIONS. 4.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND MATERIAL ON RECORD , THE LD. CIT(A) PARTLY ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4.3 ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THAT THE PRINCIPAL SWAP WAS ENTERED INTO WITH AXIS BANK [WHEN IT WAS FORMERLY KNOWN AS UTI BANK] IN APRIL, 2007, FOR A PERIOD OF O NE YEAR AND IT WAS SETTLED ON THE DUE DATE 17.04.2008. THOUGH THE ASSESSEE HAD NO BUSINESS EXPOSURE FOR TRADING IN SUGAR EITHER AS AN IMPORTER OR AN EXPORTER WITH SWITZERLAND, THE ASSESSEE HAS ENTERED INTO A CURRENCY SWAP BETWEEN INDIAN RUPEES AND SWISS FR ANCS. HE ARGUED THAT THE DERIVATIVES ARE EXCLUDED UNDER THE PROVISO (D) TO SECTION 43(5) OF THE ACT. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THAT THE LOSS INCURRED BY THE ASSESSEE IN THE ABOVE PROCESS SHOULD BE ALLOWED AS REVENUE EXPENDITU RE. 4.4 ON THE OTHER HAND, THE LD. DR STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS NOT SATISFIED THE CONDITION LAID DOWN IN THE PROVISOS (A) AND (D) TO SECTION 43(5) OF THE ACT, THE I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 5 LOSS SUFFERED BY THE ASSESSEE COMPANY ON ACCOUNT OF FORWARD CONTRACTS IS SPECULATIVE IN NATURE AND CAN BE ADJUSTED ONLY WITH SPECULATION GAIN AND NOT AGAINST BUSINESS INCOME. FURTHER, HE RELIED ON THE DECISION IN THE CASE OF CI T VS . K.MOHAN & CO(EXPORTS) (P) LTD.(2010) 39 DTR 97 . 4.5 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. I T IS AN UNDISPUTED FACT THAT THE ASSESSEE COMPANY HAS ENTERED INTO A CURRENCY SWAP BETWEEN INDIAN RUPEES AND SWISS FRANCS. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF WHITE SUGAR. THE ASSESSEE HAD NO BUSINESS EXPOSURE FOR TRADING IN SUGAR EITHER AS AN IMPORTER OR AN EXPORTER WITH SWITZERLAND. HOWEVER, THE ASSESSEE ENTERED INTO SWAP CURRENCY FOREX DERIVATIVE WITH AXIS BANK LTD. RELATING TO PRINCIPAL AMOUNT OF LOAN OF .10 CRORES. THE ONLY DISPUTE IS WHETHER THE LOSS ARISING SWAP CURRENCY FOREX DERIVATIVE ENTERED INTO WITH AXIS BANK LTD. RELATING TO PRINCIPAL AMOUNT OF LOAN OF .10 CRORES IS A SPECULATIVE LOSS OR BUSINESS LOSS. 4.6 UNDER THE NOTES ON ACCOUNTS OF THE AS SESSEE S ANNUAL REPORT FOR THE YEAR 2007 - 08, THE ASSESSEE HAS BEEN STATED AS UNDER: IN RESPECT OF ONE OF THE DERIVATIVE CONTRACT OF THE VALUE OF .10 CRORES ENTERED INTO BY THE COMPANY RELATING TO CURRENCY SWAP AND SINCE SETTLED ON 15.04.2008, THE COMPANY HAS INCURRED A LOSS OF .1,95,56,190/ - , WHICH AMOUNT HAS BEEN RECOGNIZED IN THE BOOKS AS ON 31.03.2008 CONSIDERING THE PRINCIPLES OF PRUDENCE AS ENUNCIATED IN ACCOUNTING STANDARD - 1. I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 6 HOWEVER, IN RESPECT OF ANOTHER DERIVATIVE CONTRACT OF THE NOTIONAL VAL UE OF USD 10 MILLION ENTERED INTO WITH AXIS BANK LTD. WHICH MAY ESCALATE TO USD 40 MILLION BASED ON PRESCRIBED EXCHANGE RATES OF DESIGNATED CURRENCIES OCCURRING DURING THE REFERENCE PERIOD, THE VERY SUBSISTENCE OF THE CONTRACT INCLUDING ITS LEGALITY HAS BE EN DISPUTED BY THE COMPANY IN THE SUIT CS NO. 240/2008 BEFORE THE HIGH COURT OF JUDICATURE, MADRAS AT CHENNAI AND THE HIGH COURT BY ITS ORDER IN OA NO. 251/2008 HAS GRANTED INTERIM INJUNCTION TILL 20.06.2008 RESTRAINING THE BANK FROM ENFORCING THE CONTRACT AGAINST THE COMPANY. HENCE, THE UNREALIZED LOSS OR GAIN, IF ANY, AS ON 31.03.2008 HAS NOT BEEN RECOGNIZED IN THE BOOKS. AN INITIAL AMOUNT OF .40,83,000 [USD 100,000] RECEIVED UNDER THIS CONTRACT HAS BEEN INCLUDED IN OTHER INCOME . AS THE ASSESSEE HAS A TTEMPTED TO CLAIM THE LOSS INCURRED ON A FOREX DERIVATIVE CONTRACT, AS A BUSINESS DEDUCTION, THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE CONTRACT AND RELATED DOCUMENTS TOGETHER WITH THE ACCOUNT COPY PERTAINING TO THE PAYMENTS INVOLVED. IN RESPO NSE THERETO, THE ASSESSEE HAS FURNISHED A WRITTEN SUBMISSION BEFORE THE ASSESSING OFFICER, WHEREIN IT WAS STATED AS FOLLOWS: COPY OF THE DEAL CONFIRMATION FOR INR - CHF PRINCIPAL ONLY SWAP WITH OPTION PROTECTION WITH AMERICAN KNOCK - OUT & KNOCK - IN ENTERED INT O WITH AXIS BANK LTD. [THEN UTI BANK LTD.] DATED 05.04.2007 RELATING TO PRINCIPAL AMOUNT OF LOAN OF INR 10 CRORES IS ENCLOSED. THE DIFFERENCE IN AMOUNT ARISING IN THE COURSE OF REPAYMENT OF CHF 28,30,705/ - TO UTI BANK AGAINST THE EARLIER RECEIPT OF INR 10 ,00,00,000/ - FROM THEM IN APRIL, 2007, OF .1.95 CRORES IS DEBITED TO THE PROFIT & LOSS ACCOUNT FOR THE YEAR AS EXPLAINED IN NOTE NO. 27 TO THE ACCOUNTS FOLLOWING THE PRESCRIBED ACCOUNTING STANDARDS AND AS A RESULT OF FLUCTUATION IN FOREX RATES. THE AMOUNT ACTUALLY BEEN PAID ON 17.04.2008. PROOF OF PAYMENT OF .1.95 CRORES TO AXIS BANK [UTI WORKING CAPITAL ACCOUNT EXTRACT FOR THE PERIOD] IS ENCLOSED. THE CLAIM FOR DEDUCTION AS ADMISSIBLE IS ON THIS GROUND AS A BUSINESS EXPENDITURE INCURRED, THE CONTRACT BE ING ENTERED INTO, TO REDUCE COST OF BORROWING IN INR, FOR BUSINESS PURPOSES AND IT WAS IN FORCE FOR THE WHOLE OF THE YEAR FROM 05.04.2007. I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 7 IN THE CASE OF THE ASSESSEE, THE ASSESSING OFFICER HAS OBSERVED THAT THE PRINCIPAL SWAP WAS ENTERED INTO WITH AXIS BANK [WHEN IT WAS FORMERLY KNOWN AS UTI BANK] IN APRIL, 2007, FOR A PERIOD OF ONE YEAR AND IT WAS SETTLED ON THE DUE DATE 17.04.2008. THOUGH THE ASSESSEE HAD NO BUSINESS EXPOSURE FOR TRADING IN SUGAR EITHER AS AN IMPORTER OR AN EXPORTER WITH SWITZERLAND, T HE ASSESSEE HAS ENTERED INTO A CURRENCY SWAP BETWEEN INDIAN RUPEES AND SWISS FRANCS. THE LOSS INCURRED BY THE ASSESSEE IN THE PROCESS HAS BEEN CLAIMED AS REVENUE EXPENDITURE. 4.7 THE ASSESSEE HAS BEEN ENTERED INTO FOREX DERIVATIVE CONTRACT FOR SWISS FRAN C (CHF) AND INDIAN RUPEE (INR) CURRENCIES EVEN THOUGH THE ASSESSEE WAS NOT DEALING IN ITS BUSINESS IN SWISS FRANCS AT ALL. THE CONTRACT FOR THE FOREX DERIVATIVE WITH AXIS BANK DOES NOT HAVE ANY SPECIFIC UNDERLYING RISK EXPOSURE FOR WHICH THE PURPORTED CONT RACT HAS BEEN TAKEN. 4.8 FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT AS PER THE FOREIGN EXCHANGE MANAGEMENT (FOREIGN EXCHANGE DERIVATIVE CONTRACTS) REGULATION (MASTER CIRCULAR NO. 6/2008 - 09, DATED 01 . 07 . 2008) ON FOREX DERIVATIVES, THE REGULATION PER MITS THE FOREX DERIVATIVES INSTRUMENTS TO BE TAKEN ONLY UPON A SPECIFIC UNDERLYING RISK EXPOSURE AND ONLY TO THE EXTENT OF THE UNDERLYING RISK EXPOSURE. WITHOUT UNDERLYING RISK EXPOSURE AND ABOVE THE LIMIT OF UNDERLYING RISK EXPOSURE, DERIVATIVE INSTRUMENT IS PROHIBITED BY FEMA I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 8 REGULATIONS. AS THE ASSESSEE HAS ENTERED INTO A FOREX DERIVATIVE WHICH IS PROHIBITED BY THE FEMA ACT AND AS A RESULT HAS SUFFERED A NET LOSS, THE SAME C ANNOT BE ALLOWED AS BUSINESS EXPENDITURE UNDER S ECTION 37 OF THE ACT . 4.9 MOREO VER, THE ASSESSING OFFICER HAS OBSERVED THAT T HE ASSESSEE'S TRANSACTIONS ARE SPECULATIVE TRANSACTIONS SINCE IT SATISFIES THE PROVISIONS OF SECTION 43(5) TO TREAT IT AS 'SPECULATIVE TRANSACTION'. (I) THERE IS A CONTRACT BETWEEN THE ASSESSEE COMPANY AND THE AXIS BANK FOR THE NON DELIVERABLE DERIVATIVE, SPECIFICALLY CROSS CURRENCY CONTRACT WITHOUT UNDERLYING EXPOSURE. (II) THE COMMODITY REFERRED IN SECTION 43(5) INCLUDES STOCK, SHARES AND NON DELIVERABLE FOREX DERIVATIVES ALSO. (III) THE ASSESSEE ALSO HAS NOT ACTUALLY DELIVERED THE CURRENCY TO THE AXIS BANK. 4.10 THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE CASE OF THE ASSESSEE FALLS INTO THE AMBIT OF EXCLUSION UNDER PROVISO (D), IF IT IS DONE THROUGH A RECOGNIZED STOCK EXCHANGE. AS A RESULT, THER E CANNOT BE EXCLUSION WITHOUT AN INCLUSION. IF THE COMMODITY DOES NOT INCLUDE DERIVATIVES THE SAME WOULD NOT HAVE BEEN EXCLUDED IN THE PROVISO (D) TO SECTION 43(5). SO , THE CLAIM MADE BY THE ASSESSEE THAT FOREIGN CURRENCIES ARE NOT COMMODITIES AS PER SECTI ON 43(5) IS NOT VALID. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER HELD THAT IT IS A CLEAR CASE OF SPECULATION BUSINESS, WHICH CANNOT BE ALLOWED TO BE SET OFF WITH THE NORMAL BUSINESS INCOME AND BROUGHT TO TAX. I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 9 4.11 REGARDING APPLICABILITY OF PROVISIONS O F SECTION 43(5) OF THE ACT, THE RELEVANT PROVISIONS ARE REPRODUCED AS UNDER: SECTION 43 (5): SPECULATIVE TRANSACTION MEANS A TRANSACTION IN WHICH A CONTRACT FOR THE PURCHASE OR SALE OF ANY COMMODITY, INCLUDING STOCKS AND SHARES, IS PERIODICALLY OR ULTIM ATELY SETTLED OTHERWISE THAN BY THE ACTUAL DELIVERY OR TRANSFER OF THE COMMODITY OR SCRIPS: THAT FOR THE PURPOSES OF THIS CLAUSE (A) A CONTRACT IN RESPECT OF RAW MATERIALS OR MERCHANDISE ENTERED INTO BY A PERSON IN THE COURSE OF HIS MANUFACTURING OR MER CHANTING BUSINESS TO GUARD AGAINST LOSS THROUGH FUTURE PRICE FLUCTUATIONS IN RESPECT OF HIS CONTRACTS FOR ACTUAL DELIVERY OF GOODS MANUFACTURED BY HIM OR MERCHANDISE SOLD BY HIM; OR (B) A CONTRACT IN RESPECT OF STOCKS AND SHARES ENTERED INTO BY A DEALER O R INVESTOR THEREIN TO GUARD AGAINST LOSS IN HIS HOLDINGS OF STOCKS AND SHARES THROUGH PRICE FLUCTUATIONS; OR (C) A CONTRACT ENTERED INTO BY A MEMBER OF A FORWARD MARKET OR A STOCK EXCHANGE IN THE COURSE OF ANY TRANSACTION IN THE NATURE OF ACTUAL DELIVER Y , SEE TAXMAN S DIRECT TAXES MANUAL, VOL. 3. JOBBING OR ARBITRAGE TO GUARD AGAINST LOSS WHICH MAY ARISE IN THE ORDINARY COURSE OF HIS BUSINESS AS SUCH MEMBER; [OR] (D) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN DERIVATIVES REFERRED TO IN CLAUSE 35 [(AC)] OF SECTION 236 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) CARRIED OUT IN A RECOGNIZED STOCK EXCHANGE;] (E) AN ELIGIBLE TRANSACTION IN RESPECT OF TRADING IN COMMODITY DERIVATIVES CARRIED OUT IN A RECOGNIZED ASSOCIATION, WHICH IS CHARGEABLE TO COMMODITIES TRANSACTION TAX UNDER CHAPTER VII OF THE FINANCE ACT, 2013 (17 OF 2013) SHALL NOT BE DEEMED TO BE A SPECULATIVE TRANSACTION. EXPLANATION . FOR THE PURPOSES OF THIS CLAUSE, THE EXPRESSIONS (I) ELIGIBLE TRANSACTION MEANS ANY TRANSACTION, (A) CARRIED OUT ELECTRONICALLY ON SCREEN - BASED SYSTEMS THROUGH A STOCK BROKER OR SUB - BROKER OR SUCH OTHER INTERMEDIARY REGISTERED UNDER SECTION 12 OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 (15 OF 1992) IN ACCORDANCE WITH THE PR OVISIONS OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) OR THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 10 1992 (15 OF 1992) OR THE DEPOSITORIES ACT, 1996 (22 OF 1996) AND THE RULES, REGULATIONS OR BYE - LAWS MADE OR DIRECTIONS ISSUED UNDER THOSE ACTS OR BY BANKS OR MUTUAL FUNDS ON A RECOGNISED STOCK EXCHANGE; AND (B) WHICH IS SUPPORTED BY A TIME STAMPED CONTRACT NOTE ISSUED BY SUCH STOCK BROKER OR SUB - BROKER OR SUCH OTHER INTERMEDIARY TO EVERY CLIENT INDICATING IN THE CONTRACT NOTE THE UNI QUE CLIENT IDENTITY NUMBER ALLOTTED UNDER ANY ACT REFERRED TO IN SUB - CLAUSE (A) AND PERMANENT ACCOUNT NUMBER ALLOTTED UNDER THIS ACT; (II) RECOGNISED STOCK EXCHANGE MEANS A RECOGNISED STOCK EXCHANGE AS REFERRED TO IN CLAUSE (F) OF SECTION 238 OF THE SE CURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956) AND WHICH FULFILS SUCH CONDITIONS AS MAY BE PRESCRIBED AND NOTIFIED 39 BY THE CENTRAL GOVERNMENT FOR THIS PURPOSE;] 4.12 FROM THE ABOVE PROVISIONS OF SECTION 43(5) OF THE ACT, IT IS CLEAR THAT SINCE T HE ASSESSEE IS NOT A BANK AND NOT AN AUTHORIZED FOREIGN EXCHANGE DEALER, SECTION 43(5) OF THE ACT ITSELF IS NOT APPLICABLE. MOREOVER, THE EXCEPTIONS MENTIONED IN CLAUSE (A) TO (E) OF SECTION 43(5) OF THE ACT ARE ALSO NOT APPLICABLE TO THE ASSESSEE S CASE BECAUSE (I) THE CONTRACT WAS NOT IN RESPECT OF ANY GOODS OR RAW - MATERIALS. (II) THE ASSESSEE WAS NOT A DEALER IN STOCKS OR SHARES. (III) THE ASSESSEE WAS NOT A MEMBER OF STOCK EXCHANGE. (IV) THE TRANSACTION WAS NOT CARRIED OUT IN THE RECOGNIZED STOCK EXC HANGE. (V) THE ASSESSEE IS NOT TRADING IN COMMODITY DERIVATIVES. IN THE INSTANT CASE, THE DERIVATIVES DO NOT PERTAIN TO COMMODITY/STOCK/SHARES. IT PERTAINS TO FOREIGN EXCHANGE AND IT IS WELL SETTLED THAT A FOREIGN EXCHANGE IS COMMODITY ONLY IN THE HANDS O F BANKS AND AUTHORIZED FOREIGN EXCHANGE DEALERS AS ONLY BANKS AND FOREIGN EXCHANGE DEALERS ARE AUTHORIZED TO TRADE IN FOREIGN EXCHANGE AND NOT OTHERS AS PER RBI GUIDELINES IN VIEW OF THE I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 11 DECISION OF THE DELHI BENCHES OF THE ITAT IN THE CASE OF MUNJAL SHOWA LTD. V. DCIT 94 TTJ 227. 4.13 I N THIS CASE, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE HAS TAKEN TERM LOAN FROM ERSTWHILE UTI BANK, NOW AXIS BANK OF .10 CRORES VIDE SANCTION LETTER DATED 16.08.2006. THE ASSESSEE HAS ENTERED INTO WITH AXIS BANK UNDER CURRENCY OPTION TRANSACTIONS ON 11 TH APRIL, 2007 AND THE DELIVERY DATE WA S 17 TH APRIL, 2008. BEFORE THE ASSESSING OFFICER, BY FILING PROOF OF PAYMENT OF .1.95 CRORES TO AXIS BANK [UTI WORKING CAPITAL ACCOUNT EXTRACT FOR THE PERIOD], THE ASSESSEE HAS SUBM ITTED THAT THE AMOUNT HAS ACTUALLY BEEN PAID ON 17.04.2008. THE ASSESSEE HAS CLAIMED CURRENCY SWAP LOSS . 1,95,56,190/ - . SINCE, THIS LOSS WAS RELATED TO HEDGING OF RUPEE LOAN WITH DOLLAR AND SWISS FRANC , THE ASSESSING OFFICER HAS OBSERVED THAT THE SAID TRA NSACTION WAS NOT ELIGIBLE TRANSACTION AND HENCE THE LOSS INCURRED WAS REQUIRED TO BE TREATED AS SPECULATIVE LOSS UNDER SECTION 43(5) OF THE ACT AND S UCH SPECULATIVE LOSS COULD NOT BE ADJUSTED AGAINST NORMAL BUSINESS INCOME AS PER THE PROVISIONS OF SECTION 73(1) OF THE ACT. THE LD. CIT(A) HAS OBSERVED THAT UNDER CURRENCY SWAP, THE TERM LOAN WAS TAKEN AS A NOTIONAL LOAN FOR FOREIGN EXCHANGE FOR THE EXCHANGE OF SWAP TRANSACTION. THIS WAS HEDGED AGAINST US DOLLAR AND SWISS FRANC. THE VALUE OF LOAN WAS TAKEN INT O CONSIDERATION AT EXCHANGE RATE OF .43.1200 FOR US DOLLAR, US DOLLAR TO SWISS FRANC 1.2206 AND FROM SWISS FRANC TO INDIAN RUPEES AT 35.3269. I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 12 THERE WAS A BARRIER MONITORING AT KNOCK IN AT US DOLLAR TO FRANC AT 1.27 AND KNOCK OUT AT US DOLLAR TO SWISS FRAN C 1.08. FURTHER, HE HAS OBSERVED THAT THE WHOLE PORTION OF THIS FOREX DERIVATIVE WAS ON THE UNDERLYING THAT THE TERM LOAN WAS CONVERTED NOTIONALLY AS A FOREX DERIVATIVE FOR OPERATION OF THE FOREX DERIVATIVES. THE ABOVE ACTIVITY OF THE ASSESSEE ON THESE FOR EX DERIVATIVES CLEARLY SHOWS THAT IT IS HIGHLY SPECULATIVE IN NATURE ON NOTIONAL PAYABLE ON DELIVERY DATE. FURTHER, THE WHOLE TRANSACTION OF FOREX DERIVATIVE IS NOT IN HEDGE AGAINST FOREIGN CURRENCY VALUATION IN THE COURSE OF BUSINESS AND MOREOVER, IT CANN OT ALSO BE TREATED AS A TRADING LOSS BECAUSE OF THE SPECULATIVE NATURE INBUILT IN THE DERIVATIVES. 4.1 4 IN THIS CASE, T HE VALUE OF LOAN WAS TAKEN INTO CONSIDERATION AT EXCHANGE RATE OF .43.1200 FOR US DOLLAR, US DOLLAR TO SWISS FRANC 1.2206 AND FROM SWIS S FRANC TO INDIAN RUPEES AT 35.3269. THE TERM LOAN WAS CONVERTED AS A FOREX DERIVATIVE FOR OPERATION OF THE FOREX DERIVATIVES AND WHILE CONVERTING FOR OPERATION OF CURRENCY SWAP , THE ASSESSEE HAS CLAIMED LOSS OF . 1,95,56,190/ - . THE ASSESSEE HAS ALSO EARNE D INTEREST OF .10,39,561/ - AND HAD TO PAY AS A SETTLEMENT FOR CURRENCY SWAP AMOUNT OF .1,32,90,556/ - AND ON ACCOUNT OF CURRENCY OPTION I.E., AGAINST US DOLLAR .73,05,194/ - TO AXIS BANK. BEING SO, THE EXPENDITURE INCURRED ON ISSUE OF DEBENTURES/EQUITY SH ARES, WHETHER CONVERTIBLE OR NON - CONVERTIBLE IS AN ALLOWABLE DEDUCTION AS REVENUE EXPENDITURE IN VIEW OF THE DECISION OF THE I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 13 HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FIRST LEASING CO. OF INDIA LTD. 304 ITR 67. FURTHER, IN THE CASE OF CIT V. SECURE METERS LTD. 321 ITR 611 , THE HON BLE RAJASTHAN HIGH COURT HAS ALSO HELD THAT THE DEBENTURES WHEN ISSUED WERE A LOAN AND, THEREFORE, WHETHER THEY WERE CONVERTIBLE OR NON - CONVERTIBLE DID NOT MILITATE AGAINST THE NATURE OF THE DEBENTURE, BEING LOAN AND , THEREFORE, THE EXPENDITURE INCURRED WOULD BE ADMISSIBLE AS REVENUE EXPENDITURE. 4.15 HOWEVER, IN THIS CASE, IT IS NOT CLEAR FROM THE ORDERS OF AUTHORITIES BELOW FOR WHICH PURPOSE; THE ASSESSEE HAS ENTERED INTO CURRENCY SWAP FOREX DERIVATIVES. IF THE AS SESSEE HAS ENTERED INTO FOREX DERIVATIVES CONTRACT FOR THE PURPOSE OF ISSUE OF DEBENTURES/EQUITY SHARES, THEN THE LOSS CLAIMED BY IT WOULD BE ADMISSIBLE AS REVENUE EXPENDITURE AND OTHERWISE NOT. THE ASSESSING OFFICER IS DIRECTED TO VERIFY THE SAME AND DECI DE IN ACCORDANCE WITH LAW. THUS, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE INTEREST RECEIPTS AS INCOME OF THE ASSESSE E. 5.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS FOUND THAT THE ASSESSEE CREDITED THE INTEREST RECEIPTS AMOUNTING TO .1,95,02,045/ - TO CAPITAL WORK IN PROGRESS. THE ASSESSEE WAS ASKED TO I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 14 EXPLAIN AS TO WHY THE AFORESAID AMOUNT OF REVENUE RECEIPTS , IN THE NATURE OF INTEREST, SHOULD NOT BE BROUGHT TO TAX. THE ASSESSEE FURNISHED A WRITTEN SUBMISSION IN THIS REGARD, AS FOLLO WS: 'INTEREST PAID /ACCRUED/RECEIVED IN RESPECT OF ECB LOAN: THE COMPANY AS IS MANDATORY, IS FOLLOWING THE ACCRUAL METHOD OF ACCOUNTING AND THEREFORE HAS TO RECOGNIZE AN EXPENDITURE WHETHER ACTUALLY PAID OR NOT. LIKEWISE, ALL INCOME HAS TO BE RECOGNIZED WHETHER ACTUALLY RECEIVED OR NOT. IN THIS CONTEXT, IT MAY BE NOTED THAT THE TOTAL AMOUNT OF INTEREST DUE ON ECB LOAN FOR THE YEAR IS RS.10,01,57,046/ - OUT OF WHICH THE SUM OF RS.5,93,29,810/ - HAS BEEN ACTUALLY REMITTED DURING THE YEAR, AND THE BALANCE OF RS. 4, 08, 27, 236/ - HAS NOT YET BEEN REMITTED AS ON 31 - 3 - 2008. THE JOURNAL ENTRY FOR THE SAME IS - A. INTEREST ON ECB LOAN (INCLUDED UNDER CAPITAL WORKING PROGRESS A/C) DR. 5,93,29, 810 TO BANK ACCOUNT RS.5, 93,29, 810 (BEING AMOUNT PAID FROM TIM E TO TIME DURING THE YEAR) B. INTEREST ON ECB LOAN DR. 4, 08, 27,236 TO INTEREST ACCRUED BUT NOT DUE RS.4, 08, 27,236 (BEING AMOUNT PROVIDED FOR THE BALANCE PERIOD UPTO 31 - 3 - 2008) (TOTAL BORROWING COST INCLUDED IN CAPITAL WORK IN PROGRESS IS RS.11, 11,20,203 / - (REFER NOTE 17). THE BALANCE RS.1,09,61,557 / - REPRESENTS INTEREST CAPITALIZED ON FUNDS USED FROM CC A / C FOR PAYMENTS MADE TO PARTIES AS PER DETAILS ENCLOSED) . THE AMOUNT OF INTEREST RECEIVED IN RESPECT OF THE FUNDS AVAILED FROM ECB AND TEMPOR ARILY PARKED OUTSIDE IS RS.1,87,42,8971 - AND IT IS INDEPENDENT OF THE INTEREST AMOUNT OF RS.10 CRORES CLAIMED TOWARDS PAYMENT. ACCORDINGLY, THE JOURNAL ENTRY THERE FOR IS : BANK ACCOUNT DR. RS.1,87,42,897 TO CAPITAL WORK IN PROGRESS A/C. RS.1,87,4 2,897 (BEING INTEREST REALIZED ON SHORT TERM DEPOSIT WITH BANKS OUTSIDE INDIA MADE FROM ECB FUNDS) (TOTAL INTEREST RECEIPTS CREDITED TO CAPITAL WORK IN PROGRESS IS RS. 1,95,02,045/ - (REFER NOTE 18 ). THE BALANCE RS. 7,59,148/ - REPRESENTS INTEREST REALIZED O N SHORT TERM DEPOSITS MADE WITH STATE BANK OF INDIA, COIMBATORE, FROM OUT OF UNUTILIZED FUNDS FROM THE ECB LOAN).' AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND IN VIEW OF THE SECTION 2(24) OF THE ACT AND AS PER THE DECISION OF SECTION 2(28A) OF THE ACT, THE WORD 'INTEREST' MEANS INTEREST PAYABLE IN ANY MANNER IN RESPECT OF ANY I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 15 MONEYS BORROWED OR DEBIT INCURRED (INCLUDING A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF THE MONEYS BO RROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED AND T HEREFORE, THE ASSESSING OFFICER HAS TREATED THE INTEREST OF .1,95,02,045/ - AS INCOME OF THE ASSESSEE AND BROUGHT TO TAX. 5.2 THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS OBSERVED AS UNDER: 7.3 I HAVE GONE THROUGH THE SUBMI SSIONS MADE BY THE APPELLANT AND THE ORDER OF THE ASSESSING OFFICER. THE ASSESSING OFFICER AT PARA 6 AND 7 OF THE ASSESSMENT ORDER DETAILEDLY DISCUSSED THE ISSUE AND BROUGHT THE INTEREST AMOUNT OF R S .L,95,02,045/ - TO TAX. THE TOTAL INTEREST RECEIPTS WERE C REDITED TO CAPITAL WORK IN PROGRESS IS R S .L,95,02,045/ - . THE BALANCE RS.7,59,148/ - REPRESENTS INTEREST REALIZED ON SHORT TERM DEPOSITS MADE WITH SBI, COIMBATORE FROM OUT OF UNUSED FUNDS FROM THE ECB LOAN. THE VARIOUS DECISION OF THE APEX COURTS EMPHASIZE THAT INTEREST REALIZED FROM INVESTMENTS OF SURPLUS FUNDS IN BUSINESS SHOULD BE TREATED AS INCOME EVEN BEFORE COMMENCEMENT OF BUSINESS, IS APPLICABLE TO THE FACTS OF THE PRESENT CASE ALSO. THE CIRCULAR QUOTED BY THE ID.AR WAS ISSUED ON 2.7.2007. THERE IS FLEXIBILITY REGARDING THE USAGE OF ECB PROCE EDS AND THE GENERAL GUIDELINE IS THAT THE FUND SHOULD BE INVESTED IN SUCH A WAY THAT THE INVESTMENT CAN BE LIQUIDATED AS AND WHEN FUNDS ARE REQUIRED BY THE BORROWER IN INDIA. TAKING THIS INTO CONSIDERATION AND ALSO THE ASSESSING OFFICER'S ASSESSMENT ORDER, I CONFIRM THE ADDITION MADE BY THE ASSESSING OFFICER. THESE GROUNDS OF APPEAL ARE DISMISSED. 5.3 ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL . BY FILING A DETAILED WRITTEN SUBMISSION, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE INTEREST RECEIPTS OF .1,95,02,045/ - REALIZED ON FUNDS WITHHELD BY THE DISBURSING BANKERS OUT OF THE SANCTIONED LOAN AMOUNTS HAS I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 16 BEEN CREDITED TO CAPITAL WORK IN PROGRESS RESULTING IN THE COST OF BORROWINGS BEING REDUCED TO THAT EXTENT. BY RELYING ON THE RECENT JUDGEMENT OF THE HON BLE DELHI HIGH COURT IN THE CASE OF PCIT V. FACOR POWER LTD. IN ITA 1011/2015 VIDE ORDER DATED 07.01.2016, THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THAT THE ADDITION MADE ON THIS ACCOUNT SHOULD BE DELETED. 5.4 ON TH E OTHER HAND, BY RELYING ON THE DECISION IN THE CASE OF CIT V. ARASAN ALUMINIUM INDUSTRIES PVT. LTD. 220 ITR 476 (MAD), THE LD. DR SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 5.5 WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH T HE ORDERS OF AUTHORITIES BELOW. THE ASSESSEE COMPANY HAS SET UP A 3500 TCD SUGAR FACTORY AT GINGEE, SEMMEDU VILLAGE, VILLUPURAM DISTRICT TOGETHER WITH A CO - GENERATION (POWER) UNIT WITH A CAPACITY OF 20.5 MW. THE PROJECT WORK WAS COMMENCED IN THE FINANCIAL YEAR 2006 - 07 AND COMPLETED BY DECEMBER 2008. COMMERCIAL PRODUCTION COMMENCED FROM JANUARY 2009. THE AGGREGATE PROJECT COST FOR THE SAME W AS .230 CRORES TO PARTLY FINANCE WHICH THE ECB LOAN OF .125 CRORES (YEN LOAN EQUIVALENT TO US $ 30 MILLION) WAS TAKEN FROM BANKS AND FINANCIAL INSTITUTIONS OUTSIDE INDIA, VIZ. BANK OF INDIA (TOKYO BRANCH), BARCLAYS BANK PLC (HONG KONG BRANCH), STATE BANK OF INDIA (OSAKA BRANCH), UCO BANK (HONG KONG BRANCH), AND WHICH LOAN WAS ARRANGED BY BARCLAYS BANK P LC. THE PROJECT COST INCURRED UPTO 31.3.2008 WA S SHOWN AS CAPITAL WIP IN FIXED ASSET SCHEDULE. UNDER THE TERMS OF LOAN, I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 17 THE FUNDS AVAILED / DRAWN AND BROUGHT INTO INDIA HAD TO BE UTILIZED IMMEDIATELY FOR THE UNITS AND WERE NOT AVAILABLE FOR OTHER PURPOSES. ACCORDINGLY, THE LOAN FUNDS WERE WITHDRAWN IN TRANCHES. THE UNUTILIZED AMOUNT S WERE HELD BY THE LENDING BANKERS AS SHORT TERM DEPOSITS ON WHICH INTEREST HAS BEEN RECEIVED BY THE ASSESSEE C OMPANY FOR THE PERIOD IT WAS SO HELD. ON THE OTHER HAND FOR THE LOAN AMOUNTS SO INVOLVED , THE ASSESSEE WAS CHARGED INTEREST BY THE LENDING BANKS. INTEREST ON ECB LOAN PAID DURING THE YEAR W AS .1 0,01,57,046/ - WHICH HAS BEEN CAPITALIZED AND INCLUDED IN THE CAPITAL WORK IN PROGRESS AS REQUIRED UNDER ACCOUNTING STANDARD 16. T HE INTEREST RECEIVED ON THE UNUTILIZED FUNDS PARKED OUTSIDE HAS ALSO BEEN TAKEN TO THE SAME ACCOUNT. THE GROSS INTEREST OF .1,95,02,045/ - SO RECEIVED FROM SHORT TERM DEPOSITS WERE CREDITED TO CAPITAL WORK IN PROGRESS. HOWEVER, THE ASSESSING OFFICER TREATED THE SAME AS INCOME OF THE ASSESSEE AND BROUGHT TO TAX. THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. BEFORE US, THE LD. COUNSEL FOR THE ASS ESSEE STRONGLY CONTENDED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION IN THE CASE OF PCIT V. FACOR POWER LTD. (SUPRA). WE HAVE ALSO PERUSED THE CASE LAW OF HON BLE DELHI HIGH COURT RELIED ON BY THE LD. COUNSEL. HOWEVER, IN T HE CASE OF CIT V. ARASAN ALUMINIUM INDUSTRIES PVT. LTD. (SUPRA), AS RELIED ON BY THE LD. DR, THE HON BLE JURISDICTIONAL HIGH COURT HAS OBSERVED AND HELD AS UNDER: THE ASSESSEE WAS A PRIVATE LIMITED COMPANY INCORPORATED ON MAY 28, 1977, WITH THE OBJECT OF DOING BUSINESS IN MANUFACTURE AND SALE OF PYROTECHNIC ALUMINIUM POWDER. ITS PAID - UP CAPITAL WAS RS. 6.05 LAKHS. THE I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 18 ACCOUNTS WERE CLOSED FOR THE FIRST TIME AS ON OCTOBER 31, 1978. DURING THE ENTIRE YEAR, THE COMPANY WAS ENGAGED IN THE PROCESS OF ERECTION O F ITS PLANT AND MACHINERY AND CONSTRUCTION OF THE FACTORY. THE ASSESSEE RECEIVED AN AMOUNT OF RS. 25,532 AS INTEREST FROM THE STATE BANK OF INDIA AND TWO SISTER CONCERNS. THE ASSESSEE ALSO PAID AN INTEREST OF RS. 2,666 ON ITS LOAN TO THE EXTENT OF RUPEES O NE LAKH FROM THE STATE BANK OF INDIA. THE INTEREST RECEIVED WAS FROM THE ADVANCES MADE OUT OF PAID UP CAPITAL AMOUNTS. THE INCOME - TAX OFFICER BROUGHT THE ENTIRE AMOUNT TO TAX BUT THE TRIBUNAL HELD THAT IT WAS NOT TAXABLE. ON A REFERENCE: HELD, THAT THE INTEREST RECEIPT OF RS. 25,532 WAS ASSESSABLE AS INCOME. ANDHRA PRADESH CARBIDES LTD. V. CIT [1992] 198 ITR 386 (AP): CIT V. DERCO COOLING COILS LTD. [1992] 198 ITR 375 (AP) ; CIT V. MODI RUBBER LTD. [1994] 208 ITR 379 (DELHI) ; CIT V. SESHASAYEE PAPER AND BOARDS LTD. [1985] 156 ITR 542 (MAD) AND GODAVARI FERTILIZERS AND CHEMICALS LTD. P. CIT [1992] 198 ITR 388 (AP) FOLLOWED. HELD ALSO, THAT THE QUESTION WHETHER THE INTEREST PAYMENT OF RS. 2,666 TO THE STATE BANK OF INDIA AND OTHER EXPENSES SHOULD BE A LLOWED AS A DEDUCTION WAS NOT CONSIDERED BY THE TRIBUNAL. IT WAS OPEN TO THE ASSESSEE TO AGITATE THIS GROUND BEFORE THE TRIBUNAL, AND IF SUCH REQUEST WAS MADE, THE TRIBUNAL HAD TO CONSIDER IT ON THE MERITS. 5.6 HENCE , RESPECTFULLY FOLLOWING THE ABOVE DE CISION OF THE HON BLE JURISDICTIONAL HIGH COURT (SUPRA) , WE CONFIRM THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DISMISS THE GROUND RAISED BY THE ASSESSEE . 6. DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS PRAYED FOR ADMISSION OF AD DITIONAL GROUND OF APPEAL RAISED FOR THE FIRST TIME BEFORE THE TRIBUNAL WITH REGARD TO THE AMOUNT REALIZED BY TRANSFERRING CARBON CREDITS CERTIFIED EMISSION REDUCTIONS [CER], WHICH IS NOT LIABLE TO BE INCLUDED IN THE TOTAL INCOME OF THE ASSESSEE WAS INAD VERTENTLY CREDITED IN THE PROFIT AND LOSS ACCOUNT AS INCOME IN CO - GENERATION DIVISION AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. BY RELYING ON THE DECISION OF THE I.T.A. NO S . 851 & 755/M/12 & 2235/M/14 19 HYDERABAD BENCHES OF THE TRIBUNAL IN THE CASE OF MY HOME POWER LTD. V. DCIT IN ITA NO. 11 14/HYD/2009 VIDE ORDER DATED 02.11.2012, THE LD. COUNSEL FOR THE ASSESSEE HAS PLEADED THAT AMOUNT REALIZED OF .7,19,14,997/ - BY TRANSFERRING CARBON CREDITS IS TO BE CONSIDERED AS A CAPITAL RECEIPT AND EXCLUDED FROM THE TOTAL INCOME COMPUTED. THE LD. DR DI D NOT SERIOUSLY OBJECT TO THE ABOVE SUBMISSIONS OF THE LD. COUNSEL. 6.1 CONSIDERING THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE, THE ADDITIONAL GROUND RAISED BY THE ASSESSEE FOR THE FIRST TIME BEFORE THE TRIBUNAL IS ENTERTAINED. HOWEVER, THE MATT ER IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE AND DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER ALLOWING OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, BOTH APPEALS FILED BY THE REVENUE ARE DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 28 TH DECEMBER , 201 6 AT CHENNAI. SD/ - SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 28 . 1 2 .201 6 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.